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Refinancing is generally a good idea for most borrowers but there situations where switching loans just isn’t worth it. Here are a few examples:
- You have a fixed rate home loan with a very high exit cost and the cost of fees could outweigh the benefits of refinancing until the fixed rate period expires.
- You are looking at selling your property in the near future and you won’t keep the loan long enough to make any decent savings.
- The size of your loan may be too small to have any significant interest savings. After taking into account the fees associated with refinancing, it may not be worthwhile to move to a new lender.
- Your property has dropped in value and your overall Loan To Value ratio (LVR) is higher than 80%. This mean you may pay Lenders Mortgage Insurance again if you switch to a different lender.
- Refinancing your loan for a longer term which could result you in paying more interest over time.
It is important to understand your goals and objectives for refinancing to work out if this is suitable to you.