Refinancing Traps To avoid

​Whether you’re after lower repayments or want to tap into the equity sitting in your home, refinancing can offer a world of benefits. Here are some things to be aware of so that you don’t find yourself hooked into a bad deal.

Whether you’re after lower repayments or want to tap into the equity sitting in your home, refinancing can offer a world of benefits. Here are some things to be aware of so that you don’t find yourself hooked into a bad deal.
 
Don’t be fooled by the interest rate
Finding a lower interest rate doesn’t necessarily mean you’ve scored yourself a better deal. In fact, a product with more features may cost you a bit more in fees or interest, but could save you more in the long run. Including features such as an offset account can prove valuable.  An offset account is a transaction account linked to an eligible home loan.  The money you have in this account can offset the amount you owe on your loan and you’ll only be charged the interest on the difference.

​Honeymoon rates are just that
Don’t be lured by offers with discounted introductory rates unless you’ve calculated the savings over the life of the loan. While a loan with a discounted interest rate seems a tempting offer, it’s only temporary. Once the introductory period is over, the interest will revert to a higher standard variable for the rest of the loan term. It may be more beneficial financially to negotiate a lower interest rate without an introductory discount.
 
Be aware of the fees
One of the main purposes of refinancing is to lighten the financial burden or get ahead on your home loan, however, that doesn’t mean that it’s not going to cost you. There are fees involved, which may include discharge costs and application fees, a valuation fee, land registration fee, and mortgage insurance. While these cannot be avoided, you have to ensure that the costs involved are not higher than the savings, to make the process worthwhile.
 
While there are traps to avoid, a little expertise can take the stress out of refinancing to save you thousands, fund that renovation, or simply find a loan that suits your life a little better - Kerry McKenzie from KLM finance can guide you through the process.