The decision to move to another lender can be a difficult yet important decision. The wrong decision could end up cost you thousands. Surprisingly, the interest rate is not the most important factor to consider. You also need to consider refinance fees, annual fees, exit fees, how practical the lender is to your lifestyle, if you’re willing to move all your banking to the new lender & your future goals such as the possibility to selling your home. It is important to fully understand these costs to consider if refinancing to a new lender is the right decision for you.
Refinancing could make sense if
- Your lender’s rate is no longer competitive
- A major change has occurred in your financial situation
- You’re looking for more money to pay for something major like a home renovation, a child’s education, or another property investment
- You want to switch to a fixed rate at an opportune time
- You’ve started accumulating large credit card debts and want to consolidate
Staying with your current lender could make sense if
- You might not own the property for much longer
- Prepayment penalties are high on the exiting home loan
- Since your previous loan, your credit history has taken a hit due to outstanding debts, making it less likely you’ll get a good rate
- You’ve don’t have a reliable source of income over the period of the loan (ex: You’re freelancing)
- Your loan balance is low and you don’t want to redraw on available equity
- You don’t have enough equity & would need to pay LMI with a new lender
