There are numerous reasons for refinancing, including speculation about interest rate hikes, an array of lending options, dissatisfaction with current lender's service, the need for more mortgage flexibility, and the opportunity to pay off a home loan sooner. Some individuals also refinance to consolidate high-interest debt into a lower paying loan such as a mortgage or to tap into the equity in their homes to fund renovations or other investments.
However, refinancing can come with substantial costs. The expenses can run into the tens of thousands, including valuation fees, early discharge fees, application fees, mortgage insurance, and stamp duty (depending on your State).
Refinancing can also be a time-consuming process as one has to deal with two lenders instead of one and the associated paperwork.
While a mortgage broker can help match you with the right lender and manage the process, it's important to note that brokers receive an upfront fee of around 0.4% of the loan amount and ongoing commissions that may represent 0.2% of the loan balance.
Before refinancing, it's advisable to contact your current lender to see if they can offer you a better deal. Additionally, one should consider the costs of refinancing and the time it will take to recoup them.
If you're planning to sell the property in the short-term, refinancing may not be the best option, but if you're planning to keep it for the long-term, the costs might be worth the hassle. If your calculations show that you can save money by switching lenders, remember to ask if your current lender can match the deal you are considering.
Published: Thursday 29th March, 2007
Last updated: Wednesday 8th February, 2023
