Count the Costs of Home Loan Refinancing
If you're unhappy with some aspect of your mortgage then you could be forgiven for getting excited about the prospect of refinancing to a better or more favourable deal.
Reducing your repayments could allow you to free up some more money for other monthly expenses; a lower interest rate might help you pay your loan off quicker; and building some extra flexibility into your loan structure may simply make for a better fit with your lifestyle.
There is one minor caveat to consider, however, and that is how much it will cost to change any given aspect of your loan.
There is no such thing as a free lunch, and this is particularly true if you find yourself craving a refinanced loan around midday.
While they will vary depending on the conditions and features of your current home loan, you'll nonetheless be facing some one-off charges to bring about any change to your mortgage.
These can include fees for applications, documentation, handling, property valuation and discharge.
If as a result of refinancing you end up on a course to paying your home loan off sooner, you may then also be presented with early repayment fees, which can vary depending on your lender.
Evidently, as the general goal of any refinance strategy is to get a better deal, it is important to take these costs into account when assessing the effectiveness of each refinancing scenario.
This is why it is so important to establish what you want from home loan refinancing – what would a 'better deal' mean for you?
If you are after a solution geared towards short-term relief from mortgage pressure, you might deem it acceptable to pay slightly more in the long run so that you can lower your monthly repayments and create a bit more financial wriggle-room.
However, if saving money over the term of your loan is the number one priority, it is a good idea to measure the impact on your loan balance of the costs of refinancing – it is quite possible that even with a better interest rate or an accelerated repayment schedule, the expense of changing your loan may be such that it is better to stick with the status quo.
If you are interested in the possibility of refinancing and would like to learn more about your options, it makes sense to seek some expert advice.
Mortgage brokers know the home loan market intimately and can compare hundreds of loan products to find the right match with your objectives.
They won't just take you through your options, however; they'll also help you calculate whether refinancing is the best route to take, both in the short and the long term.