Refinancing the mortgage is one method investors can use to maximise the financial position on their investment property. However, unwary investors could find themselves worse off if they don’t avoid these top 10 mistakes of refinancing.
1. Compare Lenders/Loans – Don’t simply renew your loan with the current lender without looking at other lenders.
2. Assumptions – Don’t assume lower rates necessarily mean savings by ignoring costs and fees.
3. Delay – Don’t wait hoping for interest rates to drop, the risk is they could rise while you delay.
4. Get it in Writing – Make sure you get your new rate in writing.
5. Do Your Own Sums – Research the interest rates available – a 1 per cent reduction can save you large amounts on your loan repayments.
6. Clarity – Don’t switch loans or lenders without a clear understanding of all the potential associated costs like loan establishment fees. These costs could outweigh any savings from a reduction in the interest rate.
7. Evaluate – Not having regular assessments by lender or broker to evaluate your credit rating and financial position.
8. Total Disclosure – It’s important that you get all the relevant information in writing from any lender before you make any decision. Conditions and fees such as application fees or break fees to leave a loan can change the financial equation and could alter the best loan for your circumstances.
9. Honeymoon Rates – Don’t take lower rate introductory loans without calculating the true costs of the loan when the ‘honeymoon’ period ends and the higher rate kicks in.
10. Bad Habits – Don’t devalue your home equity by refinancing to pay off credit card debts without changing your spending behaviour also.