As mortgage brokers who take care of a lot of home loans and refinancing in the Perth area, we are often asked about refinancing home loans. On the surface, refinancing can often seem like a “no-brainer” decision. You may be dissatisfied with your terms. The last year, record low interest rates have sent a lot of homeowners scurrying to take advantage of those rates.
However, there are many pitfalls associated with refinancing. You need to consult a mortgage broker who is an expert at refinancing and can steer you through a complicated process that often costs more money than it saves. Here is a quick guide of when and when not to refinance.
Reasons for Refinancing
The biggest reason is if the rate your lender is charging isn’t staying competitive with others in the current marketplace. Another reason: when your financial situation undergoes major change or transition. This can affect your ability to keep up with payments; you may want higher payments to pay the loan off more quickly or lower ones to live more comfortably in the present.
Refinancing works if you have equity in your home and need money for home renovations, an investment property or your child’s education. In periods such as this one, many homeowners are switching to lower fixed rates. Another great reason to refinance is if you have high interest debt such as credit cards or other unsecured loans that you want to consolidate.
Reasons for Caution
There are also reasons to be careful or to ultimately say no to refinancing. If you don’t plan on keeping your home long, it may not be worth your money. If your current loan has prepayment penalties that are too high, it could negate the benefits of refinancing. Any credit problem that may raise your rates can hurt, too.
The best course of action is to review your individual financial situation with one of the qualified mortgage brokers in our Perth office.
Call 1300 745 778 to learn more.