Refinancing traps to avoid
Refinancing can offer a world of benefits. Whether you’re after lower repayments or want to tap into the equity sitting in your home. Here are some things to be aware of so that you don’t find yourself hooked into a bad deal.
Don’t be fooled by the interest rate
Refinancing to a lower interest rate doesn’t necessarily mean you’ve scored yourself a better deal. In fact, a product with more features may cost you a bit more in fees or interest. It could however save you more in the long run. Including features such as an offset account will prove valuable. It will allow you to make larger repayments or put any extra cash against the loan.
Honeymoon rates are just that
When refinancing, don’t be lured by offers with discounted introductory rates. These could cost more in the long run. That is, unless you’ve calculated the savings over the life of the loan. While a loan with a discounted interest rate seems a tempting offer, it’s only temporary. Once the introductory period is over, the interest will revert to a higher standard variable for the rest of the loan term. It is generally more beneficial financially to negotiate a lower interest rate without an introductory discount.
Be aware of the fees
One of the main purposes of refinancing is to lighten the financial burden, however, that doesn’t mean that it’s not going to cost you. There are many fees involved, which may include discharge and application fees, a valuation fee, land registration fee, and mortgage insurance. You may also be subject to stamp duty depending on what state your property is located in. While these cannot be avoided, you have to ensure that the costs involved are not higher than the savings, to make the process worthwhile.
Use Our Calculators
An easy way to check out some options is to do the sums on a calculator to see how much you might save.
While there are traps to avoid, a little expertise can take the stress out of refinancing to save you thousands, fund that renovation, or simply find a loan that suits your life a little better.
Other blogs that may be of interest;
The Home Loan Comparison Co. compares home loans from a much wider variety of banks than most people have time to consider, and we find the loan that suits your goals.
We are experienced, knowledgeable and dedicated to building ongoing relationships to keep on providing personal and valuable service that is rarely experienced when dealing with the banks.