Mortgage Refinancing: a beginner’s guide to the best home loans
For us, the end of the financial year is a bit like New Year’s Eve. Sadly, this time of year involves fewer fireworks and more paperwork (but hey, at least you have a reason to pop a bottle of bubbles once your taxes are done!) Instead of resolutions involving eating more veg and watching less TV, come EOFY time our minds turn to creating better money habits. One simple way to do this is to give your mortgage a health check. We’re betting you can’t even name your interest rate. With a little expert guidance, mortgage refinancing can be a smooth and painless process (unlike trying to find a taxi at 12.01am on New Year’s Day). Here’s how:
Why should I refinance my mortgage?
Changing your lender is usually done to get a better interest rate (ie. so you can potentially save tens of thousands of dollars over the life of your loan). However, some other reasons you may like to refinance are;
overall finance restructuring
quality of service of your lender
convenience and flexibility
equity release (to invest in another property for example)
When should I refinance?
Our in-house mortgage expert Toby Box recommends taking a look at your mortgage every 3 years. Generally, savings can be made that cancel out the refinancing cost and fees in this relatively short timeframe.
What do I need to do to get started?
You’ll need to find a finance expert or mortgage broker who will ask the right questions to properly assess your financial situation including your financial history, employment, assets, liabilities and future plans.
You’ll have to be honest about your current banking habits and what your must-have features are so that the broker can find the best product for your unique needs.
The broker will then present you with some options and potential savings or restructure advice. Once you decide on which way to go, there’s some paperwork to apply and then some contracts from the lender to complete. Simple!
Why should I use a broker?
A good broker saves time (and headaches). Do you really want to visit and compare multiple banks, building societies, credit unions and non-bank lenders? Brokers have access to many institutions and deals at one time (and sometimes they even have access to offers that aren’t available to the public). They also know about the pitfalls that might trip you up and they’ll take the time to explain each product option to you and cut through all that mind-boggling bank jargon and math. Brokers cut out some of the legwork and will also have a good idea as to whether your application will be accepted ahead of time.
How does it work in real life?
Wealth Effect had a client recently who banked with ANZ. Their interest rates were 4.81%, 4.81% and 4.15% over three different loans, applied over a total of $887,750. Our solution was to refinance the loans with another lender, with interest rates of only 4.09%, 4.09% and 3.87%. We had an even cheaper rate available for one of the loans, but the client wanted the convenience of all the accounts in one place.
They are now saving $727.11 per month and $8,725.32 per annum. Take a moment to imagine what you could do with an extra $700+ a month! Now, this saving could have been used for a number of fun things, but we advised our client on the right path for them: making the same repayments as they had been on their old loans. They’ll pay off the debt over six years early (and save a whopping $141,567.61 in interest).
If mortgage refinancing sounds like a good fit for you, chat with Toby: firstname.lastname@example.org or 0401 626 114