Home News When is refinancing not worth the hassle?

When is refinancing not worth the hassle?

Font size :
Nila Sweeney
Are you thinking of refinancing your mortgage? Before you begin sorting through loan applications, it pays to seriously consider whether refinancing is worth the hassle.
 
There are plenty of reasons why you may be considering refinancing your home loan.
 
It might be a cheaper interest rate that has tempted you to switch lenders, or you may be seeking to consolidate all of your loans and debts to one lender.
 
However, there are some situations where borrowers should avoid refinancing, says Tony Beck, head of corporate and social responsibility for Members Equity Bank. According to Beck, refinancing may not be worth the hassle when…
 
You have a great relationship with your current lender
It may not be worth the hassle of refinancing in order to secure a slightly lower rate if you’ve already established a good relationship with your current lender.
 
“In these circumstances, chasing the small reduction in interest rate may prove to be a mistake,” he explains. “As with other industries, you get what you pay for – and the small reduction in interest rates may mean you’re not as well looked after.”
 
You’ve been paying off your current loan for several years
You need to consider how long you have been paying off the loan so far, and how long you plan to hold it for in the future.
 
For instance, if you’ve been paying your loan for 15-20 years already, then refinancing over a longer loan term will immediately reduce your monthly repayments. But, it will cost you many more years and much more money in the long-term.
 
You’ll pay hefty exit or penalty fees
Do your calculations to ensure that the benefits you’ll receive by refinancing are not outweighed by any deferred establishment fees, penalty fees and exit fees that your current lender may impose on you for closing your loan early.
 
If you used a mortgage broker to secure you loan, they may also try to claw back some fees from you if you refinance within the first three years, as they will miss out on trailing commission from the loan.
 
“Refinancing isn’t for everyone,” says Michael Quinn, director of legal and financial services provider, The Quinn Group.
 
“If the current rate on your loan is comparatively low, there may be no benefit to be had from refinancing. In fact, you may end up incurring more costs when exit and other administration fees are taken into account.”
 
Before you dive into a refinance, check your original loan documents carefully to see exactly how much you’ll need to pay in order to close your loan. Also be sure to take into consideration any loan application fees and bank fees you may be hit with if you decide to proceed with a refinance.
 
 

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

Mortgage News and Articles

New social housing aims to transform Ivanhoe Estate New social housing aims to transform Ivanhoe Estate

The sprawling redevelopment aims to boost the supply of affordable housing in Sydney Read more

A new suburb will be built in west Melbourne A new suburb will be built in west Melbourne Mount Atkinson will become home to more than 22,000 people over the next 15 years ... Read more

Surging house prices threaten liveability in Melbourne Surging house prices threaten liveability in Melbourne Analysts warn the city could become just as unaffordable as Sydney, if property trends continue ... Read more

More Aussies would benefit from regional hubs linked to cities More Aussies would benefit from regional hubs linked to cities Shorter commutes could spur higher home sales in regional towns, analysts say ... Read more

More mortgage news and articles

Sponsored Links

Thursday, Aug 17, 2017
Top Featured Rates
Top Bank Rates

Get help choosing the right home loan

Let us help you find the right home loan for your needs.

Tell us a bit about your circumstances:
  • 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?
Next
  • First name
  • Last name
  • Where do you live?
  • Phone number

Special Offers

Related Keywords