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is current home loan still the best option for you? with mr finance loans

Has the official cash rate changed since your current loan settled? Has the rate your lender is charging you changed? Chances are the market has also changed with new products constantly being introduced. Let’s not forget that things have probably changed in your life too.

 

Since you took out the mortgage your income or expenses may have changed and even your financial goals could be different – from a change in your relationship status, to plans to start a family or the addition of other loans or credit cards. It’s also very important to know how the value of your property has changed since you took out your current loan. Despite most loans being around 30 years in length, you may be surprised to hear that Australians often refinance their home loan every 4-5 years in order to change with the times.

Refinancing is a chance to look at what else is out there and check if your current loan is still the right fit for you. If you are considering a switch, this blog contains some of the key things you may want to consider.

Lower Rates and Fees

First of all, the obvious question to ask is could you be paying less? A loan with a lower interest rate or less fees can be the simplest way to reduce your repayments, meaning you can unlock more spending money or pay the loan back sooner.

Additional Features

It’s not all about interest rates – sometimes the loans with the lowest rates also sacrifice features that are not only handy, but also save you money in the long run. For example:

  • An offset account
    A separate account that lets you use the balance to offset the principal on which your interest is calculated -simply having your pay deposited into this account can reduce the time of your loan.
  • Flexible payments
    Additional payments to the loan when you have the spare funds – a great way to shorten your loan and save more in the long term.
  • Ability to redraw
    Allows you to easily access any extra funds you’ve deposited into your loan.
  • Flexible rates
    Depending on what you think rates are going to do (go up, down, or stay the same), this option lets you choose the type of loan that could save you money when they go down, or protect you if they rise.

Refinancing to renovate

One of the most common reasons to refinance is to renovate. If you’ve owned your home for a while and its value has increased, you may be able to use this equity to fund some improvements. An added bonus is that when you renovate well, you potentially add even more value to your property. When the extra funds for the renovation are put into an offset account you may be able to avoid paying interest on the renovation funds until you start using them. Your other option is to consider a line of credit loan which is essentially like a credit card with a bigger limit and often much smaller interest rate. These funds are available to draw down on as you undertake your renovations, and you only pay interest on the amount you use.

The costs of refinancing

The best way to understand the costs involved in ending one loan and moving to another is to speak to your broker. Before you choose to do so, Troy from Mr Finance Loans has outlined some of the fees and costs that you may be charged:

  • Lender’s Mortgage Insurance
    If your new loan is worth more than 80% of your home’s value, a lender will ask you to pay this to protect them from defaults.
  • Discharge fee
    A lender may charge you a termination fee.
  • Break cost
    If you have a fixed rate loan you could be charged a break cost.
  • Application fee
    This is often charged on settlement of the loan.
  • Valuation fee
    A lender can charge this fee in order to have your property independently valued.
  • Early exit fees
    May be payable if you’ve had your loan for less than a specified period (e.g. five years).
  • Settlement fee|
    A fee charged once the loan is settled.
  • Registration fee
    Charged when you switch your mortgage to a new lender. This amount varies from state to state.

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