Considering Refinancing - What Should You Do Before Making Any Decisions?

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Anyone who has bought a home or an investment property in the past decade or so has benefitted from historically low interest rates. And they have had a great run. But with central banks across the world seemingly turning around, albeit slowly, and rising interest rates, change could be in the wind.

That could provide the impetus for home owners or long-term investors to start shopping around for more suitable mortgages, maybe even taking a chance and moving from variable to fixed interest rates.

A successful mortgage refinance can have many benefits, so what should you do before making any decisions?

Research, research, research

Take a very close look at your current home loan. Research everything from interest rates to fees and charges and features, so you know what you are comparing a possible new loan to. Have you ever used the features on your current loan? Do you think you ever will? Do these features mean your home loan is more expensive? Features change a lot over the years, as do your requirements. The feature that first attracted you to your current home loan years ago may be irrelevant now. Maybe you want a new feature you haven’t got with your current mortgage. Maybe the amount of features on your home loan are tiny compared to a new loan and the flexibility they may offer.

Speak with your mortgage broker

A good mortgage broker should be able to make an assessment of your current mortgage relatively quickly, and whether or not it is working for you as well as it can. They can also speak with you about whether or not you want to consolidate any other loans or credit card debt. Doing this can save you money almost immediately. If you and your broker think refinancing could be beneficial, then they should be able to find you a range of home loan options that may be suitable to your circumstances and property goals.

Do the sums 

Working out whether you may be better off with refinancing and switching loans can be simple, if you have the right tools. Mortgage House’s  Switching Mortgage Calculator can give you an indication very quickly of whether or not it is a viable thing to do. All you need to do is enter the estimated property value, loan amount, loan period and repayment frequency. Make sure you also enter any termination fees, and what the interest rate levels of the current and potential loan are.

Consolidate your options

If you do decide to refinance, it can be important not to send mortgage applications to multiple lenders in the hope one will say yes. That can impact negatively on your credit rating, which can affect your ability to borrow money in the future. 

Make sure your documentation is complete

Ensuring your mortgage application is complete might sound like an obvious suggestion, but if you do apply to refinance your home loan there may be sections of the application that won’t apply to you. If that’s the case, cross them out so the bank or lender knows they don’t have to chase up that information. And if you aren’t sure how to complete a section of your application, don’t be afraid to call your lender or mortgage broker to ask questions. It is better to do that than send in an incomplete form.