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Should I get financial advice before I refinance?

Should I get financial advice before I refinance?

Refinancing your home loan can seem like a big decision considering a property is often the most expensive purchase Australians make in their life time. For this reason, when big sums of debt are involved, it can seem like a good idea to get as many opinions as possible before making a choice as to whether or not to refinance a loan.

While professional financial advice can provide good guidance in these sorts of situations, for your standard refinancing process on a straight-forward owner-occupier or investment loan, financial advice may not be necessary. It must be stressed, however, that seeking financial advice is a personal choice and if you feel more confident seeking a professional perspective then that is encouraged.

If you are wondering whether your situation may benefit from a professional perspective, read on to see some different scenarios where financial advice may be advisable.

It should be noted that professional advice should be sought from an impartial financial adviser. A broker who receives benefits for directing you to one loan or another may not be the best person to give you an unbiased view of as to whether or not you should refinance and how to best do it.

Pros
  • Can assist you with complex financial problems related to mortgages
  • Can assist with planning if you are experiencing financial hardship
Cons
  • Costs will be involved
  • Will slow down the refinancing process

Situations where you may prefer to consult with a professional financial adviser

a young husband and wife with their baby sit and chat to a woman in their dining room . They are all referring to a laptop in front of them and various paperwork is dotted about the table.

You own multiple properties 

If you have multiple properties, and therefore multiple home loans, and you are considering refinancing one or all of these loans, you may benefit from getting some professional advice as to the best way to go about this process. While not strictly necessary, a financial adviser could provide you with some tips to make sure you are paying your debts off in the most cost-effective and efficient manner.

You are refinancing because you can’t pay your mortgage

If you’ve fallen on to hard times financially and you urgently need to reduce your mortgage costs you may be considering refinancing to a lower rate to do so. If, however, you have already missed a mortgage repayment or are at risk of defaulting on other loans then you may benefit from contacting a financial adviser instead to help you get your immediate situation under control. Refinancing your mortgage may be part of the greater plan but in the near future it is important that you receive assistance to stop yourself sinking into further financial stress.

You are refinancing from an owner-occupier loan to an investment loan or vice versa

If the purpose of your property has changed then the type of loan will need to change along with it. If this is your first time owning an investment property you may want to seek advice on how to switch your loan and the potential tax implications of your new investment.

You have no equity in your existing home loan

If you want to refinance your loan but you have no equity in your property, then it will be much harder to accomplish than your standard home loan switch. You may want to engage a professional adviser to discuss why you want to refinance with no equity and if it will be possible given your personal circumstances.

You are refinancing for debt consolidation

If the reason you want to refinance your home loan is to consolidate existing debt from multiple loans and credit cards, then this can potentially be a good strategy to help you get your debt under control. There are, however, certain rules that should be followed to ensure that you don’t end up paying more in interest than is necessary. While you can read up on this and devise your own plan to pay back your debt, if the reason you got into trouble in the first place is from mismanaging your finances then some personalised financial advice may be in order.

Situations where you most likely will not need to consult a financial adviser

You are refinancing your only home loan to get a better deal

While it is up to you whether you feel more comfortable seeking advice before refinancing, for your standard home loan switch to a loan that offers a lower rate or better features you should be able to navigate the process alone. Taking the time to research the refinancing process and how to find a home loan suited to your needs will help you along the way but personal advice will most likely not be necessary.

You want to switch to a different lender

If you’re unhappy with the level of service offered by your lender and you have a straightforward mortgage situation, then you will probably not require personalised advice before refinancing. All that would be required is for you to compare and find another lender and loan you are happy with to kick start the refinancing process.

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