03 Nov The Dos and Don’ts of Refinancing

When you currently have a mortgage it’s important to always check up on what interest rate you’re currently paying and if you might have better options.

While low interest rates are important to any homeowner with a mortgage, there are a number of other considerations you should think about when it comes to refinancing.

The first step is to always speak to a mortgage broker in Melbourne to assess your current situation and see if refinancing is right for you.

Here are some other dos and don’ts when it comes to refinancing.

Dos

Access Equity

When markets are strong like they are at the moment, it can be a great time to speak to a mortgage broker about refinancing.

One of the biggest benefits of refinancing is that it allows you to unlock equity which can be used for other purposes. The most obvious is as a way to get yourself into another property.

When markets are moving higher and there are strong sales taking place, that will invariably mean your current property is gaining value. A lender will always conduct a valuation when approving a loan. If your property has gained value, then it might be possible to access some of that equity to continue to build your property portfolio.

Consolidate Debts

Mortgages (compared to other loans) normally have relatively low interest rates attached to them as property is considered a safe investment. Home loans are also secured by the property, which is why these types of loans have considerably lower interest rates than things like personal loans or credit card debt.

When you refinance it’s a great opportunity to consolidate some of those higher interest rate debts into one single loan that is secured by your property.

What you’re doing, is effectively paying out those loans and you’ll end up with lower weekly repayments as a result. That means you get out of debt earlier and pay less in interest. There are some considerations here, such as break/exit fees, which is why you should speak to a mortgage broker in Melbourne.

Clean up your Finances

It’s important to understand that when you refinance, you are effectively taking out a new loan and paying out your previous loan.

That means you need to go through the loan application process with a new lender.

It’s important that you have all your financials in order so you have a good chance of being approved.

Your mortgage broker will be able to as=sess things on your behalf, so it’s a good idea to speak to them well in advance of when you want to actually apply.

Don’ts

Apply directly

Every time you apply for a home loan it impacts your credit rating. The big advantage of a mortgage broker is that they are able to work directly with multiple lenders and not only find the right product fit for you but also ensure you have a high probability of successfully applying.

If your goal is to build your property over time, or even if you want to get other types of loans in the future, protecting your credit rating is vital.

Chase Deals

There are a lot of special offers and deals on interest rates that can look a little too good to be true. That’s because many of these introductory offers boast a honeymoon period that will expire at some time, and these low introductory rates will revert back to a more normal level.

When choosing lenders and home loan products when refinancing it’s important to make sure doing so is in keeping with your personal goals. Speak to a mortgage broker and they will be able to advise you if any of these offers are suitable.

Accept What a Bank Offers

Lastly, don’t accept what your current lender tells you. In the current market, there are many options for borrowers and if your bank or lender is unwilling to improve your current interest rate, then you have options at your disposal.