5 home loan features to consider when refinancing

Jul 12, 2018Investment Lending0 comments

When it comes to refinancing, Australians are becoming increasingly savvy. According to the Australian Bureau of Statistics, over $80 million worth of properties were refinanced in the last year alone.

Refinancing your mortgage, put simply, is the act of transferring your loan from one lender to another and in the process negotiating better terms (such as a lower interest rate or additional features). If done right it might save you thousands, however when it comes to home loans there is no one-size-fits-all solution.

Here’s a list of some things to consider to help get the best deal when refinancing your home loan:

1. Low interest rate

The main way to save money through refinancing is to find a home loan with a better interest rate than what your current lender is offering. This will ultimately bring your interest down and result in lower total mortgage repayments. This however is not the only feature of a home loan you need to consider…

2. Offset account

The mechanics of an offset account work similarly to that of a regular savings account, however the amount of funds in this type of account is used to offset against your loan balance before any interest is calculated on it. The funds held in an offset account can usually be accessed through normal means with a debit card in shops and at ATMs, however the difference being that the more money you hold in the account, the lower amount of home loan interest you will pay.

3. Portability

Many home loans are tied to the property, however when refinancing, consider looking for loans that are transferable. These portable loans allow you to take it with you, should you sell your home or purchase a second property. If you meet the criteria of a portable loan, such as the new loan amount being of similar or lesser value to the original, you could be able to avoid set up costs and exit fees that would otherwise be incurred.

4. Free redraw

A free redraw facility is a home loan feature that will allow you to make additional repayments on your loan with the aim to reduce the interest rate charges, however you are free to withdraw any or all of that extra money. This feature is similar to the offset account and could give you peace of mind should you ever need to access additional money in an emergency or at a time of need.

5. Revised repayment calendar

An often-underutilised home loan feature and one infrequently considered when refinancing a mortgage, is to negotiate your repayment schedule. While most loans have monthly repayment calendars by default, consider setting up either weekly or fortnightly repayment plans to better suit your personal financial cash flow situation. Not only can these shorter repayment periods better fit in with when you are paid, but if you pay half the monthly repayment amount each fortnight, may also result in you making more annual payments in total which can reduce the life of the home loan overall.

To find out more about these loan features and others that may be suitable for your specific circumstances please get in touch.
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