Professionals Real Estate 
5 questions to ponder before refinancing your home loan
Christmas came early for a lot of mortgage holders this year when the Reserve Bank dropped the official cash rate to a ludicrously low 0.10 per cent.
But while interest rates are lower than they’ve ever been before, some lenders are offering much more enticing deals than others.
For those who are thinking about changing their loans so they can enjoy a lower rate, there are a few things you should keep in mind first.
Including:
What features are there beyond the interest rate?
A lot of people chase the lowest rate they can get, but there are a lot of other things to consider when it comes to home loans.
The right home loan features can offer you flexibility and benefits that can help you pay your loan down quicker, or allow you access to your funds when you need them.
Features to look out for include an offset account, a redraw facility or the ability to make extra repayments. You might also choose a particular lender because they offer you convenience or reliable customer service.
Will the loan term change?
You’ll want to make yourself aware of any changes to your loan term if you’re looking to refinance.
Be wary of refinancing to a new 25 or 30 year loan term as while this might reduce your regular repayment amount, you’ll end up paying more in the long run.
A loan that is refinanced to a shorter term however might increase your repayment amount, while reducing the amount of interest you pay overall.
Will you need to pay LMI?
Another thing to think about before refinancing is whether or not you might be up for paying lenders mortgage insurance (LMI).
Generally, you’ll be up for paying LMI if you own less than 20 per cent equity in your home.
If you’re asked to take out LMI to refinance than this may negate any possible savings you could make from paying a lower rate.
Are there any fees involved?
Switching home loans can be costly. It’s important to look at the terms and conditions of your existing loan and your potential new one to see what fees you could be up for.
Some costs to look out for include discharge fees, break costs, valuation fees and set-up fees.
Should you fix?
Many lenders are offering very attractive fixed rate home loans at present, which may have you pondering whether or not it’s time to lock in your rate.
As with anything, fixed rate home loans have their pros and cons but they are good for those who like the reliability of knowing what they’ll be paying each month.
Keep in mind however that some fixed rate loans don’t have features that allow for extra repayments and they may result in break fees if you decide to exit your loan early.
Everybody’s circumstances and needs are different so if you want the best advice it’s always worth talking to a financial professional or picking up the phone for a chat with your current lender.
