So, you’re thinking of refinancing your home loan. Or perhaps you’ve decided to make the plunge. Don’t fall into these all too common traps!


1. Automatically refinancing with a current lender without shopping around.


2. Failing to get written confirmation of a new fixed rate while the loan is being processed.


3. Switching loans or lenders without being certain the total cost (including discharge fees, establishment fees, legal fees, stamp duty fees if you’re buying a new property, ongoing fees) of moving is less than the interest savings.


4. Not having a lender or broker evaluate your credit rating.


5. Being lured by honeymoon rates, which ultimately revert to punitive higher rate at the end of the introductory period.


6. Turning short-term debt into long-term debt by refinancing to use equity to pay off credit cards without changing spending behaviour.


7. Entering a deal that gives relatively little benefit but pushes the loan value above 80% of the home's value, making expensive lenders mortgage insurance (LMI) necessary.


8. Borrowing more than you need with repayments you can’t afford – leading to a downward spiral that may bring about the need to refinance again.


9. Switching from variable to fixed or fixed to variable based on the direction rates are moving in at that moment – then wondering why when rates change direction again.


10. Rolling smaller debts into your home loan and extending the loan term, effectively paying interest on small debts over 30 years.

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