Got a home loan? Paying too much on interest? Stuck on a mortgage structure that no longer suits your situation? Want to pay off your loan faster?
If you answered yes to any of the above, then make sure you read on..
With falling interest rates and banks willing to lean over backwards to get your business, now is the perfect time to explore your refinancing options.
What is Mortgage Refinancing?
Refinancing a mortgage means paying off an existing home loan and replacing it with a new one. This usually involves (but not always) changing from one lender to another.
Why should I refinance my mortgage?
If you haven’t done a mortgage review lately, then you could be missing out on the opportunity to pay off your loan faster with no extra effort – saving you thousands of dollars in the process.
Here’s three of the most common ways refinancing a mortgage can help you do this:
1) Better interest rate
This is the most common reason people want to refinance a home loan. They see banks advertising their latest home loan rates, which are much better than what they’re on, and want to refinance to this lower rate. Doing this will save you money because you’ll have lower monthly repayments since you’ll be paying less on interest.
2) Professional assistance
If you are included in the 70% of New Zealanders who went directly to the bank to organise your original home loan, then refinancing provides you the opportunity to save money by utilising a mortgage adviser’s professional assistance.
Since they have more negotiating power with the banks than an individual, they can often secure you a mortgage rate below what is advertised. They’ll also assist you in setting up a loan & repayment structure to help you pay off your mortgage as fast as possible – saving you thousands of dollars in the process!
3) Loan structure to suit lifestyle changes
Throughout the term of a home loan, your financial or life situation may have changed significantly. Getting a new job, having kids or doing renovations will all influence your repayment capability and loan structure. In times when certainty is needed, fixing interest rates for 3 or 5 years can be very attractive.
When it isn’t a concern you can take advantage of even lower interest rates by fixing for a shorter period of time. Additionally, a different loan structure (Table, Reducing, Interest Only, Transactional) may now be more appropriate to suit your lifestyle changes, which will save you money and stress.
Things to consider before refinancing your home loan:
Know your reasons – Before refinancing you need to know your reasons to do so. Often this can simply be to save money on interest and become debt free faster. Other considerations as mentioned above involve lifestyle changes you’ve recently had or are planning. These include employment status, having children, starting a business or renovating your house. All these will influence how you approach home loan changes.
Break fees – This is the fee you’ll need to pay to get out of your current mortgage. As interest rates drop these fees will be higher. The good news is that your new lender could potentially cover these fees for you. Even if they don’t, it’s still worth paying a $2000 break fee if you’re going to save $5000 or more by doing so.
Switching conditions – To get the best refinancing package from a new bank may involve switching more than just your mortgage. Don’t be surprised if you will need to shift your everyday banking, credit cards and the likes to your new provider.
Know your options – Banks are getting more and more competitive in the refinancing market, which is something you can take advantage of. This means your current lender may no longer be your best option as other banks will offer all sorts of incentives to win your business.
To explore your refinancing options, it’s best to start with a trusted mortgage adviser. They’ll be able to guide you through the refinancing process and will quickly compare and secure you the best available mortgage package.
If you’ve been thinking, “should I refinance my mortgage?” then the best place is to start with our short refinancing questionnaire. With this information, we’ll be able to help you determine if refinancing is right for you.
With years of experience helping people like you, along with our background in the banking and debt consolidation industry, we’re in the best position to provide you with advice you can trust. In a matter of minutes we’ll answer all your questions and point you in the right direction – saving you time, money and a whole lot of stress.
Jeff Elias is a registered financial adviser. He worked previously as a mortgage debt reduction specialist and has an intimate knowledge of mortgages. He likes to look for creative solutions where required and enjoys showing people how to structure and pay their mortgage off quickly. Jeff is a father of four and enjoys tennis and walking his dogs.