Should I refinance my home loan or not? That is the burning question right now in mortgage holders’ minds.
And it’s hardly surprising when fixed-rate loans have already been on the rise for a year while variable loans are now increasing fast as well, in the wake of the Reserve Bank of Australia’s cash rate hike to 0.85% this month.
Amongst a wealth of top-notch refinancing advice we can offer, here are a few extra points to consider.
1. Do cashback offers really give you cash back?
Aiming to keep further rate hike fears down, lenders are reaching out to mortgage holders with special offers and deals.
A good example of such deals is cashback offers which essentially give refinancers a quick cash splash, often in the form of a gift card or similar, if they choose to take up a refinanced loan with that lender.
Sounds great, right – but is it?
Tempting as these deals may be, it’s important to look at all the aspects of your potential new lender and loan, particularly what happens if and when their initial deal ends.
And with cashback offers in particular, don’t be surprised if, beyond the initial cash, you find high interest rates and other drawbacks, including agreeing to certain terms and conditions.
On the other hand, if you’re short on cash – and who isn’t, these days, particularly when you’ve just bought a home – cashback offers can be helpful.
Just remember that cashback offers may only be available for a certain period, amount, type of property, or loan-to-value ratio (LVR).
2. Short-term benefits or long-term gains?
Again, we recommend that you don’t get caught up in the rush and panic of rising interest rates combined with the frenzied property market that is just only beginning to ease.
Remember that if you are thinking, should I refinance my home loan, refinancing should help you save and not vice versa.
The actual financial cost of both short and long-term benefits with a refinanced loan should far outweigh that of your current mortgage.
So, apart from special deals, does your refinancing opportunity still feature excellent interest rates with reasonable fees, charges and other benefits?
Would you jump at it if didn’t come with a great offer?
Of course, none of this means you shouldn’t talk to lenders offering cashback offers, frequent flyer points and other benefits.
Be honest with them and tell them what you’d like to see in a refinanced loan from them.
Perhaps tell them that while their short-term benefits are great (it always pays to be polite), you’d prefer they take the cost of these benefits out of your mortgage debt or give it back to you in the form of an interest rate discount.
If nothing else, you’ll get a good idea of how easy it is to work with this lender.
3. Should I stick with my current lender?
An excellent question!
You may end up staying with the lender you know and pushing for better benefits from them rather than refinancing.
It’s certainly worthwhile talking with your current lender before refinancing, especially if you’ve had a good relationship with them for awhile.
With rates now changing on almost a daily basis, your lender may have much better opportunities on offer for you and never more so than when you tell them you’re thinking of refinancing.
If not, there are spades of other lenders in the sea to choose from.
4. How do I know if I’ve got a good deal?
Yet another good question and much of the answer depends on your personal and financial situation and your mortgage priorities.
Research, explore and make some calls; ask friends, family members and industry experts for recommendations and advice; and spend plenty of time with your calculator and budget before you make your final decision.
NB: don’t forget you may have to pay exit fees to your current lender and application and valuation fees with your new lender.
But if you’ve got a good deal, these fees should soon be wiped out by all the great savings you’re enjoying.
Refinance My Home Loan. We Can Help.
Of course, if you’re wondering should I refinance my home loan, the best people to contact is our Lending Loop team.
We can help you get the hang of the refinancing game including sorting out figures and leading you through the maze of cashback offers and other tempting deals.
We’ve got more than 40 of Australia’s biggest banks and specialist lenders at our fingertips and best of all, we’re free!