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Here are 5 tips to consider when refinancing your mortgage.

Is it the right move?

When conditions are right, financially and economically, you might be considering a refinance of your mortgage. Before you jump into what seems like a good idea, it's best to know exactly what the refinancing process is, and just what it entails. You should know that when you are going to refinance, it involves starting the loan application process right from the start, as if you are buying a new home. Will you be taking the loan with a new lender, setting up a new deal, or should you shop around and see what's on offer from other loan providers? The best person to lead you through what is now a veritable minefield of lenders, is your mortgage broker. They are far more up to date with what's on offer than if you spent hours scouring the internet looking for the best deals.

Why Refinance?

What are your reasons for refinancing? There could be a variety of reasons. Lower interest rates on offer? A difference of a point or two in the rate may seem small when you look at it, but that couple of points can save you thousands over the years because your repayments will go on for 15 to 30 years for a typical mortgage.

Another reason some may decide to refinance is to get a shorter term, which also saves thousands of dollars. For example, things have never looked rosier personally, and both you and your partner are working, and your income is higher. So, a change in your financial situation can be used to save money on higher monthly payments. Conversely, you might be after a lower monthly payment or have that fixed rate changed to a variable rate, or vice versa.

Refinancing Costs

There are some obvious things to look at when considering refinancing. One of the first things is the actual cost of refinancing. Look at the fees you will be paying and divide it by the months of your mortgage and see whether there is a saving as a result of the refinancing. Sometimes you are ahead straight away, other times you might have to work out when you will hit the break-even point.


Are there any penalties in your mortgage terms and conditions that apply if you pay out the mortgage early? Lenders do NOT like mortgages paid out early. Remember, when you refinance, you are paying off one loan and applying for another completely new loan. Add any penalties to your total costs for refinancing and calculate that break-even point again. Be certain that you are not losing money overall when you refinance.

Your Equity

An important factor in this whole process is to work out the equity you have in your home. A negative equity is when you owe more on the home than what the house is worth. If you have been in your home for a number of years, the annual increase in your home's value will stand you in good stead. But if this is a refinance taken out after only a short time into your mortgage, price fluctuations may have worked against you. If your lender is offering less than the equity, you will not be able to get the refinance, unless, of course, you have the money to pay the difference. Current markets indicate an overall rise in prices, but there have been some downward movements as well over the year and that may have had a negative effect on your home's value.

See your Mortgage Advisor

With so many variables to look at with a refinance, you can get some quick answers by putting it into the lap of your Mortgage Choice advisor who probably got you the initial loan. With up to date calculators and current interest rates available from many lenders, you can get a fast answer to any refinance query.

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When you are looking for a home loan there are so many options out there in the market that it can get rather confusing. One of those options is a Home Loan Package. It's usually a bank that offers these types of packages and it offers a way to utilise a few of the bank's services at a discounted rate. What the bank provides is a home loan and they add a few financial products. Perhaps a credit card and/or a transaction account with no fees.

These packages are quite attractive to buyers. Banks ensure the popularity of their packages by offering at least three products, usually the minimum needed to be eligible, to add to the home loan.


It's a competitive market, particularly for banks considering they dominate the home loan market, so they can dangle the proverbial carrot on that home loan interest rate discount. Because they have you on board, don't be surprised to see further discounts added to your credit card interest rate, lower account fees and while you're there, you might as well take their heavily discounted home and contents insurance. It's all about savings.

The level of discount that will be offered varies between financial institutions, so it is essential to understand the pros and cons and weigh this against your circumstances.


All in One Place

If you have had a few different accounts and cards with numerous institutions you will find it a lot more convenient and manageable to have all your banking with the one lender. Given the lender has probably offered you savings on accounts, cards and your mortgage, it wouldn't make much sense to have accounts and cards at a higher rate or transactional costs with other institutions.

More Discounted Products

As mentioned, the four major banks own a big chunk of the existing market in mortgages and that gives them the ability to offer these package deals against which smaller lenders have difficulty competing. If you are looking to take out a home loan with a building society or a credit union, they usually offer products in which they specialise.

High Income

For high income earners, package deals will help build equity a lot quicker in an offset account. The savings on interest can be worked through a combination of having the salary reduce the interest charge and living off the credit card. Just remember to pay off the card each month!


Locked In

It's not always smooth sailing when you are paying off a mortgage. Interest rate rises, changes in lending policy, and on a personal level, problems that make repayments difficult. Also, someone offers a better deal. Wriggling out of a home loan package may incur costs. In fact, those costs can make it unattractive to move to another lender.

The Rate

Don't kid yourself that discounts on financial products will save you anywhere near the savings you will make on a lower mortgage rate. Repayments over 30 years add up to an astronomical amount of interest. Saving a couple of dollars per transaction or having a lower credit card rate won't come anywhere near that amount. While discounted mortgage rates might sound attractive, talk to a mortgage broker or use an online mortgage calculator to compare basic mortgage rates.

Keep it Simple

You may be better off by taking out a simple home loan and not be attracted by the bells and whistles of special packages. Technology these days means accessing your loan account online and utilising a redraw facility (f applicable) to pay off the mortgage faster, which saves some serious interest, or if you're in need of extra funds, withdraw from that account.

Does it Cost?

Check that the package deal does not have something like an annual charge. If it does carry an annual fee, work out whether the savings overall on lower interest rates for the life of the loan make you better off.

Here to Help

If you don't have the time to do a lot of research, then using expert mortgage broker services, knowledge and experience is great way to get the information you need and the best home loan tailored to your budget and circumstances. Mortgage Broker services are free, and personalised service is an added bonus!