If you’ve got a mortgage and are considering refinancing to get a lower interest rate, keep reading.
In this article, you’ll learn whether or not you should be refinancing and three points to consider before you move that might help put some extra money in your wallet.
If you’re a “rate chaser” i.e. someone who moves banks every 1-2 years chasing the lowest interest rate, then you shouldn’t be considering refinancing. Not only does rate chasing waste a lot of time for yourself and the banks, it isn’t a proven strategy that pays off long term. Instead, you need to focus on having a better plan in place which we can help you create and put into motion.
Watch instead: Should I refinance my mortgage to get lower interest rate?
Consideration number one: Ensure that moving banks will get you a substantially lower interest rate.
If you’re going through the hassle of completing a mortgage application, paying legal fees and perhaps break costs, make sure that you’re coming out the other side with more money in your pocket.
As the cost of living continues to rise, you may be under some financial duress due to crippling mortgage repayments. Switching banks may mean you’re saving an extra $150 per fortnight that would have otherwise been going towards your mortgage, which is a completely valid reason for moving banks, particularly if it’s the difference between keeping your house or having to sell your house
Consideration number two: Look into whether or not the bank you’re wanting to switch to is offering cash contributions towards your refinance.
A standard cash contribution is about 0.6% of your mortgage size. A good cash contribution is about 1% of your mortgage size; it could put an extra $5,000 in your pocket as a result of getting that cash contribution. Something to keep in mind when it comes to cash contributions is that you have to stay with the bank for 3+ years in order to not forego the contribution.
Consideration number three: Do you have a personalised plan in place to help pay off your mortgage even faster.
Believe it or not, this consideration will same you much more money than the first two considerations combined. When it comes to refinancing, you can actually use the banks products to structure your loan to take your mortgage from a 28-year term down to an 8-year term. This plan will save you hundreds of thousands of dollars in interest costs and you’ll NEVER have to worry about rising interest rates again.
Don’t have a personalised plan? No need to worry, this is a key area that our team, here at Futurebound, specialise in. We can tailor a mortgage repayment plan specific to you and your financial situation and will assist you in implementing this plan.
If creating a personalised plan is of interest to you and you’d like to talk with us a bit more about your situation and whether it’s right for you to refinance at the moment, you can click the button below to schedule in a 15 minute chat.
Keep in mind this article is providing general information and not individual financial advice.