‘Do the maths’ on refinancing
More than 14,000 Australians refinanced their home loans last year to cash in on low interest rates – and the trend is likely to continue. Mortgage Industry Association CEO Phil Naylor said, however, that lower interest rates are not the only reason people might consider refinancing. Dissatisfaction with a current loan or the lender's service, debt consolidation, more options and flexibility in loan packaging and the chance to pay off a mortgage sooner are some other reasons. Some borrowers use the increased equity in their properties to raise funds for renovations or to invest in other areas for self-funded retirement.
But Mr Naylor warned people needed to weigh up the costs, benefits and current economic climate before embarking on refinancing. The Mortgage Industry Association says borrowers need to consider several points before deciding whether or not to proceed.
Borrowers should make sure they're aware of all the costs associated with refinancing, because it's rarely free. The costs may include a break fee if you have a fixed interest rate, early repayment fees, deferred establishment fees, along with government and mortgage discharge fees, plus new loan application fees, stamp duty, mortgage registration fees and mortgage insurance costs.
Don't refinance into a new loan unless you understand exactly what you are signing.
“Make sure the loan also offers you the facilities you want. A low interest rate is only one aspect of the whole package”, Mr Naylor said.