Should i Refinance my home loan

There are two circumstances in which you may wish to refinance you homeloan. Firstly, you may be dissatisfied with the terms of your existing home loan or the service provided by the lender. Secondly, you may be seeking an additional home or investment loan secured by another property, and it may be advantageous to combine it with your existing home loan to get the best overall deal.

You need to compare the costs of refinancing your home loan with the benefits you will obtain from the new home loan account.

The costs will include fees and charges to pay out your existing home loan and fees and charges to establish the new loan. Payout fees include Release Fees payable to the titles office, a bank administration fee for attending to the payout and discharge of mortgage, and may include penalties for early repayment.

Costs to set up a new loan may include the valuation fee, mortgage insurance premium if the Loan to Valuation Ratio (LVR) is greater than 80%, legal disbursements and stamp duty on the new mortgage.

These costs need to be compared with the savings that can be achieved over the life of your new loan. These savings are likely to be achieved by obtaining lower interest charges. The interest charges may be lower (over the life of the loan) because:-

• The new lender has a lower rate of interest;
• The new lender provides 100% benefit on its Mortgage Offset Account;
• The new lender allows you to make additional repayments at any time without penalty.