Refinance A Home Loan
Not happy with your bank's customer service? Maybe you feel like you are getting ripped off? Or you've just seen a much better home loan rate advertised? If either or all of these scenarios apply to you, then you are one of many Australians who may consider refinancing your home loan.
If you can get a better deal somewhere else, it only makes sense to switch, right? Theoretically yes, but there are some important things that should be considered before you make that decision to switch.
When Is It The Right Time To Refinance?
There are some situations where refinancing your mortgage can make sense, the most popular one is of course when your current rate isn't as good as others in the market. But other times when it could be a good idea to look at refinancing could be if there has been a change in your financial situation, or if you would like to consolidate some credit card debts. You may also want to refinance in order to do some renovating, or purchase another property.
There are also times when you should avoid refinancing, such as if there are high fees on exiting from your existing home loan or if you have ruined your credit rating since taking out your first home loan. In the second situation, it would be a very bad idea to refinance, as you will appear as more of a risk to the banks, and thus won't receive a very competitive rate if you were to take out a new loan.
Things To Consider Before Refinancing
A lower interest rate shouldn't be the deciding factor on whether or not you switch lenders, you need to think about more than just this. The most important thing for you to consider here is the amount of fees you may be charged if you exit your existing home loan plus the costs associated with applying and taking out a new loan, including application fees, valuation fees, legal fees plus more.
You should also be wary of the vibe you get from the new lender. If they are slow in processing your new application, or aren't very keen to help you out, then you should stop and think to yourself, 'Will this be how it is going to be for the life of the loan?' don't get stuck with a lender who has hopeless service.
Don't Leave Your Old Lender Behind
It is a very good idea to discuss your situation and your plans with your existing lender. They will do everything they can to keep you as a customer, which could even mean beating the other lender's offer, especially if they can see you have been a good customer. Don't be afraid to do this, you don't have to be aggressive about it, just be honest about what you plan to do and what you have been looking at. It won't hurt to ask.
If you still think someone else has a better offer than prepare yourself for the switch. Make sure you have the best profile going into to the new agreement. Pay off as many debts as you can, cancel all your credit cards, pay all your outstanding bills, make yourself look as good as you can so you look safe, low-risk and thus you have a better chance of getting a great rate.