Thinking of Refinancing?
Why? What is Your Motivation? What Are you trying to Achieve?
Refinancing forms approximately 40% of all loans we write at Loan Market in Shellharbour, but the reason and motivation for the refinance need to be clear before we consider the proposal. The reasons to refinance can be varied and may include
- Cheaper rate
- Cheaper Fees
- Specific Product features
- Change of personal circumstances
Our reason for reviewing each case prior to taking on the file is that we are conscious of the financial benefit that may, or may not, be attached to completing the process. As an example -
Freddy has a $310,000 loan at his existing lender at a fixed rate of 5.99%. This fixed rate has 1.5 years prior to expiry. Freddy approached us to complete a refinance to the advertised rate of 4.84% for 3 years. On face value this looks like a saving of 1.15% P.A. which translates into $3,565 interest saving p.a. Closer review of the file reveals that for Freddy to break his existing fixed rate contract will cost approximately $6,000 in break fee’s at the existing lender and will attract a mortgage insurance premium of $3,000 at the new lender plus discharge and statutory costs. In total this would be $10,000 of cost in the current year to $3,565 next year i.e. it will take 2.8yrs to recover the cost attached to completing this refinance. Remembering Freddy only has 1.5 years left to go on his existing contract we advised Freddy we will review the file again in 18 months time but could not proceed with the application at this stage.
This is just one example of a file that on face value appears to have value, however, closer review shows the cost far outweighs the benefit at this time.
This is not always the case and often we can achieve huge savings. In July 2013 we settled a $1,950,000 facility that took the clients from 8.25% to 5.22%. This is a massive 3.03% or $59,085 in interest per year.
Such success stories are possible and a close review of the individual file will confirm if the refinance is viable or not, so, please fill out the form below or call Lee directly on 0412 951 773 to organise a review of your loan.