Home News Refinancing - what not to do

Refinancing - what not to do

Font size :
Refinancing your loan is a great way to access more competitive interest rates, better customer service and a product that more closely matches your needs. But when it comes to tinkering with your mortgage, there is definitely a right way and a wrong way to go about it.
There are plenty of situations where refinancing makes perfect sense. If your current lender’s interest rate is higher than its competitors, for instance, or you need to access cash to finance renovations, investments or your child’s education, then refinancing is a great way to tap into your equity.
However, you need to enter the process with your eyes wide open, as there are many factors that can influence the outcome of a refinancing application.
Before you get stuck in a legally binding contract to move your mortgage to another lender, make sure you carefully answer the following questions:
  1. Has my financial situation changed?
If your income has changed for any reason, you may not have the same borrowing power today as you did when you applied for your existing loan. Financial factors that can impact your borrowing power include: moving from full time to part-time or casual employment; starting a new business, so you’re now self-employed; increasing your personal debts, such as credit cards or car loans; and/or dropping an income temporarily to have a baby.
  1. What is my motivation for refinancing?
If your personal debts such as credit cards and personal loans have escalated, and you wish to refinance so you can consolidate them into your mortgage, tread carefully. “People usually ‘bundle’ to reduce their monthly commitment, rather than to pay down the debt more quickly,” says Margaret Lomas, director of Destiny Finance Solutions. “Under those circumstances, it will greatly increase the amount of time you’ll take to pay off your home loan.”
  1. Will I have to pay exit fees to get out of my current loan?
Lenders don’t want you to take your valuable business elsewhere, and they can financially penalise you for doing so. Make sure you check your loan contract carefully: exit fees, pre-payment penalties and deferred establishment fees can equate to thousands of dollars, which can cancel out any benefits you’ll receive by refinancing.
  1. Has my credit rating changed since I first got this loan?
If your credit history has taken a hit due to outstanding debts or financial difficulties that you’ve experienced since you were approved for your current loan, you may have trouble accessing a good rate and/or a competitive product when you refinance. It’s best to do a credit check prior to applying elsewhere; order a free copy of your credit profile at www.mycreditfile.com.au.

Whether you are looking to buy your first home, move home, refinance, or invest in property, a mortgage broker can help. Access loans from all the major lenders, get help with paperwork – plus there is no charge for this service. Get help from a local mortgage broker

Mortgage News and Articles

Mortgage applications drop in second quarter Mortgage applications drop in second quarter

This marks the “beginning” of a downward trend, says Equifax executive Read more

To break monopoly, many smaller lenders could become banks To break monopoly, many smaller lenders could become banks The proposed change could break the Big Four’s monopoly over the mortgage market and help families get cheaper home loan rates ... Read more

Borrowing against the home: A strategy to pay for aged care Borrowing against the home: A strategy to pay for aged care Such debts can generally be divided into long-term and short-term loans ... Read more

NAB slashes growth forecasts for houses, units NAB slashes growth forecasts for houses, units Numerous factors, including tighter credit rules and the growing supply of new stock, have reined in Australia’s seemingly unstoppable housing market boom ... Read more

More mortgage news and articles

Sponsored Links

Saturday, Jul 22, 2017
Top Featured Rates
Top Bank Rates

Get help choosing the right home loan

Whether you're a first homebuyer, looking to refinance, or investing, it's important to have the right loan for your needs. Just fill in a few details below and one of our trusted mortgage advisers will contact you.

A quick & easy way to find the right home loan
  • Purpose of mortgage
  • Household Income
  • How much do you want to borrow?
  • How much deposit do you have?
  • How much is your house worth?
  • How much do you still owe on your mortgage?
  • What type of mortgage do you have?

  • How much is your new home?
  • How much do you want to borrow?
  • How soon do you want a mortgage?
  • First name
  • Last name
  • Where do you live?
  • Phone number

Special Offers

Related Keywords