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Director of Lending
October 23, 2018

Why refinancing is smart if you outsource it

The statistics are mind boggling, 3 out of 5 borrowers do not review their home or investment loans every 2 years. Most borrowers therefore have no idea you can lower your mortgage payments or get your home loan paid off faster, simply by refinancing and looking at all available loan options. On average borrowers who do not review their loans every 2 years, end up paying thousands of dollars more in interest over the life of their loan. There are a number of advantages to refinancing but the process is not without certain drawbacks, especially when it comes to the fees involved and time taken to gather all required information. Hargate Advisory has always seen these two obstacles as being the primary deterrents to refinancing and that is why in most circumstances we cover 100% of our clients refinancing fees and use technology to make the process as easy as possible.

Firstly, What is Refinancing?

Mortgage refinancing is a strategy that helps homeowners meet their goals. This often means refinancing to a lower interest rate or refinancing to a different mortgage term. Refinancing a home or investment property is a big financial decision and one that should not be made without doing due diligence or discussing your requirements with a professional adviser. When you refinance, your new lender covers your old mortgage and replaces it with a new mortgage. Most people refinance to reduce their monthly payment, but some refinance to access better service or for situational reasons (such as a bridge loan to allow you to move into your new home and then sell your old home, thus lowering the impact of having to find a temporary place to live)

Refinancing gives you an entirely new mortgage, ideally with more favourable terms. Wondering how to refinance? You’ll need to make sure a refinance is worth your while first. Hargate Advisory can shop around for a lender that will offer you a good interest rate with affordable monthly payments. We also cover 100% of your refinance fees and use technology such as automated bank statement software to make the process of gathering documents for any loan application as easy as possible.

Adding Up the Costs

Generally, when you buy a home you have to pay certain closing costs to complete the sale. When you refinance, you’re essentially replacing your original mortgage loan with a new one which means you have to pay certain costs again (i.e. discharge costs, re-registration costs). The closing costs for a refinance cover a wide range of fees and can easily total up to $1,000 or more. 

Before you start the refinance process, it’s a good idea to find what sort of fees you will be up for. Additional costs you may have to pay include a title search fee, a valuation fee and/or a yearly loan package fee to get the best rates at the lender. These fees can easily increase the cost of a refinance by several hundred dollars or more so make sure you are aware of all costs involved in any new loan refinance process.

The number one reason that many people refinance is to get a lower interest rate on their mortgage. A lower rate translates to lower payments, which means you’ll pay less for your home overall. Paying less towards your mortgage each month also frees extra cash in your budget that you can put towards your short and long-term savings goals.

Refinancing also offers an advantage if you want to clear your mortgage debt in less time. If you’ve got a 30-year loan, refinancing to a lower rate and keeping your repayments at the original higher level, you’ll own your home that much sooner. You’ll also be able to build equity in your home faster if you take this route.

Taking out a fixed-rate loan also makes sense in the current environment of rising bank funding costs and a royal commission that is likely to see banks passing on more of their costs to borrowers. Hargate Advisory is also advising all borrowers to switch or opt for principal and interest repayments rather than interest only for the simple reason that reducing debt creates instant equity rather than having to wait for your property to rise in value. P&I rates are also a lot cheaper than interest only repayments. The same is true if you have a loan approaching the end of its interest-only repayment period. Once you have to start repaying the principal, you could see your payments increase substantially which can put a major strain on your wallet. Refinancing to a fixed-rate loan helps you avoid any nasty surprises in both situations.

Whichever way you decide to go, when you are deciding about refinancing, the best thing to do is run the numbers to figure out how much you will save and whether it’s worth the fees you’ll have to pay. The easiest way to do this is to outsource this process to a business like Hargate Advisory who will not only do all the leg work for you, but in most circumstances we will cover 100% of the refinance costs for you to make sure these don’t stop you getting in the way of paying off your home sooner or simply getting a better deal. There is no cost for this initial service and it could save you thousands over the life of your loan.

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