Don’t Be Fooled By The Interest Rate
Looking at refinancing? Don’t be fooled by the interest rate.
I have always considered myself honoured to help you get into your new home. It’s a special privilege to be part of that journey. However, I don’t believe the journey should stop there and I always encourage my clients to review their home loan on a semi regular basis. But what does this mean and what should we be considering when we work together to do this?
Firstly, don’t be fooled by the interest rate. Finding 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, but could save you more in the long run. Including features such as an offset account will prove valuable as it will allow you to make larger repayments or put any extra cash against the loan. Products without this feature may charge a fee for early repayments.
Secondly, Honeymoon rates are just that. Don’t be lured by offers with discounted introductory rates unless you’ve calculated the savings over the life of the loan. While a loan with a discounted interest rate seems like 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 may be more beneficial financially to negotiate a lower interest rate without an introductory discount.
Thirdly, refinancing is not done for free it’s 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. This is an essential for consideration and really hits home on the point of not being fooled by the interest rate.
That being said refinancing saves many people a lot of money on their home loans. It may also be able to provide the deposit you need for an investment property or to consolidate and tidy up other financial goals. Refinancing during this low interest rate market, whilst the banks are hungry for new business could be a great solution.
If you would like some help considering your options and explore whether refinancing would be beneficial to you, please don’t hesitate to contact me.