10 things you should know before refinancing
Before we start, remember, Property Friends is not a financial advisor and we do not provide financial advice. However, our dealings with hundreds of investors’ means we hear many stories and pick up a lot of information that relates to the financial side of property investing.
No one wants to make costly mistakes with their mortgages, so from our experience in dealing with property investors, we’ve compiled a list of things that WON’T help you financially. If you have any finance questions, we strongly urge you to seek a finance or mortgage expert.
There are many ways to go about your finances, here’s our top 10 list of things you might like to avoid:
1. Staying put: Automatically refinancing with your current lender without shopping around every 2-3 years may be costing you a lot. Make sure you speak with a range of lenders or brokers regularly to ensure you are receiving the best deal.
2. Low rates, high fees: Don’t assume lower rates will automatically save you money. Rates are one component of your loan, always consider the overall cost of your loan [fee] versus savings. This means, ensure any fees on your low rate loan are not eroding any interest savings you may be making.
3. Paying too much to move: Switching loans or lenders without clarifying whether the total costs [including establishment fees, legal fees, stamp duty fees, ongoing fees] are outweighed by the savings in interest
4. Not having a lender or broker regularly revising your financial situation
5. Not asking questions. Speak to your provider for a better deal. They can only say no. If they say yes, decreasing your interest rate by at least 0.75% to 1% will save you about $100 a month on a $150,000 mortgage
7. Procrastinating over applying for a loan while waiting for interest rates to drop. No one knows when rates will go up, down or stay the same. Don’t believe us? Look at the economic “Experts” each month predicting the next rate movement. If they can’t get it right – what hope is there for us?
8. Not knowing the true cost of refinancing. Make sure your lender provides you with written statements on application fees, deferred establishment fees, or break costs on fixed loans.
9. Switching to a new loan because of their start –up cheap interest rate offer. These lower rates generally revert back to their original or higher rates at the end of the introductory period. Check out and compare the normal rate, fees and other terms of the new loan with your existing one.
10. Taking money out of your home equity to pay off credit cards or racking up more debts while drawing out of your home equity. This habit is bound to leave you with long-term debt – at the detriment of your investment property returns. Do something to change your spending behaviour today – before it’s too late!
Property Friends is a specialist Property Investment Advocacy that has been operating for the last 13 years on the basis of 3 principles: Trust, Community & Progress. www.propertyfriends.com.au (03) 9758 5331
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