Is it Worthwhile Re-financing?

Refinancing means moving your mortgage from one lender to another in order to reduce your cost of finance over time. It can also mean staying with your existing lender but changing the terms of your existing loan.

Traditional lending/financing sources have changed in recent times, therefore more and more Australians are shopping around for the most suitable lender/financial structure not just before choosing a lender, but also throughout the life of their loan.

There are many reasons why refinancing could make sense for you - but the main one is simple: to save money.

Costs of refinancing

Although refinancing can save you a lot of money, there are costs involved. Exit fees and early repayment fees normally apply and vary from lender to lender. Break fees apply on fixed rate loans and are calculated using various methods, your lender will be able to give you the cost of your loan's break fees. Keep in mind they change from day to day, and will change as your fixed term duration changes.

It's important to make sure you'll save more than you'll spend on fees, or there's no point in switching lenders or refinancing your loan facility. The biggest pitfall to avoid is: not knowing exactly what your costs will be if you refinance. A mortgage broker can be invaluable not only for shopping around for the most competitive deals, but also for helping you understand the real costs of refinancing and the right mortgage/financial structure for you.

It's worth pointing out that refinancing is not for everyone. If you're on an exceptionally good deal, the costs may not make it worthwhile. Likewise, if you're locked into a bad deal with steep penalties for leaving early, you also probably won't benefit from refinancing. At the very least, speak to your lender or mortgage broker?, and in the meantime do your homework so you're ready to move as soon as you can. The last group who probably won't benefit from refinancing are those with a very small mortgage, simply because the amount of money you will save is very unlikely to outweigh the cost of switching.