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 a few things to be aware of so that you don’t find yourself caught in a loan which doesn’t meet your needs.

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 more substantial repayment or pay extra cash into the 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 a 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 reasons for refinancing is to reduce mortgage interest. However, that doesn’t mean that it is not going to cost you. There are still 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 simplified the process of refinancing and find a loan that suits your life a bit better. Come to speak to Kevin today on 0415820016, and he will guide you through the process of refinancing and help you avoid the refinance traps.

Disclaimer: We recommend that you seek independent financial and taxation advice before acting on any information in this newsletter. It contains general information only and has been prepared without considering your objectives, financial situation or needs. We recommend that you consider whether it is appropriate for your circumstances. Your full financial situation will need to be reviewed prior to acceptance of any offer or product. Interest rates are subject to change without notice. Lenders terms, conditions, fees & charges apply.