Who would have ever thought we would see one of the big 4 banks offering an interest rate of 3.59%. Without a doubt their are opportunities for you to save significant money on your home loan.
Now is the time to refinance….. Or is it….
Watch on as I discuss 3 questions you should ask yourself before refinancing your home loan.
If you would prefer to read instead of watching the video, scroll down to see a transcript.
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Hello, Brendan from Buyers Choice, your home financing specialist.
This week, I want to have a chat about refinancing.
Given the current climate we’re in, the number of offers out there from various lenders, a common discussion I have with various people is, is now a good time to refinance?
If you’re thinking about refinancing, I think there’s three questions that you should ask yourself before committing to refinancing your home loan.
The first one is, has your finances changed? Have you received a pay increase? Have your expenses gone up? Your child’s moved from primary school to high school, or they’ve decided to start eating twice as much food. Have you had a new baby come into your life?
There’s various things which could have happened which changes your financial situation. As a result, it may mean it is a good time, or it could mean that it’s a poor time to refinance your home.
The second question you should be asking yourself, will refinancing save you money?
Now, I have previously done a video on the costs which you incur when you refinance your home. It isn’t a zero-sum gain. There’s also, and I’ve mentioned this previously, the fact that if you’re over an 80% loan-to-value ratio, LMI will be involved, so Lenders Mortgage Insurance.
So between that and the cost of refinancing, it could cost you from $1000 to a couple of thousand dollars to $10,000, depending on the size of your loan and your circumstances, to refinance.
Now, if you’re, found a great new rate, and you’re saving $50 a month by refinancing your home loan, but it’s gonna cost you $1000 to refinance, is it worth it? Is it worth your time and effort, getting all the information together, putting it all together, submitting the application, going through all that, for something which is gonna take you 20 months to pay off?
No, you’re better off staying where you are. So it’s a consideration that you gotta put into mind.
The third question you should ask yourself is, are you planning on selling your home in the near future?
And again, it’s around, if your plan is to sell, move on, upgrade, do whatever, now may not be the best time to refinance. There’s a lot of effort, you’ve gotta get all the paperwork together, you’ve gotta put the application in, you’ve gotta go through the process.
If you’re going to a new lender, you’ve gotta set up all your accounts and everything else. So as a result, if you’re considering selling your home in the near future, or your loan’s starting to get small, there’s only a small amount still to be repaid, it may not be worthwhile refinancing.
We look around and we see these great rates. Save an extra 0.25% here, fix it for three years at this new, never-before-seen and never-be-seen-again interest rate.
But unless there is a benefit to us, it’s not worth doing.
So next time when you’re thinking about refinancing, think about these three questions again.
Has your financial situation changed?
Are you going to save money by refinancing?
And are you looking at selling your place in the near future?
And if those answers don’t add up to you, just put it on hold until the next time you review your home loan.
Anyway, Brendan from Buyers Choice, great talking to you again today.
Please hit like to this video, and if you’ve got any questions, feedback, please leave a comment below.
Look forward to talking to you next time. Have a wonderful day.