Getting the most out of refinancing your home loan

How long has it been since you made your first home loan repayment at your current bank? A lot might have changed. You might have switched jobs, your family may have grown, or you might have decided to sell or buy an investment property. When considering how much your life has changed, it’s a good idea to take a look at your home loan too. Refinancing could be a good idea if your home loan no longer provides you the features you need for your lifestyle, or if you think you can get a better deal.

When it comes to your own finances, you’re the expert. But there are a few things to consider before you switch home loans to help you make the right decision.

What are the benefits?

The greatest draw card for refinancing is savings. There’s potential to secure a lower home loan interest rate, improved loan features, or lower fees, each of which could help you get ahead financially. There is also the possibility of saving money through consolidating finances like credit card debt, personal loans and car loans into the one loan.

Does your current home loan give you the service you need? Making a change can help you find something that suits your needs better when it comes to customer service. ING for instance will tailor the loan to you, providing flexibility to better suit your lifestyle.

So how can you get the best possible savings?

There are several ways you can make sure that you are receiving the best possible savings and benefits from switching:

1. Decide whether a fixed-rate loan, variable-rate loan, or a combination of the two, will suit your needs best.
2. Use comparison tools to compare the costs of any new home loan, not just the headline rates, because all home loans have different amounts of fees. Compare the features too – some are handy, but don’t end up paying for features you will not use.
3. Avoid sending home loan applications to lots of lenders in the hope that one will say yes. This can make your credit rating look worse. Choose a lender that meets your needs and contact them to find out more about their home loan products.
4. In working out your loan affordability, factor in potential further rate increases so that you are prepared for increases to your minimum repayment amount in the future.

Understand and allow for potential fees

There are a number of fees that can happen in the process and it’s important to understand before you commence. These fees can include:

• Exit Fees – These may apply if you pay out your loan in full, within a specified period. Lenders are not allowed to charge exit fees on loans taken out after 30 June 2011, but loans taken out before this may still have exit fees.
• Establishment/Application Fees – Some institutions have one-off fees for making an application.
• Loan Approval Fees – These are one-off fees to cover the lender organising your loan approval.
• Home Loan Stamp Duty – This State Government tax can apply if you purchase a property.
• Home Loan Registration – This may be required to let the State Titles Office know you’ve changed either your home loan provider or type of home loan.

Although there are fees, look at it in the long term. The upfront costs could easily be outweighed by the potential thousands of dollars you’ll save in interest and fees over the life of the home loan. It’s just important to be aware of them and to factor them into your budget.

When it gets down to it, the person who knows your needs best is you. The key is doing your research and using the right tools to guide you along the way. Check out ING’s home loan comparison tool to see if you’re getting the best possible deal.