Should you use a bank or a mortgage broker for your next loan?
Whether you’re planning to take out your first home loan, refinance your existing mortgage, or invest in a property, one of the key decisions you...
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This is a very common question. The main reason why you may want to consider a fixed rate product over a standard variable is if you wish to have certainty in your home loan repayment over a period of time. There are limitations to a fixed rate product. Here are a couple of key thing questions you need to ask.
- Am I selling my property during the fixed loan period? If you sell your property during the fixed term, a break fee may apply for breaking your fixed term.
- Do I need an offset account? Most fixed rate products does not come with an offset account.
- Are you looking at making extra repayments off my loan? Some lenders may offer redraw facility but there will be a restriction on how much extra you can repay each year when you fix your loan e.g. no more than $10,000 extra repayments per year.
- What balance of fixed and variable rates do I need for my portfolio? Even if you only have one loan, you can usually split the facility with a portion being fixed and the rest being a variable loan, giving you the flexibility you need. Often beginning investors choose to lock in 50% of their loans, while investors with larger portfolios protect themselves by fixing a larger percentage of their loans.
- How long should I fix my loan for? Now this is a difficult question, but if you believe that interest rates won’t increase for a year or two and after that they will remain high for a number of years, then fixing for a short period such as one or two years may not make sense. It all comes down to what are you looking to achieve and does it meet your goals and objectives
Related FAQs
What is Refinancing?
Refinancing is a process of taking out a new loan to pay off the existing loan typically at a lower rate or for better features. People wanting to change their home loan is usually because of a change in the circumstances or goals which can be a smart way to manage money. It may give you the option of securing a lower interest rate, consolidating debts or unlocking equity from your current property. Speak with one of our mortgage brokers and find out if refinancing is right for you.
Why do people refinance?
Refinancing can be used for various reasons, which include but aren’t limited to: Home Renovations, Reducing monthly repayments, Lowering your interest rate, Cashing out your Home Equity, Raise cash for another purchase (another house, car, boat etc), Access Additional home loan features (offset account, redraw facility etc.), Borrow additional funds
How much does it cost to refinance?
Refinance can help you save money and own your home sooner however there are costs involved in refinancing from one lender to another lender.
When you shouldn’t consider refinancing your property?
Refinancing is generally a good idea for most borrowers but there situations where switching loans just isn't worth it.
How can I consolidate my debt and is it a good idea?
Debt consolidation is when you payoff your existing debts such as credit cards, personals and car loans with a new debt.
