Refinancing – traps to avoid!

Whether you’re after lower repayments or want to tap into the equity sitting in your home, refinancing can offer a world of benefits. Here are some things to be aware of so that you don’t find yourself hooked on a bad deal.

Don’t be fooled by the interest rate.

You’ve found a product with a lower interest rate, and you think you’ve scored yourself a deal. However, a low interest rate doesn’t necessarily equal a good deal. In fact, there are some products with additional features that may have added fees, although, could save you long term. A feature such as an offset account will allow you to have an extra cash against the loan, saving you in interest over the life of the loan. On the other hand, loans without this feature may have a fee for early repayments.

Honeymoon rates are over in a flash!

Be careful of those discounted introductory rates that are advertised, as tempting as the offer may sound, once the introductory period is over, so too is your low rate. Before you enter into a loan with an introductory rate, be sure you’ve done the calculations to ensure that you’re saving over the life of the loan. If this is not the case, it may be worth negotiating a lower rate without an introductory offer.

Be aware of the fees

One of the primary objectives of refinancing is to put you in a more beneficial financial position. When refinancing a loan, there are plenty of costs, which could include discharge and application fees, mortgage insurance, land registration fee and a valuation fee. These fees can add up quite quickly, and they are unavoidable. Therefore, before refinancing it’s essential that you do the calculations to ensure the process is worthwhile.

When going through the process there are traps to avoid, a finance broker with expertise will be able to take the stress out of refinancing to save you thousands, fund a renovation or find a product that better suits your needs.