The media constantly bombard us about getting the best deal and switching between lenders, whether it’s for our bank accounts, mobile phones, internet, gas providers or something substantial like our mortgages. But is constantly switching your mortgage really a good idea?
At Luda Financial Solutions, not only are we experienced mortgage brokers, but we are specialist financial planners too. This means that when we look for the best mortgage product for you, we look at your overall circumstances and financial goals – not just who will give you the cheapest monthly repayment.
Let’s take a look at 5 questions you need to ask before you refinance your mortgage.
1. What are the terms of my current loan?
It may be a while since you took out your current mortgage product, so take a bit of time to go over the terms of your existing product. It’s important to know what you have now, in order to be able to compare to any new products you may be considering. Check the term, interest rate, life of loan interest discount rate, any early repayment charges and annual overpayment allowances.
2. How much equity do I have?
Before you can consider refinancing your mortgage, you need to know if you have any equity in your home and if so, how much. You could get a local real estate agent to appraise your home or you can pay a small fee to your bank to get a bank valuation, which may work out to be a lower valuation than a real estate agent appraisal and be more accurate for refinance purposes.
3. What are my financial goals?
You need to know what your long term financial goals are before you refinance your mortgage. Do you want to reduce your payments? Do you want to pay off your mortgage quicker? Do you need a mortgage that allows overpayments or has a redraw facility?
4. How much longer will I live here?
If you’re going to be staying in your home long term, then refinancing your mortgage should be explored. However, if you’re planning on moving on in the near future, weigh up the costs associated with re-mortgaging now and work out if you’ll make a loss by paying costly re-mortgage fees now.
5. What will the fees be?
Work out what your total costs will be to re-mortgage before deciding to go ahead. Don’t forget to include the cost of any early repayment fees on your existing product. If you have a fixed interest rate mortgage, you will be charged the remaining interest payable over the fixed rate term when you refinance to a different lender before the end of the fixed interest rate term. When you refinance your home loan and your loan exceeds 80% of the value of the property, you will be charged loan mortgage insurance (LMI) irrespective of whether you paid LMI previously or not.
If you’re thinking about refinancing, speak to our mortgage brokers in Joondalup today. We can help you decide if refinancing your mortgage is the right decision for your individual circumstances, and if so, we’ll help find the perfect product for you to help you achieve your long term financial goals.