What is Refinancing, Should You Consider It & What are the Pro’s & Con’s?

You often hear the term “Refinancing” but what exactly does refinancing mean and what are the Pros & Cons.

Refinancing is simply the process of replacing an existing loan with a new loan with the aim of obtaining a better interest rate, a better loan term, better loan features or a better repayment.

So what are the Pro’s and Con’s of Refinancing?

Pro’s

* The loan repayment could be lower.

* The interest rate could be lower.

* You could stop paying for features on your current loan that you don’t need or use.

* If the repayment savings are used as extra repayments on the new loan, it could reduce the loan amount faster.

* The new loan could have features, which could be of benefit such as an offset account or a redraw facility.

* You can choose a new loan type that meets your current circumstances. For example, if you have a variable rate loan, you might prefer to switch to a loan with a fixed rate which could offer protection if you believe interest rates could rise.

Con’s

* There could be costs associated with the refinance such as borrowing costs, break costs (particularly if you currently have a fixed interest rate loan), government charges and Lenders Mortgage Insurance. These costs could mean refinancing is uneconomical.

* You could pay more over the long term for the loan. For example, if you have been making repayments for 3 years on a 30 year loan and then refinance into a new 30 year loan, you could be making 3 extra years of loan repayments.

* You may have to set up or change direct debits or where the new loan repayments are to be made from.

If you are considering Refinancing I can provide you with the following information;

* What you can expect the new repayments to be

* What you can expect the new interest rate to be

* What the potential savings can be.

With this information can you can then weigh up the Pros & Cons and determine whether Refinancing is for you.

If you would like information to see if Refinancing is for you please call me on 0408 648 107 or email danny@dannycook.com.au