Refinancing your mortgage is usually seen as something you simply have to do every so often. If your product has expired or rates are changing, it’s usually taken as being the time to refinance your mortgage. But have you really stopped to consider the pros and cons of refinancing? Here are our financial advisor in Joondalup’s top 5 mistakes to avoid when you refinance your mortgage.
Refinance Mistake #1 – Not Shopping Around
If your current mortgage product has ended, you may just think it’s easier to stick with your current provider and find a new product with them. But not shopping around for other products from a range of lenders could be a big mistake. It’s really not that hard to switch lenders, especially if you have a mortgage advisor to guide you through the process.
Refinance Mistake #2 – Guessing Your Home Value
If you haven’t had your home valued for a while, you might be tempted to guess a current value and then apply for your refinanced mortgage based on that. However, when it comes time for your mortgage to be underwritten, an up to date valuation report may be requested. If your home isn’t worth as much as you thought, you may have your application rejected or not be able to get the interest rate you wanted.
Refinance Mistake #3 – Not Thinking Ahead
Mortgages are traditionally taken out over 20-30 years. Now while no-one has a crystal ball, it does pay to think long term when it comes to your mortgage set up. Look at the terms and conditions of the loan carefully – does it include a provision for making overpayments, does it have a redraw facility or can you put your payments on hold temporarily if needed?
Refinance Mistake #4 – Not Counting The True Cost
Don’t just compare the interest rate of different refinance products. Look at the total costs involved. Is there a product fee? Is there an exit fee for your current lender? Are there any early repayment charges if you want to change products again in the future? Look at every cost, not just the monthly repayment amount.
Refinance Mistake #5 – Adding Smaller Debts To Your Mortgage
If you’ve got a few smaller debts like loans or credit cards, you may be tempted to consolidate your debts into your mortgage. But this is often not a good idea. Instead of paying of smaller debts quicker, you’ll be paying them off over years – and this means the interest you’ll pay over the lifetime of the mortgage is huge!
If you’re thinking about refinancing your mortgage and want to avoid these mistakes and others, call our financial advisor in Joondalup today. We can help you find the best product for you, and determine if refinancing is indeed the best option for you right now. Contact us online now to find out more.