The mortgage market is highly dynamic and ever-changing. Mortgage offers today are poised to get outdated as lenders continuously chase and attract potential homebuyers with a more competitive roster of loan products.
Given this nature of the mortgage market, it’s a good time for borrowers to consider refinancing to benefit from the changes in the market. However, there are common refinancing mistakes that can actually make you worse off. If you are planning to refinance your loan any time soon, make sure you do not fall into these mistakes:
Relying too much on interest rates
Getting a lower rate is only one of many factors you should consider when you refinance. While a more competitive interest rate sounds good on paper, you should consider the hidden fees and costs it could entail. Furthermore, you might also be charged for ending your current mortgage contract, especially if you are in the middle of a fixed-term.
When you refinance, you should consider the comparison rate of the mortgage product you are looking to apply for. Comparison rates allow you to determine the "true cost" of the loan with a single percentage figure.
Aside from interest charges, comparison rates include upfront fees and recurring costs. They also take into consideration how long you are going to pay for your loan and your repayment frequency. Naturally, comparison rates are higher than the mortgage rate.
When refinancing, you should also inquire about the features that will come with the loan. Ask your target lender about features such as offset accounts, extra repayments, and redraw facilities.
Not shopping around for better deals
While it is not necessarily wrong to stick with your lender when you refinance, there are instances when it is more advisable that you explore what other lenders have to offer. Brand loyalty can sometimes hinder you from considering other opportunities that can put you in a better position.
The best way to shop around is to reach out to experts. With their network of lenders, mortgage brokers and home loan specialists will be able to help you find the right bank that has the ideal product for your needs.
You can reach out to a professional by visiting Your Mortgage Broker here.
Refinancing to get out of a financial setback
If you are struggling to meet your repayments, then it might not be best for you to refinance. You should only consider refinancing if you are in a strong financial position — this way, you will be able to get a better deal that is more competitive than what you currently have. Having a good track record with your lender will open a lot of opportunities for you to refinance to a better mortgage product. This means that you can save more and access useful loan features.
There are instances when refinancing still makes sense even if you are struggling financially. Should you find yourself having struggling to juggle your personal debts, then refinancing to consolidate all your loans is a practical choice. However, you should take note that this route might not necessarily give you a competitive offer — it would only provide a way for you to manage your finances better.