Home loan refinance rates
If you’re paying over the odds for your home loan, refinancing could potentially save you quite a bit of money. To do it, you’ll need to research home loan refinance rates to find a loan that offers a lower rate than your current one, providing enough of a saving to compensate for the costs involved. This will mean checking out what’s on offer just as you did when you first took out your loan – but with a few extra considerations.
Switch or stay?
Refinancing your loan could mean switching to a new lender or staying with the existing, but moving to another loan they are selling, with better rates. There are advantages and disadvantages to both. If you’re dissatisfied with your current lender, switching could be a relief, but it does mean having to persuade someone new to accept you and get used to how they do things. You may be able to take advantage of a low introductory rate. On the other hand, you may want to maintain a good relationship with your current lender, and discharge fees are sometimes waived if you’re simply moving to a new product with them.
Home loan refinancing interest rates
Refinancing works just the same way as getting a new loan, so you will need to look at the interest rates on offer. Remember that using the comparison rate makes it easy to factor in fees as well and reduces the risk of being caught out by hidden costs. You should also remember that the total amount you will pay in interest also depends on the loan term.
Is it the right time to refinance?
Most people refinance for one of two reasons. Either their circumstances have changed – for instance, you might now be in a position to pay off your loan more quickly – or they have been on a fixed rate loan and the national interest rate has fallen considerably, so much better deals have become available. Usually you will not be allowed to finance until you are at least two years into the loan term.
Costs of refinancing
Most people on fixed rate loans and some people on variable rate loans will have charges to pay if they decide to end the agreement with their lenders early. There can also be costs involved in obtaining the documentation needed to determine whether or not you qualify for the new arrangement you want, and of course you should factor in the cost of your time, as there can be quite a bit of paperwork and negotiation to do.
Although some people are forced to refinance because they can no longer afford their existing monthly payments, most people do so voluntarily. Some borrowers wait for a time when the Reserve Bank interest rate is low and when you can find a deal that meets your requirements. Run through the numbers carefully to be sure of what you can afford, and remember that you could lose money in charges if you can’t commit to your new loan for the agreed length of time.
Pros and cons
Pay interest at a lower rate;
Pay off your loan sooner;
May involve paying discharge and upfront fees.