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shutterstock_222584791With the record low fixed and variable rates we are currently appreciating makes it an ideal time to refinance your loan. Refinancing will enable you to lower your interest repayments considerably and take out a more suitable loan, which is suitable to your current circumstances.

However before you seek to refinance your loan, there are a number of important factors that you have to consider. These factors will help ensure that this is indeed the right decision for you. Here are some steps you need to undertake:

1.  Shop around first. People often approach their current lender first for refinancing however this doesn’t put you in an ideal position when negotiating your loan. Instead, it is important to shop around first to try and see if there are deals that are better than what your lender currently offers.

This is where involving a mortgage broker will save you both time and money. A mortgage broker can do this leg work for you and provide you with the best deal on the market for your current situation. Once you have this solid data to back you up, your mortgage broker can then go back to your current lender and try to negotiate a better deal on your behalf. If your current lender can’t give you what you want then your mortgage broker can help you move to a different lender, offering a better deal. When moving to a new lender however, it is also important to consider the below factors.

2.  Consider the overall cost of the loan. Don’t judge a loan product based solely on the interest rate. You also have to factor in a number of other important elements, such as the fees and charges, and the features of the loan. The reason for this is that lower interest rates don’t always translate to a better deal. For example, a basic variable rate loan may have lower rates than a standard variable rate, but the latter typically has more useful features such as unlimited repayments and an offset account. Your mortgage broker can guide you through this process to ensure that you truly are getting a better deal than your current lender offers.

3.  Find out why you need a different loan. Most people refinance their loan to take advantage of lower rates. However, if you’re making this move because you’re having trouble with your finances then it is important to look at  the issues first. If your debts are piling up, refinancing may not be the right option for you at present – it could even  heighten your current situation.

4.  Factor in your future plans. A loan that you find affordable right now may no longer be the case when your status or circumstances change in the future, such as when you decide to get married or have children. With this in mind, it is wise to consider these future plans and see if your finances could still handle the loan repayments on top of your rising living expenses.

In summary, it is important to look at the big picture when considering refinancing your loan, to ensure that the new loan you’re taking out is indeed affordable or suited for you. In addition, it’s worth considering your future plans to see how these will affect your ability to repay the loan. It is also essential to seek the advice of a mortgage broker, who can do the time consuming research for you and ensure that refinancing is really the right course of action for you. Taking these steps will enable you to take out a loan that is best suited not only to your current situation, but for the future as well.

Written by Duncan McKinnon