02 Feb Pros and cons of refinancing your mortgage
If you have a mortgage, then there is no doubt that you want to save as much money as you possibly can, and that you want to pay down the debt as quick as possible. You may therefore shop around for the best mortgage deal, but if you’re doing this, it’s always worth considering if you’re actually going to save money on your mortgage, or if changing will result in extra costs that you hadn’t budgeted for.
The first thing to consider, and this may or may not be important to you, depending on your financial circumstances, what type of relationship do you have with your bank? Sometimes it’s worth sticking with your existing bank if you have a good relationship for them. You may find that you place more emphasis on customer service than you do saving $50 – $100 a month. This would be the case especially if you have a bigger disposable income and can afford to lose that money for the sake of a strong interpersonal relationship.
It’s also worth considering that having a good relationship is worth holding onto. Some people will want to retain the familiarity of sticking with the banker or non bank lender that they’ve known for several years. This can have its advantages. When you deal with a business for a long time, they get to know your personal and financial circumstances and you have a relationship, so you don’t need to worry about explaining your situation over again, and they’re more likely to find the right financial products for your needs.
If you are worried about money though, and that’s your main concern, then you’d be looking at interest rates. It pays to shop around prior to choosing a new provider. Just as 1% can make a huge difference on your savings, 1% can also make a significant dent on your mortgage. If your mortgage rate is 1% lower than that’s great, but what if your exit fees will negate that. You will need to perform your calculations, or talk to our team at Aspirus to determine if the savings will be worth it. Sometimes mortgage fees are only a few hundred dollars, however they can reach the thousands. It will depend on the terms in your mortgage, so you’ll need to analyse it closely. For most people with a Melbourne mortgage, this would work out to be worth it. You may find that it’s worth paying exit fees to have a cheaper interest rate, which will save you money in the long term.
The best thing to do when you’re deciding whether or not to refinance your mortgage is to analyse whether or not you’ll make a loss or a gain. If you’re unsure then give us a call for some advice.