Refinancing can offer numerous benefits, whether you’re chasing lower repayments, or you want to tap into your existing equity to renovate your existing home or start a share portfolio. Whatever your reasons, there are some things you need to be aware of before you enter into a new contract.
A Lower Interest Rate Doesn’t Mean a Better Deal
Don’t be fooled by products just because they advertise a low interest rate, there may be additional monthly or annual fees. Taking fees into account, the overall cost of the new loan may not be a saving in the long term.
It’s important to look at all the features of a loan, not just the interest rate. This includes additional repayments, redraw, 100% offset and fixed rate rules. These may prove to be valuable as you could be paying less interest and therefore pay your loan off faster.
Don’t be Tempted by Low Introductory Rates
While it may be tempting to prefer a loan with an introductory discounted interest rate, you need to be aware that the offer is only temporary. Once the introductory period is over, the interest will revert back to a higher standard variable rate for the rest of the loan term. You might find that it will be more beneficial to choose a loan with an overall lower interest rate that is applicable throughout the term of the loan.
Keep Your Eyes Open for Fees
There are many fees involved in refinancing such as discharge fees, loan application fees and valuation fees. While these fees cannot be avoided, you need to ensure that these costs do not exceed the benefits of refinancing.
Some banks are offering refinance rebates from $1500 – $7000 to encourage consumers to switch banks. Rebates may vary from cashback, special discounts on application fee and discounted LMI. This is icing on the cake if you’re refinancing to a lower interest rate and they offer a rebate on top of the lower interest rate!
A little expertise can take the stress out of refinancing, and done correctly, might save you thousands. Speak to our award-winning team on (08) 9367 4222 or [email protected] and we will put you in touch with one of our expert brokers in your area.