Is your current lender offering you the most suitable deal possible or are they offering new clients better deals? It is important to question your loan in the current market if you’re paying high interest rates as you could be taking advantage of the record low rates. Before you consider refinancing your home loan, it is important to not fall in the traps or pitfalls that may come with moving from one loan product to the other or from one lender to another.
We have put together our list of do’s and don’ts when refinancing your mortgage.
Do…
- Figure out why you need to refinance.
Just because you can refinance your loan doesn’t always mean you should. Before you jump in, ask yourself why your loan product is not suitable anymore. Is your lender advertising better deals? Are you currently paying high interest rates and want to reduce these? Do you want to help manage your debt better? Figuring out why you are unhappy with your current loan will help you find the right loan for you.
- Take the time to do your research.
Refinancing isn’t as easy as switching loans and automatically saving thousands of dollars. A lot of research goes into weighing up the pros and cons of each loan product, finding the right lender and helping you benefit from switching. A mortgage broker can assist you greatly with this process to prevent you from making any irrational decisions and finding the most suitable loan product to meet your financial goals.
- Take into account other factors, not just the interest rate.
A low interest rate can look appealing at first glance. However, there are other aspects of a loan that you should consider before making the decision to switch. Your mortgage broker will talk these through with you to ensure you are not falling into any hidden traps.
Don’t…
- Approach your lender right away.
Always research the market before approaching your current lender or get the advice of a mortgage broker. This will give you more leverage because you have data to back you up when you tell them there are other great deals out there.
- Switch to first good deal offered to you.
It all goes back to doing your research. One product may seem immediately enticing, but don’t fall into the trap of taking it out right away. Only when you’ve reviewed rates of other lenders should you make a decision on which one to pick.
- Be swayed by honeymoon rates.
Lenders will typically offer honeymoon rates to attract potential clients into signing up with them. However, remember that when the honeymoon period is over, the loan will revert to the regular rates, which may be higher than those offered by other lenders. Your mortgage broker will assist in avoiding this by interpreting hidden wording within the terms and conditions.
Overall, it is best to approach refinancing as you would if you were taking out a loan for the first time–take your time, do your research, and speak to a mortgage broker. All these factors will help you choose a loan that will truly benefit you and put you on a better path to achieving your financial goals.