Refinancing a mortgage can increase your savings and make your life more convenient. But before you get started, make sure you know what you should and shouldn’t do. These tips are from our Home Loan Experts mortgage brokers, who have helped countless customers refinance their loans smoothly.
What You Should Do
Do Figure Out Why You Need To Refinance
You shouldn’t always refinance your debt just because you can. Consider why your home loan is no longer suitable for you before proceeding. Maybe your lender has better offers, or you want to lower the interest rate you’re paying, or you want to consolidate your debts. Once you are sure about why you want to refinance, finding the ideal loan to switch to is easier.
Do Your Research
Refinancing is not just switching loans and instantly saving thousands. You need to weigh the benefits and drawbacks of each loan package available and select the best lender. A mortgage broker who knows the ins and outs of home loans and lenders suitable for you can be a tremendous help. To compare offers from other lenders, you should look into selecting a new loan that offers a lower interest rate and a term no longer than the time left on your current loan. Longer-term loans usually result in greater compounded interest costs. With a shorter loan term, even though your monthly repayments may be higher, you could save much money on interest. It’s also important to evaluate all the various refinancing costs, such as break fees, carefully.
Do Take Into Account Other Factors, Not Just The Interest Rate
Some lenders may offer you a low interest rate to consolidate your down into your mortgage, prevent you from going into foreclosure, or sell your home so you can repurchase it. However, you have to be careful with enticing offers like that. At first glance, a low interest rate could seem attractive. However, before deciding to refinance, ensure the lender has disclosed all of the fees you will be charged, and that there are no hidden traps.
Do Clean Up Your Finances First
When you refinance, you’re applying for a new loan, so you should make sure your credit is in the best shape possible. Be sure to check your credit record for any mistakes. Take the time to pay off as much debt as possible and strengthen your payback history if you know that your finances are not in the finest shape. This will increase your chances of obtaining a mortgage with an appealing interest rate and other good benefits. Also, be aware that multiple credit enquiries can lower your credit score. This is another area where our brokers can help. Our experts will analyse your situation and use their extensive knowledge of our panel of lenders to determine which ones offer you the best chance of approval. This will save you from unnecessary credit enquiries, protecting your credit score.
What You Shouldn’t Do
Don’t Submit Mortgage Applications To Multiple Lenders
As mentioned above, multiple credit enquiries in a short time can hurt your credit score. So while it is advised to shop around and compare lenders, submitting several loan applications is a bad idea, as each one will result in a credit enquiry. Your ability to borrow money may suffer because lenders won’t know if you were rejected or just changed your mind. Research and narrow down the best lenders to refinance, then submit a single application for approval. Again, our expert brokers can make this easy for you.
Don’t Refinance Based On The Pressure Of Other Debts
Refinancing should not be done just because it seems like a fast option to pay off your credit-card debt. The credit-card company cannot seize your home if you don’t pay what you owe. In contrast, mortgage debt is secured by your home, so if you stop making repayments, the lender may repossess it. This means your chance of losing your house increases when you pay off credit-card debt with mortgage debt.
Don’t Be Swayed By Advertisements And Honeymoon Rates
You will always see several advertisements offering good deals if you wish to refinance your mortgage. However, some lenders might be dishonest about their fees. Lenders typically provide honeymoon rates to entice new customers into signing up with them. But keep in mind that the lender’s regular rates will apply after the honeymoon period, which can be more expensive than those other lenders offer. It’s a good idea to get help from a mortgage broker to prevent this.
Don’t Forget About LMI And Other Costs
If you select the lender with the lowest interest rate without looking into fees and other costs of the loan, you might discover that you don’t save anything. For example, you probably will have to pay Lenders Mortgage Insurance (LMI) if you want to borrow more than 80% of your home’s value when you refinance. This is crucial to remember if you want to consolidate your debt. Other expenses associated with refinancing include application fees for the new loan and closing fees for the existing loan. To ensure you can maximise your savings, it’s important to look at all of the new lender’s recurring costs and home loan features.
We’re Here To Help!
Are you thinking of refinancing your mortgage and need assistance? We have experienced and qualified mortgage brokers who have assisted thousands of customers with refinancing their home loans.
Call us right away on 1300 889 743 or enquire online.