A good broker will be your best advocate when it comes to refinancing. In fact, a well-rounded and service-focussed broker will partner with you throughout your entire mortgage journey. From getting your savings in order 12-18 months out from borrowing to two years into your loan and beyond, transactional brokerage is an outmoded concept with long-term partnerships now setting the industry benchmark.
So when is it the best time to refinance? That’s where the role of said advocate comes into play. It’s your broker’s role to combine your goals with market activity and help guide you as to when refinancing is financially prosperous. In a nutshell, your broker should regularly look at current industry rates and loan features, and if these are tangibly competitive, they can negotiate with your current lender on your behalf and encourage them to match the most appropriate market solution for you.
If the current lender doesn’t budge, the contingency will be to see what other lenders in the market can offer. Ultimately though, your broker should not encourage refinancing unless it benefits your back pocket and aligns with your personal objectives.
Reasons Why People Refinance
If the market permits, a savvy mortgagee can work with their broker and refinance every 2-3 years. So what are the reasons people refinance?
- To obtain a more competitive interest rate and loan features
- To leverage an equity release for renovations, a holiday, a new car, another property, to buy some shares etc.
- To consolidate other personal debt (credit cards, personal loans etc.) and get the best possible interest rate on all loans combined.
There are exceptions to this list, and reasons vary from mortgagee to mortgagee. Inovayt’s Mortgage Advisor, Kathy Stammers, speaks to this, “we have clients with many different scenarios. It’s our job to guide them through what’s available and to advise if we think it’s better to hold off refinancing.”
If refinancing is beneficial, your broker should present you with the pros and cons of various loan options, such as an offset loan, a basic loan or a fixed term loan. For example, a new family about to juggle a new addition with maternity leave may wish to go on a fixed term loan, “it’s about working with and alongside our client’s goals from the outset”.
Like any lending process, there are commonly affiliated pitfalls, such as getting the wrong valuation advice or refinancing when above 80% as it means having to pay mortgage insurance again.
According to Kathy, the most common mistake though is “not checking market interest rates enough. Over the course of a mortgage, this can amount to thousands not saved. It really does pay to get the right advice.”