How to avoid falling into refinancing traps?

Whether you want to reduce monthly mortgage repayments or refinance for equity release from your current home, refinancing can offer a lot of benefits. Here are few things to be aware of so that you don’t find yourself caught in a bad deal.

Don’t be fooled by the interest rate.

Finding a lower interest rate doesn’t always necessarily mean you got a better deal. In fact, a product with more features may cost you a bit more in fees however it could save you more in the long run. Features such as an offset account will prove valuable as it allows you to contribute larger repayment or pay extra cash into account to offset the interest. Product without this feature may charge a fee for early repayment.

Honeymoon rates

Don’t be lured by offers with discounted introductory rates unless you’ve calculated the savings over the life of the loan. While a loan with discounted interest rate seems an attractive offer, it’s only temporary. Once the introductory period is over, the interest rate will revert to a higher standard variable for the rest of the loan term. It may be more beneficial financially to negotiate a lower interest rate without an introductory discount.

Be aware of the fees

One of the main reason for refinancing is to reduce the financial hardship. However, that doesn’t mean that it is not going to cost you. They are many fees involved, which may include application fees, bank discharge fee, a valuation fee, land registration fee and mortgage insurance. While these costs cannot be avoided and most importantly you have to ensure that the costs involved are not cost you more than the savings to make the refinance process worthwhile.

While there are many traps to avoid, a little expertise can help you reduce the stress out of refinancing and save you money to fund that renovation, or simply find a loan that suits your life a little better. Come to speak to Kevin today on 0415820016 , he will guide you through the process of refinancing and help you avoid the refinance traps.