Refinancing your mortgage can be a great way to get a better deal and there are a lot of great deals out there as lenders constantly tweak their products to build market share. As your personal situation changes, you can adjust your mortgage to reflect these changes and tap into a better deal.
If done right, refinancing can provide you with a mortgage that is ideally suited to your needs, whether it is one with a better rate, or more affordable monthly repayments, or lower fees. However, refinancing when done without sound advice can also impact you negatively, we have provided you with some common refinancing mistakes:
1. Focusing on low introductory rates.
The mortgage industry is very competitive with each lender trying to build their market share with lower rates and fees & charges. Lenders always come up with new ways of attracting new clients, one of which is by using low introductory rates or “honeymoon rates”.
Introductory rates can be suitable if you are seeking lower repayments for a short term. However, it is advisable to take into account the rates after the introductory period expires and ask yourself if you can still afford the loan after that period and what is the cost to get out of the introductory product. In additional to this, some lenders might give you a less flexible loan, others might have higher penalties if you wish to change products.
2. Not getting enough quotes.
This is where a Mortgage Broker can help you. They will take your needs and personal circumstances into account and then present you with a wide range of options from a variety of lenders, so you can compare the most suitable loans and select the right loan for your personal situation. Using a broker will be to your advantage because they can do most of the leg work for you, from researching loans to submitting your application to following it up with the lender.
3. Not taking into account the costs of refinancing.
Many people often get caught up on the advertised rate of a new mortgage and they often forget to factor in the costs involved with refinancing. Many lenders charge break costs if you refinance certain loans and others charge establishment fees when establishing a new loan. Some lenders have attractive offers, where they will actually pay for the cost of your refinance, so you are ahead from day one. Your Mortgage Broker will use their relationship with the lenders and their extensive knowledge of the loan process to advise you of these charges and assist you in calculating whether refinancing will be beneficial overall.
Speak to one of our Mortgage Brokers about the refinancing options available to you and let us assist you in saving some much needed spare cash for that renovation job you’ve been dreaming of or that much-needed cash to put towards your retirement.
Written by Tiffany Gourlay