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Re-Financing - Is The Grass Always Greener?

These days there are new home loan products coming on the market all the time and borrowers are likely to re-finance their home loan at least once during its term. Is this always a good thing?

The ‘loan for life’ concept disappeared some time ago; in the short time since the 1990’s, loan terms have reduced from an average of seven years to three to five. Competition in the market means lenders are tailoring loans to suit their clients’ lifestyles.

It pays these days to keep abreast of the loan options available (there are now hundreds on the market) and compare your own with what’s out there. After all, it may be that your interest rate is no longer competitive or that newer products have emerged that better suit your situation.

You might want to switch loans to lock in a better interest rate or tap into the increased equity in your home.Or you may want to look at the professional packages for high earners, home equity loans for investors, reverse mortgages for retirees or even no-document or low-document loans for the self-employed.
 At the same time, be aware that new products generally come at a cost which may eat into any advantages gained. After all, banks aren’t in it just for the fun of it. Is there a price for leaving the party early? Deferred establishment fees, for example, typically apply if a loan is exited within three to five years. Every contract is different and the fine print of your current contract needs to be examined as well as the fine print in the new products on offer. Other fees and charges may include application fees for the new loan, approval fees or additional stamp duty costs.

The grass may well be greener somewhere else in the loan products range, but before switching it is smart to seek the opinion of a well-referenced accountant or financial adviser.

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