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In many cases, the long-term benefits of refinancing can outweigh the upfront costs, but it’s a good idea to factor them in to your projected savings to avoid any surprises down the track.
Here’s a handy guide on what to expect when refinancing, including the common fees and charges, how to work out if refinancing your home loan is worth it, and how long it generally takes.
While the terms and conditions of every home loan are different, here are some of the common fees that you may need to account for when refinancing your home loan:
Always remember to check the product disclosure statement and your contract carefully to see what fees may apply, or speak with a mortgage broker.
Once you’ve identified the right home loan product for you, refinancing generally takes around four to six weeks. However, it can take longer if your current lender delays the process or you experience difficulty submitting the necessary paperwork.
Working with a mortgage broker can help to reduce the time it takes to transition to a new lender and make the process a lot less stressful. They will also likely achieve a better outcome for you.
Refinancing your home loan can result in considerable long-term savings, but it largely depends on your personal situation and current home loan.
For example, say you are currently paying five per cent interest per annum on a $500,000 home loan and refinance to a lender offering a four per cent interest rate per annum.
Considering the fees involved in refinancing – including a valuation fee, application fee, registration of mortgage fee and a discharge of mortgage fee – you could still save up to $5000 in interest a year. In the first year alone you’d easily make back any exit or set-up fees you’ll pay to refinance, not to mention the long-term savings you could benefit from.
Another way refinancing could save you money is if you are paying high interest rates on multiple credit cards and you consolidate all your debt into a single refinanced home loan at a lower interest rate.
It’s a good idea to review your home loan every 12 months or so to make sure it’s still meeting your needs. Just remember to carefully weigh up the potential long-term savings versus any fees you may incur.
Setting yourself up financially starts with your biggest investment, your home loan, so find one that suits your needs. Use our online Refinancing Calculator to see how your current home loan stacks up.
Our team at iSelect have partnered with Lendi*, so we can help you compare a range of different providers on the market. Use our online tool to compare home loans, or give Lendi a call on 1300 186 260 (08:30-18:30).