Do you think you can find a better home loan? Have you done your research? Many mortgage holders make the mistake of refinancing
their home loan without researching the market and end up not saving as much as they could have. Before deciding on a new home loan, take a look at these do and don’t tips:
DO contact your lender before refinancing. If you find that your lender offers great customer service, but you want a better interest rate or a different home loan, they may be willing to negotiate a better deal in order to keep you. Staying with the same lender could also save time and paperwork.
DON’T apply for a home loan with multiple lenders. Yes, it is suggested that you compare a number of different lenders; however, each time your application is assessed, the lender will look at your credit report, which will leave an enquiry on the file. This can be extremely damaging as multiple enquiries on your credit report could classify you as a high-risk borrower. It is safer to submit one application at a time and only with a lender you intend to proceed with.
DO contemplate Fast Re-fi. Fast Re-fi can help cut the refinancing process down significantly. All of the correspondence is done between your current and future lender and you may only have to wait a few days, rather than weeks. Not all lenders offer this, so make sure to speak with the lender first.
DON’T assume you will save money. It is important that you research more than the interest rate when it comes to choosing a home loan. Factors such as ongoing monthly fees and home loan features could affect how much you could save. Also, refinancing may have other costs such as establishment fees and closing fees for your current loan.
DO work on your finances. Even though you were approved for your current loan, it doesn’t guarantee that you will be approved for a new loan now. Before applying for a new loan, make sure that you are in the best financial position that you could be in. Take the time to repay as much debt as possible and improve your repayment history. This will also help you look like a high quality borrower and may give you a better chance of getting a competitive interest rate.
DON’T forget about Lenders Mortgage Insurance. If you are planning to borrow over 80% of the purchase price, you will most likely have to pay Lender’s Mortgage Insurance. This is quite a significant extra cost, so it may be beneficial to try and avoid it.
DO look at a shorter term. This will depend on how long you have had your current loan for and what your financial situation is like. But, if you are able to handle the higher repayment amount, you could save a sufficient amount of money in interest.
DON’T depend on introductory offers. Many mortgage holders decide to refinance because of a special prize or low introductory rate, however, this
could end up costing you more in the long run. Introductory rates (or honeymoon rates) often have a very low interest rate for the first few years, but then revert back to a rate that is less competitive. This is why you need to consider the whole loan package, not just the attractive features.
It can be confusing to know whether to get a variable rate or fixed rate mortgage, and what features are important. That's why it's important to not only check the right rates, but make sure that you're getting the right features in your home loan. Get help choosing the right home loan
Anouska Linz is Manager, Online Sales at State Custodians and has over 10 years’ experience in financial services, both in broking and banking. Holding a bachelors degree in accounting, Anouska quickly discovered a love for mortgage lending and assisting people to achieve their home ownership goals. She leads a team of highly experienced lending specialists who are passionate about finding lending solutions which result in real wins for the customer. She is also a massive netball fan.
For more information on our home loans, visit www.statecustodians.com.au or call 13 72 62.