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What to do When Looking to Refinance Your Home Loan

Buying a house can be such a challenging ordeal that you may be tempted to set and forget – simply paying your regular repayments. Whilst some people’s circumstances may not have changed and their home loan is still fit for purpose, your needs may have altered. You may have also been subject to interest rate rises which have drastically impacted your repayments.

Refinancing may be a great way to minimise your repayments, and have you paying off your home loan in a shorter period of time.

Know Your Current Interest Rate

Even if you are making your repayments on time each month, not everyone will know their current interest rate. Your interest rate may have changed multiple times, particularly if it is a variable rate, and depending on how vigilant you are, you may be able to negotiate a better rate. In many case as a first port of call, you may wish to approach your current lender and see if they’re willing to give you a better rate.

Shop Around – Cautiously

It’s common that financial institutions may offer lower rates to new customers than existing customers. Whether you do the research yourself or use a comparison tool, be sure to compare lenders and their product and interest rates. However, if you are using a comparison tool, do be aware that they may not be wholly representative of the market, that is, they don’t include all lenders and products.

As with the first time you applied for the loan, you’ll need to do your due diligence. Watch for honeymoon rates, which are heavily reduced rates that may be fixed for a period, before rising to a much higher one once the introductory rate runs its course.

Avoid applying with too many lenders through this process, as multiple credit checks may leave a query on your credit report and impact your ability to seek finance. You may also want to search out feedback on what it’s like to bank with the alternative provider, to understand their reputation and what’s important to you.

Consolidation May Be an Option

If you have several forms of debt, for instance a home loan, personal loans, etc., you may be able to combine your debt into one loan and possibly save on interest and have one single repayment. This may well be a complex option, as you may be able to reduce the interest rate of your loans, however you may end up paying off your loan over a much longer period of time, which may impact your total repayments.

Consider a Broker

Depending on your experience, time available, and comfort levels in negotiating, you may wish to outsource finance approval to a broker. A broker will operate on your behalf as a go-between to the lenders, recommend a product(s) and help you through the process.

As with any service providers, quality varies, so you’ll have to do your research on the broker. Ensure the Broker is licensed and reputable. Brokers may be paid a fee or commission by the lender as well as charging you a fee, so be sure to ask questions of them to get the full picture.

Given the nature and size of the investment, it’s always a good idea to keep on top of your home loan. Be aware if your interest rate changes, and don’t be afraid to reach out to your lender or a competitor if you feel that your loan is no longer competitive or your situation has changed.

Disclaimer: The ideas, discussions, options and details expressed in SCCU Blogs are for general informational purposes only and are not intended to provide specific personal advice or recommendations for any individual or on any specific security or investment product. We intended only to provide education about the financial and banking industry to make the complex simple, and help everyday customers realise their dreams.

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