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You can benefit from better transactions by replacing your current mortgage with a new one, but there are some things to keep in mind. Even if you have a competitive package when you borrow a mortgage, check the mortgage details every year to make sure that interest rates, fees, and features continue to meet your needs and reflect current market interest rates. Worth checking.
If not, refinancing may allow you to secure lower interest rates, reduce repayments, and repay your mortgage faster.
How does refinancing work?
When you refinance, you replace your existing mortgage with a new one that is ideally cheaper and more flexible.
It may mean switching between your current provider and your mortgage product, but this often means switching to another lender that can give you a better deal.
If you're wondering if many are doing this, the Australian Bureau of Statistics says refinancing in Australia hit a record high in 2021 and borrowers are paying attention to low-interest rates and cashback offers. Revealed 1.
What is the reason for refinancing?
Here are some of the reasons you might consider refinancing:
1. If you want a low-interest rate
Finding lower interest rates can save you money and reduce your repayments. Even a 0.5% reduction can make a big difference over time.
2. Requires a shorter loan period than
If interest rates fall, you may be able to shorten the life of your loan by refinancing without changing the repayment amount too much (for example, 30 to 25 years). Keep in mind that you may also be able to do this by being with your current lender.
This means that you can repay your mortgage faster than you expected.
3. I want to access more mortgage features
You may be looking for further cost savings and a wide range of options with the help of additional features such as B. Unlimited additional repayments, redrawing capabilities (allowing access to money paid beyond the minimum repayment amount), or offsetting (may reduce interest paid overtime).
4. Want more flexibility or security
Converting to a fixed rate, variable rate, or a combination of both may give you more choices and security.
For example, the defined interest rate on a fixed-rate loan remains the same during the fixed-rate period. Floating rates, on the other hand, can fluctuate, but split rates mean that you can apply a fixed rate to one part of the loan and a variable rate to the other.
There are pros and cons to all the options to consider.
5. I want to access home equity
If you're thinking of investing in property, refurbishing your children's education, or funding, it might be a good idea to borrow against the fairness of your property, There are things to consider. Most importantly, if you can't mortgage your property and repay it, you could potentially lose your home.
6. You want to consolidate your existing debt
If you have multiple debts. For example, if you have a personal loan, a credit card loan, or a car loan, you can include them in your mortgage if you are happy with the repayment.
This is because mortgage rates are generally (but not always) lower than other forms of borrowing. Again, there are potential benefits and things to keep in mind.
What should I consider when refinancing?
Do you know what you want?
If you are looking for refinancing, do you know what you are looking for? It could be low-interest rates, additional features, increased flexibility, improved customer service, or a combination of all of these. When you study other loans, it is important to make these decisions so that you know exactly what you are looking for.
Do economic benefits outweigh costs?
Refinancing may save you money in the long run, but it is important to consider all the costs associated with leaving your current plan and switching to a new one.
For this reason, it is worth checking where the costs can be incurred and which charges are negotiable. If you have a fixed-rate loan, consider the costs of relief fees, mortgage fee registration, and confusion.
Also, when exchanging lenders, consider application costs, including incorporation fees, attorney fees, valuation fees, stamp duty, and lender mortgage insurance, depending on the amount you borrow.
Did you talk to your current lender?
It is also worth talking to your current lender before you leave the ship. Because they may be willing to renegotiate your package to keep you as a customer. This also saves you money on exit taxes if you decide to stay.
Also, additional features seen by alternative lenders may already be available to current lenders.
Has there been any change in your situation?
If you decide to refinance, there is an application process and your lender will take into account changes in your situation.
This could include changing jobs, taking on additional debt, or increasing family. All of this can affect your ability to repay.
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