Should you use a mortgage broker to refinance your home loan?
At present times, interest rates are at record lows, you might be thinking if it is a good idea to look around for a better deal on your home loan.
Most Banking experts say that this is a good time to look for home loan refinancing. Refinancing can seem like a daunting process, but right now consumers have all the power.
During a prevailing situation like recession, banks are really rushing to offer lower interest rates to consumers. Thus, if you are trying to shop a better deal, it’s worth using services of a mortgage broker to save yourself time and from other related worries.
Here, we will look at the pros and cons to help you make an informed decision.
Mortgage brokers are convenient.
First, let’s take a look at how brokers get paid.
Generally, customers don’t have to pay any money to a broker for their services. Instead, most brokers are paid by the lenders as upfront and trailing commissions. So in that sense, most mortgage brokers offer free service to borrowers.
Another important fact to consider is that some lenders have certain loans which they sell directly to borrowers, and they don’t provide commissions to brokers for those products.
Certainly, it aint not difficult to say that those loans won’t be recommended by brokers — however how cheaper they are than the alternatives.
Some mortgage brokers are rewarded for bringing in new customers as well.
If you are going to use a mortgage broker, you should ask these questions.
Freshwater Financial Services suggests the following questions to ask your broker:.
- Can I get a loan from a wide range of lenders?
- How are you paid for offering your advice? Does this vary between lenders?
- Why did you suggest I take this loan?
- What fees must I pay when I take out this loan?
- What features are included with this loan? Can you explain how they work?
- Would you be able to give me a couple more options, including the lowest-cost option?
- What is the Lenders’ Mortgage Insurance (LMI) threshold, and how do I avoid it?
- What information is required for the loan application?
Additionally, check whether the broker has a proper credit license with the ASIC Connect Professional Register.
Here are still so many good reasons why you might want to use a mortgage broker to refinance your home loan.A Good broker can suggest options which you may not have considered or that would otherwise be unavailable.
Additionally, it’s also far more convenient to use a broker than having to do the research and deal with the banks yourself.
Independent mortgage brokers Freshwater Financial services recommends getting quotes from different lenders before making a decision.
Furthermore, it will help to ask your broker to explain why they recommend certain products and how they work.
The costs of refinancing
Refinancing a mortgage comes with a range of fees from lenders.
Among the most common fees are ‘discharge fees’ which you pay when you close a loan, ‘application’ fees which you pay when you apply for a new loan, and ‘switching fees’ which is paid if you keep your loan with the same lender.If you have a fixed-rate loan, be aware that you will also face a break fee, which can be substantial.
Even though there are fees attached to refinancing, it can still be worthwhile if it means you’ll pay less interest in the long run.
However, as a general rule, you should aim to recover any refinancing fees you pay through the interest you save within 18 months. You can always do the work yourself
You can refinance yourself if you prefer not to use a broker. It is also worthwhile to call your current lender to see if you can get a better rate.
It costs you nothing but can save you money. And, if you decide to go through a broker, this sets a higher bar for them to meet.
These tips are provided by experts at Freshwater Financial Services to assist you when talking to your lender.
- Research all your options and other rates available first, including what your current lender is offering new clients.
- When dealing with the staff involved, be courteous and confident.
- Ask large banks to offer better rates than what the other major banks are offering or, if a smaller lender, ask them to match what is offered on the market. You may also inquire about their rates for new clients.
- In the event you receive a no reply, ask politely to speak to someone more senior.
- To prove your seriousness, ask for a mortgage discharge form. Sometimes, this can be the deciding factor.
- It may be worthwhile to refinance for a larger sum if you have a lot of equity in your home since larger loans often have lower rates and you can then opt to repay the additional funds after settlement.
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