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Should I Refinance my Home Loan?

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By Kylie Cassidy and Brendon Ojala

 

With the banks competing for new customers and offering cash incentives, the temptation to switch banks can be rife. Brendon and Kylie ask if the switch is really worth it.

 

The first thing to note if you’re considering refinancing is that you should consider much more than just interest rates. The actual costs can vary depending on whether you have existing loans that are still fixed. There are also the non-monetary factors like finding a bank that better suits your needs or has a superior service level. These are all things to consider.

 

Turning to your mortgage broker for advice should be your first step as they can help you work out the pros and cons, in the meantime, here are four factors to get you thinking:

 

1. Does the bank suit my needs?

 

Consider the bank’s products and whether they will suit your current needs. Do you want to be able to make lump sum payments without penalty? Do you want a large revolving credit account? Or perhaps an offset product where you can use the funds across savings accounts to offset the interest on your mortgage?

 

2. Don’t get hung up on lower interest rates

 

Lower interest rates aren’t the be-all-and-end all, and often some smart budgeting coupled with the right mortgage structure can give you more than then a 0.2 per cent decrease in interest rates. We will of course, work hard to get a competitive rate from the bank, but it’s in this finer detail where your mortgage broker can add real value.

 

3. Making the switch can be messy

 

If you’re offered a cash incentive to move banks, chances are you’ll need to move your banking across to them. This means changing your APs, direct debits, salary and so on. Some banks do offer a “switching service” to make the process easier, but you may need to keep your existing account open with some cash in it, to cover any repayments or direct debits you may have forgotten about.

 

4. Costs of switching

 

Below are some costs to consider:

 

·         Potential break costs at your current bank (anywhere from zero to tens of thousands!)

·         Lawyers fees (approx. $1000-$1500)

·         Cash contribution claw backs (if your current bank offered you a cash contribution, if you move banks within a certain time frame—between two and four years—they reserve the right to ask for this cash back.

·         Discharge fees ($100-$150)

 

The new bank may offer you some cash to offset the above costs, however, it’s important to consider all of the above. The “best bank” offering the lowest rates changes all the time, so it’s important to consider your needs long term. 

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Kylie Cassidy and Brendon Ojala are Registered Financial Advisers with Velocity Financial. No investment decision should be taken based on the information in this blog alone. A disclosure statement is available free of charge upon request.

Confessions of a Man with a Small Toolkit

Lance confesses that, when it comes to DIY, he resorts to seeking out the expert. And he gives you full permission to do the same with your finances: pester your Velocity financial adviser every step of the way.

 

In my family I have one brother and two sisters, and I am the least “handy man” of all of us.

 

My brother, who owns a very successful plumbing firm, was concerned when he came around to my home and noticed the only things in my toolkit were a pair of scissors, a ruler and some moisturiser!  

 

So, of course, whenever any plumbing (or the like) was needed, I had two options: 1) Spend hours trying to figure it out myself through a minefield of trial and error and various YouTube clips. Or 2) Just go to the expert … my brother.

He would either talk me through it over the phone or come round with his massive toolkit and do it himself. Saving me the pain, the time, and ultimately the very real risk of making the problem even bigger if I had tried to do it myself.

 

They say it takes over 10,000 hours to become an expert at something, so it would take a lot of blocked drains and dripping taps for me to get anywhere near my brother’s expert level in plumbing. Likewise, when it comes to mortgages and financial advice we, at Velocity, are the equivalent of my brother and his toolkit. We deal with banks and legislation changes and the intricacies of mortgage applications every day.

 

So when should you call us?

 

The moment that first thought jumps into your head to purchase your first home or another property!

 

Why? So you can brainstorm with us to come up with some best next steps.

 

Our services are free to you. And they’re often accompanied with a coffee, so it’s a win-win!

 

Our goal is always to save you time and money. We know how the banks operate and how to find the right fit for you. Many people think a mortgage broker is only here to secure their home loan. Au contraire! We can assist, give advice, and organise anything mortgage related—be it changing the structure, negotiating new fixed rates, discounts on floating rates or changing regular repayments.

 

Let us at Velocity bring our toolkit and expertise to you. We’ll help get you the right loan and set the right structures in place to help see your plans realised. And, please, if you have a blocked drain, feel free to contact me about that too … I have a pair of scissors that just might do the trick … on second thoughts, I’ll pass you on to the expert for that one.

 

Lance Shearman is a Registered Financial Adviser with Velocity Financial. No investment decision should be taken based on the information in this blog alone. A disclosure statement is available free of charge upon request.