Given the current low interest rates, and further possible interest rate reductions we are currently faced with, many are looking at re-financing to save hundreds off their monthly expenses. It may be a short-term fix but the best re-financing decisions are taken with a broader view, possibly to be viewed in conjuction with your long term financial plan.
Refinancing isn’t always an easy decision, but weighing up the risks and benefits of switching can help make the decision easier. It is always a good idea to get good advice from a professional prior to making the decision. It is a myth that using a broker will add to the cost of refinancing – in fact, the opposite is more the case. Brokers are paid by the financial institutions, not by the lender. Regardless of whether you’re thinking about refinancing to get a better interest rate or as a way to consolidate your debts, refinancing can save you a significant amount as long as it is done for the right reasons so it pays to be informed.
The risks of refinancing include
- Paying more interest in total if short term debts are refinanced with a long term solution
- being approached by dodgy lenders and brokers
- needing to pay additional insurances
- exit fees may be charged for exiting out of your current loan early and these can be quiet high
- longer loan durations lock you to your home for a longer period that you may have initially planned
- bad credit rating might cause you to end up with a higher rate when refinancing
- Often those additional features include additional fees and so much more
An important factor to consider is your credit history when it comes to re-financing. If you make unsuccessful applications you can damage your credit file. This is because every application for credit is recorded on your file. Too many applications in once space of time could lead to denied loan applications, which further damage your credit file. Using a broker can also ensure that your application is placed with the correct institution to give you the highest chance of approval.
Since most financial projects carry some kind of risk, it is important to research and reach out to professionals who can offer expert advice. Proactive Accounting and Financial Solutions can help with gathering the particulars of your current finances and of course your credit history, which is essential when you begin navigating your re-financing options.
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Phone: 07 5539 4143
Fax: 07 5677 0614