Top 10 myths when it comes to refinancing

There can be benefits to re-financing such as getting a lower rate, suitable features and increased cash flow. This top 10 list busts some myths, notes some benefits and highlights why you are best talking to a Brisbane Financial Advisor and Mortgage Broker.

1)    It’s too hard and too complicated.

The most time consuming parts of applying for a loan or refinancing is completing the necessary research and getting all your supporting documents in order. The job if your Brisbane Mortgage Broker is to assist you with both. The process involved is designed to make your life easier and includes,

• A consultation with your mortgage broker to learn about your existing situation and lending needs.
• Making a list of the necessary financial statements required by the banks
• Researching different lenders who meet your lending criteria and then the best rate
• Providing you with a recommendation and explaining how you will be placed in a better position
• Pre-populating all the application forms &
• Providing assistance and clarity around completing the loan contract

2)    Re-financing is expensive.

People are concerned about the cost of refinancing. Actually loans taken out after the 30th of June 2011 are not allowed to charge an exit fee. Other fees may be involved such as application fees with new banks, lenders mortgage insurance or break free charges on existing fixed rate loans.

Your Brisbane mortgage broker will weigh up the cost vs benefit of refinancing and make an ethical recommendation. Often there will be no fee at all. Contact us today to learn more.

3)    It will be an awkward conversation with my existing bank.

No one wants to have a break up call with a service provider. It can be awkward and uncomfortable. Part of the refinance process is getting a signed loan discharge authority form so you do not have to have these conversations. We even process them for you.  Contact us today to learn more.

4)    Refinancing is all about getting the best rate.

When it comes to refinancing it is not all about getting the lowest rate, it is about getting value for money. People refinance to get better service, better features, loyalty benefits, budgeting techniques and to fulfil strategic debt reduction strategies prepared by their Brisbane financial planner.

Sometimes banks will offer to match a competitor rate to keep your business but why would you want to stay loyal to someone who was prepared to offer you a lower market rate but didn’t?

5)    It doesn’t matter which bank you lend with.

A great rate and low fees are important but if all the banks charge the same what sets them apart? In our world today we seek value in customer service, ethical and socially responsible investments as well as sustainability. It is easy to go online and see what different banks are involved with in our community.

6)    I need to be an expert to know whether it’s the right choice.

There is so much information available at our fingertips it can all become overwhelming. Everywhere you look banks are promoting awards and low rates. Everyone wants your business and promoting refinance without discussing your personal goals and circumstances. By seeking advice from your Brisbane mortgage broker and financial planner you will be explained your choices in clear plain English.  Contact us today to learn more.

7)    I was approved for my current home loan, so Ill be approved for a refinance.

Every time you apply for a loan you will be assessed based on your current circumstances. Changes in employment, income, expenses, number of dependants, levels of debt and assets can all affect your lending capacity. Before applying to a bank for a cheaper loan seek advice from your Brisbane mortgage broker and financial planner to pre-assess your application to make sure you get the best outcome.  Contact us today to learn more.

8)    Refinancing is too much hassle for only a 0.5% discount.

The benefit of compounding interest is small changes over time make a big difference. If you had 28 years left on your mortgage with an outstanding balance of $430,000 at a rate of 4.3% you would be paying $2,178 per month.*

If you refinanced to 3.8% retaining your 28 year loan term your repayments would reduce down to $2,081 per month. If you kept your repayments at $2,178 per month you would pay off your loan in under 26 years, over 2 years earlier.*

*As per the moneysmart.gov.au mortgage calculator.

9)    Debt consolidation is always a good idea.

Debt consolidation can result in a lower interest rate and freed up cashflow. However there are some risks to debt consolidation strategies when not completed correctly.

Consolidating debt into a mortgage may reduce your interest rate but can also significantly increase the loan term. For example consolidating a 5 year personal loan into a 25 year mortgage. Unless additional repayments are made your 5 year loan has now become a 25 year loan increasing the amount of interest paid.

Some consolidation loans are used to free up cash flow with longer loan terms but can also have higher fees and interest rates. This can provide short term relief but leave you worse off long term. Before consolidating debt you should seek advice from your Brisbane mortgage broker and financial planner.  Contact us today to learn more.

10)    You must change your banking.

Gone are the days where you must keep your banking with your mortgage provider. With technological advancements many banks will allow you to link external accounts to your online banking making it easy to view and transact between your bank accounts and new mortgage facility. Most lenders also offer online mortgage redraw allowing you to make additional repayments which can be withdrawn online when required.

If it has been 2 – 3 years since you had a Brisbane based mortgage broker review your lending needs I can help you get clarity around your future, your options and the next steps in plain English. Book an appointment today to learn more.

What you need to know

Constancy Wealth Management Pty Ltd ABN 51 168 427 361 trading as Constancy Wealth is an Authorised Representative and Credit Representative of AMP Financial Planning Pty Limited ABN 89 051 208 327 Australian Financial Services Licence 232706 and Australian Credit Licence 232706.

This information does not take your circumstances into account, so read the relevant disclosure documents and consider what’s right for you. If you acquire an AMP product or service, AMP companies and/or their representatives will receive fees and other benefits, which will be a dollar amount and/or a percentage of either the premium you pay or the value of your investments. Ask us for more details.

This checklist contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information.