If you are thinking of how to refinance, first here are some things to avoid.

Most people look to refinance to lower their interest rate. As a mortgage we get paid when client refinance but we also put caution into the wind for out client. If you are with a Big 4 or major second tier lender, we can usually find a lower interest rate for you but that doesn’t mean it makes sense for you to refinance. Here are some things to be aware of so that you don’t find yourself in a bad deal.

Don’t just look at the interest rate

Some loans have certain features you are want, for example an offset account. Usually the lowest interest rates relative to basic product which don’t have offset accounts attached. In fact, a product with more features may cost you a bit more in fees or interest, but could save you more in the long run. Including features such as an offset account will prove valuable as it will allow you to make larger repayments or put any extra cash against the loan. Products without this feature may charge a fee for early repayments.

We rarely like Honeymoon rates 

Most, if not all, discounted introductory rates have a significantly higher interest rate in the long term. While a loan with a discounted interest rate seems a tempting offer, it’s only temporary. Once the introductory period is over, the interest will revert to a higher standard variable for the rest of the loan term. In some cases it might make sense to have an introductory rate.  This is usually when the loan amount is high and the LVR is low. The high loan amount reduces the proportion of refinance fees and the low LVR allows the chance to refinance after the honeymoon period.

Be aware of the fees

Have a read of the the article What are the costs to refinance? This article will explain many of the different fees which may or may not be included in the refinance. There are many fees involved, which may include discharge and application fees, a valuation fee, land registration fee, and mortgage insurance.

While there are traps to avoid, Orange Mortgage and Finance Brokers will work out all the costs and give you the detailed calculation to make sure it makes sense to refinance. Give Orange a call to discuss your specific needs.