Questions to ask when refinancing
When refinancing, make sure to look at the overall cost of moving including all fees and charges before you switch.
1. Can I make interest-only payments?
This is primarily applicable for investment loans. However, it doesn’t hurt to find out whether you have got the option of making interest only payments on your mortgage, should loss of income situations or unforeseen circumstances arise.
2. What are the fees, if any, for paying out my home loan early?
If you make extra repayments or pay out the loan before the term is up, you want to know that you won’t be penalised for doing so. This is applicable to fixed term loans as deferred establishment fees have been abolished for new variable rate loans.
3. Can i get an interest rate reduction?
Lenders offer special packages to borrowers, which may offer a reduced interest rate, allow for a lower deposit or waive application or settlement fees. Some lenders also offer cheaper rates to their shareholders – so if you do hold investment interests in a bank or lender, ask about their investor packages.
4. Is the loan fully transferable to other properties?
A loan is usually calculated over 25 years, but the average time spent in a property is often far less – more like seven years. So it’s conceivable that during the life of the loan, you may be changing properties twice or more. Each time you do this, there are costs associated – hence, transferring the security of your loan from one property to another is a valuable option to have.
5. Can I have an offset account linked to the loan?
If you hold savings of any decent amount, these can be taken into consideration in an offset account. The amount in your savings account effectively reduces the amount you are being charged interest on, which has the effect of reducing the amount payable, and the term it will take you to pay off your loan.
6. Can I make additional or more frequent payments?
This is a handy option for reducing the loan term and cost of your mortgage, as it allows you to make lump sum payments against your loan. it’s especially suitable when you receive dividends from other investments, tax returns or other lump sums such as bonuses or end-of-contract payments.
To discuss this article or anything to do with your finances, please call our office today and we will be happy to assist you.