( CHA CHING )
IS IT WORTH REFINANCING YOUR MORTGAGE ?
Mortgage finance expert Chris Straw explores if refinancing is the way to go .
espite all the recent changes to
D the finance sector , and Australia ’ s
enjoyment of some of the lowest interest rates in history , refinancing still requires careful consideration .
There is no doubt , nearly every person I meet with to discuss refinancing their home loan is paying too much in interest on their mortgage . In fact , some people I have helped to refinance their home loan have been paying tens of thousands of dollars too much each year . For a growing family that is a lot of money . Money that can be used on a holiday , or paying down the mortgage or putting into other wealth creation assets .
The problem is that many people take out a mortgage and then tend to stick with their home loan provider for many years without realising that their rate has quietly crept up . By this time , they have paid way too much for their home loan and have effectively lost quite a lot of money .
Comparative rates across the home loan sector show that there is a wide range of interest rates and products available . Rates vary from as little as 3.4 to 6 per cent and higher .
I suppose this is the benefit of working with a broker rather than a single finance institution . When you work with a broker , you get to see all the products and rates available and gain a better understanding of what your options truly are .
While refinancing does seem like a big thing to do , it is actually one of the best things you can do if you want to stop paying too much interest . In effect , you are losing money . You are throwing it away on interest when you could be using it for other things .
There are some key things to look at when refinancing and a broker can help you to work through these things :
• What types of better rates and products are available on the market which suit your circumstances
• Look at your existing loan product and work out what type of exit fees you may have to pay . These may include penalties , bank discharge fees , and mortgage discharge fees
• Work out what your new mortgage is going to cost to set up . This may include bank application fees , valuation fees , preparation and registration of mortgage documentation fees .
• Work out the difference and the net result .
An example may be that you may find is that refinancing your mortgage may cost $ 1000 ; however , the money you may save per year in interest costs is $ 5,000 . Over the life of a 20-year loan , this could be $ 100,000 .
Refinancing can save you a lot of money . Is it really worth it ? Absolutely yes . Which is why banks will try and reduce the interest rate for you when you tell them you are leaving . Even if they offer to reduce it a little , chances are they are still not going to reduce it enough for it to be financially beneficial for you . My advice is , don ’ t let the fear of exit or refinance costs scare you . It is more than likely you are paying way too much and refinancing could end up saving you lots of money .
Chris Straw Chris is a mortgage finance expert and the co-founder of You ’ re Welcome Finance , one of Australia ’ s leading finance brokers . To learn more visit www . yourewelcomefinance . com . au
34 OH ! MAGAZINE ( SEPTEMBER 2018 )