What Not to Do When Refinancing to Lower Interest Rates

Refinancing your home loan to access a lower interest rate can save you thousands of dollars over the life of your mortgage. However, many Bonbeach homeowners make critical errors during the refinance process that can cost them money or prevent them from securing the optimal outcome.

Don't Rush Into Refinancing Without a Plan

One of the most common mistakes is jumping into mortgage refinancing without conducting a thorough loan health check. Your current loan might already offer competitive features, or you could be eligible for rate reductions with your existing lender.

Before starting the refinance application, consider:

• Your current interest rate compared to available market rates
• Remaining loan amount and repayment term
• Exit fees and costs associated with your current mortgage
• Features you value, such as offset accounts or redraw facilities

Avoid Focusing Only on Interest Rates

While accessing a lower interest rate is often the primary motivation for refinancing, don't overlook other valuable loan features. A marginally higher rate with superior features might provide more value than the lowest rate available.

Consider loans that offer:

• Offset account functionality to reduce interest payments
• Flexible redraw options for accessing extra payments
• The ability to switch between variable and fixed interest rates
• Professional packages with fee waivers

Don't Ignore Your Fixed Rate Expiry Date

If your fixed rate period is ending, don't automatically accept your lender's standard variable rate. This is an ideal time to compare refinance rates and potentially move to a lender offering more attractive terms.

Many borrowers coming off fixed rates find themselves stuck on high rates simply because they didn't explore their options in time. Start reviewing your choices at least three months before your fixed rate expires.

Avoid Inadequate Property Valuuation Preparation

Property valuation plays a crucial role in the refinance process. Don't assume your property value hasn't changed since your original purchase. Presenting your property in its optimal condition and providing recent comparable sales data can influence the valuation outcome.

A higher property valuation can:

• Reduce your loan-to-value ratio
• Qualify you for lower interest rates
• Provide access to equity for investment purposes
• Eliminate lender's mortgage insurance requirements

Don't Overlook Equity Release Opportunities

When refinancing, many homeowners miss the opportunity to access equity that has built up in their property. Whether you're looking to purchase an investment property or consolidate other debts into your mortgage at lower rates, releasing equity can be a strategic financial move.

Consider these equity release options:

• Cash out refinance for home improvements
• Access equity to buy your next property
• Consolidate high-interest debts into your mortgage
• Fund investment opportunities

Avoid DIY Refinancing Mistakes

Attempting to handle mortgage refinancing alone can lead to costly oversights. Professional mortgage brokers understand lender policies, can identify suitable loan products, and help you avoid common pitfalls.

Working with a mortgage broker in Bonbeach provides:

• Access to multiple lender options
• Professional guidance through the application process
• Negotiation of rates and terms on your behalf
• Ongoing support throughout the settlement process

Don't Delay When Rates Are Favourable

Timing can significantly impact your refinancing outcome. Interest rates fluctuate, and waiting too long might mean missing out on attractive rates. However, avoid making rushed decisions based on short-term rate movements.

If current refinance rates are substantially lower than your existing rate, and the numbers support refinancing after accounting for costs, delaying could mean paying more interest than necessary.

Regular loan reviews help ensure you're not paying too much interest and that your mortgage continues to meet your financial objectives. Whether you're looking to reduce loan costs, improve cash flow, or access equity, professional guidance can help you avoid costly mistakes and achieve your refinancing goals.

Call one of our team or book an appointment at a time that works for you to discuss your refinancing options and ensure you're making informed decisions about your mortgage.