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When should I refinance my loan?

Refinancing your loan is when you move your home loan from one lender to another. Many things may prompt this:

  • Being unhappy with your current lender either due to the service they are providing or the rate they are offering.
  • To help facilitate an investment property by accessing equity.
  • To fund a big ticket item such as a renovation or car purchase.
  • To consolidate debt such as credit cards or personal loans into one easy repayment, often at a lower rate.
  • To reduce your overall repayment.

What are the negatives to refinancing:

  • As refinancing involves setting up a new loan, you’ll have to go through the loan application process all over again including providing payslips, bank statements and completing a valuation on your property.
  • There may be costs involved such as discharge fees from your current provider, government registration fees, and if you are currently on a fixed loan, there may be early termination fees.
  • If all your banking is with your current home loan provider, you may need to consider moving all your banking across to your new lender, or understanding the implications of leaving it where it is.

Our advice? Always complete a cost/benefit analysis before executing on your refinance. This will include more than just the interest rate, but also convenience and your long term financial goals.

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