5 Mistakes to Avoid when Refinancing Your Mortgage
With rising inflation and rising interest rates becoming an unwelcome occurrence over the last 14 months, many borrowers in Australia are looking to refinance their mortgages to reduce cost of living pressures. As home loan repayments form a large part of the household budget, it is crucial to consider all the factors involved, before switching lenders.
While it’s true that refinancing may help save money on monthly loan repayments and thereby improve your financial situation, it requires proper due diligence to ensure that this outcome occurs.
Here are the top 5 common mistakes to avoid when refinancing your mortgage in Australia:
1. Focusing Purely on Interest Rates
One of borrowers’ most significant mistakes when refinancing their mortgage is concentrating solely on interest rates. While interest rates are undoubtedly essential, they are not the only factor to consider when refinancing. To avoid this mistake, you should also take into account loan features, terms, and fees.
Furthermore, during your evaluation, consider whether the loan offers flexible repayment options that align with your financial goals or not. Remember, a lower interest rate with inflexible terms that don’t suit your needs, might not be as advantageous as you think it might be.
2. Brushing Off the Exit Fees
Exiting your current mortgage may incur exit fees or early repayment penalties. Many borrowers make the mistake of underestimating these charges, assuming they’re negligible. Exit fees can be substantial, so it’s vital to understand how much you may be charged for leaving your current lender, before you refinance with a new lender.
3. Reluctant to Change Current Lender
Many homeowners hesitate to change their current lender, but staying loyal to one institution may not be the most financially advantageous choice. Alternative lenders often offer better loan terms, lower interest rates, and meaningful cost savings. Therefore, it is best to explore all your options, and switch lenders if it benefits you financially.
4. Falling for Initial Rate Offers
Lenders frequently promote enticing initial rate offers to attract borrowers. However, these rates may only be introductory or honeymoon rates, which means they can increase significantly after a certain period. It’s essential to read the fine print, understand how long the initial rate lasts, and what the ongoing rates will be. Look for loans that provide long-term affordability, not just short-term appeal.
5. Going Brokerless in the Refinance Process
While many Australian borrowers opt to navigate the mortgage refinancing process on their own, this can be a costly mistake. Mortgage brokers have extensive industry knowledge and can help you to effectively navigate the complex world of refinancing. They can save you time and potentially secure better deals with lenders.
To Wrap It Up
Refinancing your mortgage can offer substantial financial benefits when done right. Staying away from these 5 mortgage refinancing mistakes, can help you make a well-informed decision, that aligns with your long-term financial goals.
At Oz Lend, we’re here to help you make the most of your refinancing journey and to achieve a brighter financial future. Our team of experienced mortgage brokers can analyse your financial situation, provide advice tailored to your needs, and help you find the most suitable loan options.
Are you ready to refinance your mortgage? Talk to one of our expert mortgage brokers now!