Mortgage refinancing
|
Why refinance?
| Mortgage refinancing involves taking out a new loan to pay out your existing one for the purpose of realising some benefits such as lower interest rates, lower repayments, different loan features, to consolidate debts or to access equity to fund an initiative such as renovations.
| What to consider when refinancing
| The two main things you need to weigh up when considering mortgage refinancing to a different financial institution are how much better off you'll be with the new loan and what the costs are to switch your loan to a new one.
|
| |
|
|
If the switching costs are too high, they could negate any savings you expect to make by obtaining a cheaper loan. On the other hand, putting up with a few switching costs can be worth the savings you could make in the long run by having a loan that is either great value or better suits your needs.
If you are changing home loans within the same financial institution, this is regarded as an internal switch and you may be required to pay a switch fee. This process is quicker and more straight forward.
|
Costs to consider
|
If you are switching home loans to a different lender, you will need to consider costs such as early repayment fees, break costs if you are in a fixed home loan and other possible discharge and administration fees. You should contact your financial institution to get an understanding of the costs involved as they vary between lenders. Often however, this is a worthwhile exercise as you will be in a position to better weigh up the benefits you can realise by switching.
|
Abolishment of early repayment fees
|
As of 1st July 2011, the Federal Government announced that financial institutions can no longer charge customers a fee for paying out their home loan early. This means you can switch home loans without having to pay an early repayment fee. However, it should be noted that early repayment fees may still be applicable to home loans that were taken out prior to 1st July 2011. This does not abolish all fees associated with switching your home loan as discharge and administration fees associated with closing your loan may still apply.
|
Costs you may be charged by the new lender
|
Once you have assessed what costs you may be up for with your existing financial institution, you will need to assess what upfront costs you may be charged by taking out a new home loan. These costs can include application fees, legal and valuation fees and government charges.
|
