Are you a stickler for a certain supermarket, or do you like to shop around for the best buys?
Whether you’re an Aldi aficionado or a Coles crusader, sometimes it pays to scour the specials – and the same principle applies to your home loan.
With interest rates and policies fluctuating between banks, it might be time to consider a mortgage switcheroo, otherwise known as refinancing.
To help you decide whether refinancing is the right move in your aspiring property portfolio, our mortgage broker expert Grace Lee, at Walshs, answers some of the top questions on the topic.
WHY DO PEOPLE MAKE THE SWITCH?
According to Grace, clients usually switch lenders for a better rate or service. “Most banks tend to offer the lowest rate for new clients, so today’s low rate doesn’t mean you’ll be on the lowest rate forever. When people realise they’re paying much more than they would at other lenders, they usually start to shop around for a better rate,” Grace says.
The same applies to investment properties. “In a lot of cases would-be investors turn to their existing lender first, but then they find another bank offers lower rates, fees and charges so they move,” Grace says. “In other cases, their lender won’t lend them the money for a new loan but another bank will, because every bank’s borrowing capacity is different.”
Another reason people refinance is to change the terms of their loan, including the amount or frequency of their repayments, or the overall life of their loan. They could also be looking to consolidate credit cards or personal debts into one loan to reduce the amount of interest in the long run.
HOW MUCH AM I UP FOR?
Dishing up the bad news first – refinancing costs money. You’ll usually be expected to pay a discharge or exit fee ranging from $100 to $500 depending on your lender, along with set-up fees for your new loan and associated accounts, which varies from $300 to $1000 depending on your T&Cs. You could also be slugged Lenders Mortgage Insurance (LMI) depending on your circumstances and the lender.
Now for the good news – most banks are eager beavers when it comes to attracting new clients, so they’ll usually offer a cash-back incentive. Grace says Walshs also negotiates special policies for clients in the medical profession, enabling them to borrow up to 95% of the loan with no LMI. For all other clients we can obtain up to 85% in lending with no LMI.
SHOULD I STAY OR JUMP SHIP?
Refinancing doesn’t necessarily mean switching lenders. In some cases, you might be better off playing hardball to convince your current lender to offer a lower rate. Other times, Grace recommends shopping around to find yourself a new home loan. “At Walshs, we work with more than 20 different lenders, comparing their competitive deals to suit our clients’ best interests.”
If you’d like to chat to Grace or a member of our lending team, drop us a line at (07) 3221 5677 or book a 1-1 meeting.