With interest rates at record lows and competitive deals on offer, switching to a new loan or lender may be an appealing prospect, with the potential to make significant savings.
Since the Reserve Bank of Australia (RBA) began its latest round of rate cutting, lenders have been lowering mortgage interest rates across the board, with several now offering rates below the 3% mark.
But before you make the decision to refinance, there are a number of areas to consider. Here we cover off some questions you should ask before making the switch.
Refinancing to a lower interest rate can be a great way to lower monthly mortgage payments, freeing up some of your income for spending in other areas.
However, opting for lower repayments will usually mean signing up for a longer loan period – and the longer you take to repay your debt, the higher the accumulated interest payments will be.
Before refinancing, do some calculations to see how the new loan will stack up in the long run. If you find your total interest payments are higher under the new loan term, you might want to consider adjusting the amount you pay each month (if the mortgage terms allow) to help you to become mortgage-free sooner.
Switching to a new lender can come with a number of associated costs, so it is important to ask your broker about these before making any changes. Some of the costs you need to be aware of include:
Choosing a new home loan involves much more than finding the lowest interest rate. Home loans come with a range of features, which can provide flexibility and help you pay off your mortgage faster.Depending on the lender and loan type you choose, some of the features you might be able to access include an offset account, free redraw, unlimited extra repayments and direct salary crediting. There are many things to consider before signing up for a new loan, so do your homework to ensure you are getting the best deal.
For more information or assistance with your finances please call us on 08 8451 1500
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