With record low rates available it can be tempting to refinance a better deal. Just be sure you’re not falling into some classic traps.
Get the most from refinancing by following these simple steps:
1. Don’t make multiple applications – it’s an easy way to wreck your credit record
Refinancing involves taking out a new loan to pay out the old one, and starting the process of paying off the new one.
It’s important to shop around for the right loan before making a single application to just one lender because every time you apply for a loan it will be noted on your personal credit record. Lenders that record how well you’ve handled debt in the past to assess what sort of a risk you represent. Making multiple applications will raise questions about whether you’ve been rejected by other lenders – and why.
2. Don’t skip your current lender – they could come to the table
Talk to your current lender before looking elsewhere for a lower rate or better features. Nothing makes a lender sit up and take notice more than a customer who’s ready to take their business elsewhere, and it could be a lot easier to stick with the same lender than to jump ship.
3. Don’t assume refinancing will leave you better off
Refinancing comes with costs – including charges associated with closing the old loan and fees attached to the new one. Crunch the numbers or ask your broker to do it for you, to see if refinancing will actually put you in front financially… especially if you’re refinancing to consolidate debt. Consolidating short term debts like credit cards into a long term debt like your home may mean paying more in overall interest unless you commit to making additional repayments.
4. Don’t overlook lender’s mortgage insurance
If your refinanced loan is worth 80 per cent or more of your home’s value, it’s likely your lender will ask you to pay LMI. You may be able to capitalise the cost by adding it to the loan and paying it off gradually but that also means adding interest charges to the initial premium.
5. Don’t miss speaking with a broker
Your broker will make refinancing easier by comparing a broad range of loans and lenders on your behalf to find the loan(s) that are right for you. They’ll also help complete the application paperwork, and that’s what refinancing should be all about – making your loan and your life a lot easier!
Thanks Aussie for providing such valuable insights on what can be one of the most important decisions and processes we undertake.
Right now until June 14th, attend an appointment with one of their friendly brokers and you could WIN a $2000 Flight Centre voucher*.
Simply call Aussie on 1300 292 829 or Click Here to Book an Appointment!
Aussie has won Mortgage Broker of the Year six years in a row (2008-2013). Aussie’s accredited Mortgage Brokers offer home loans from a panel of lenders, including the big banks, while also offering Aussie Home Loans’ own suite of loan products. Aussie brokers can provide an objective comparison of the loans to find exactly the right loan, based on an analysis of customers’ specific needs and preferences. In addition to the home visits, Aussie also has over 150 retail stores now operating in city and regional areas. For more info, please call 1300 292 829 or visit: www.aussie.com.au