Should you refinance for a better deal?
Refinancing a loan can take advantage of lower interest rates to bring down the overall cost of servicing a loan. But it’s not always the best, or the only, option.
There are many different factors borrowers need to consider when thinking about refinancing a loan. The first step is to speak to an expert about your needs and whether you can afford to service a different loan structure.
At this point, your lender or finance broker will also need to find out about your existing loan, repayments and the structure of the facility.
The current value of the property is also taken into consideration, so the finance broker will have access to current data that will indicate what the asset is worth.
Then finance broker will have a look at the various loan options and figure out whether it’s worth it for the borrower to refinance. It’s not usually worth it if it’s only going to save a couple of hundred dollars a year, taking into consideration exit and application fees. But if it’s going to save upward of $1000 a year, refinancing might be a sensible approach.
Another key consideration is lenders’ mortgage insurance (LMI). If switching loans means you will need to pay LMI again, sometimes it’s not worth refinancing.
If you want to refinance just to lower lending costs, ask your finance broker to negotiate with the bank for a lower rate.
If you do decide to go down the refinancing path, working with a finance broker rather than going straight to a bank has advantages because the broker has access to thousands of loan products from scores of different lenders.
Finance brokers can compare lots of different lenders and, if there is a better opportunity, they’re able to access it. Finance brokers are always working to give you great advice that’s in your best interests.