TIPS TO BE AWARE OF WHEN REFINANCING... Whether you are repaying a home or investment property loan, the regular contributions can be a major chunk out of your budget. As such, it makes good financial sense to regularly check if your existing home loan still meets your current needs, boasts a competitive interest rate, charges minimal fees and offers useful features. By refinancing your home loan you might be able to repay the loan sooner and get on the right track to achieving your next financial goal sooner. Refinancing can also often be a great way to lower your mortgage repayments, consolidate your debt or even access equity in your home. In saying that, there are a few things you should be mindful of before deciding to refinance, including: • Hidden fees and charges: Before you refinance, it is a good idea to find out about any exit or deferred establishment fees that might apply if you choose to pay out your existing loan early. While exit fees were banned on all new loans taken out after 1 July 2011, they could still apply to loans taken out before this date. It is also important to note that exit fees don’t include break costs, which can be imposed if you bail out of a fixed rate loan before your loan term expires. • Borrowing costs: When you refinance, your new lender may charge a range of upfront fees, including a loan application fee, valuation fee and a settlement fee. It is worth noting that not all lenders will charge these fees and some may be negotiable. • Lender’s Mortgage Insurance: This is an insurance designed to protect your lender in the event you default on your loan. And while you may have paid Lender’s Mortgage Insurance when you first took out your loan, it is important to know that this insurance is not transferrable, so if you borrow 80% or more of the property’s value, you will be required to pay it again. • Stamp duty: If through refinancing you increase the size of your loan, stamp duty may be payable. In addition, you may be required to pay a Mortgage Registration Fee. Further, when you are ready to compare home loans, it is important to look beyond the interest rate alone. Many borrowers will look to refinance with a lender that boasts the cheapest interest rate, but just because they have the cheapest rate doesn’t mean their product is the cheapest home loan overall or the most suited to your needs. Before making any decisions, it is important to investigate the various fees each lender intends to charge. There are many kinds of loan fees borrowers may incur, including application fees, monthly account fees, redraw fees, additional repayments fees, rate lock fees and break fees. A mortgage broker, like myself, will be able to tell you what the real cost of the loan will be once all the fees and charges have been taken into account.
Posted on: Thu, 02 Oct 2014 00:51:06 +0000
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