What type of mortgage suits you now?
There’s much more to refinancing loans than just finding more attractive rates and fees.
Obviously a low rate is important, but it’s not everything. Your new loan may be a different type of facility to your current mortgage and offer features that make managing your mortgage easier. We can advise you on the differences of each to help you make an informed decision. There are many subtle differences between each lender’s loans, but here is a basic rundown on the type of options you could consider.
Variable: The interest rates go up and down depending on the official cash rate, market conditions, and each individual lender’s decisions. When the rate goes down, so do your minimum repayments. But when the rate goes up, your payments will too.
Fixed: The interest rate is fixed for one to five years. Even if rates change, your repayments stay the same. This helps manage your household budget by knowing exactly what you have to pay.
Split Rate: One part of the loan is variable, the other is fixed. This lets you enjoy the benefits of an interest rate drop but also protects you from being affected fully if they rise.
Interest Only: You only pay the interest on your loan but do not repay the principal loan amount. Your repayments are less but you still have the same level of debt at the end of the interest only period.
Line of Credit: You can pay into and withdraw from this account as long as you keep up with the required repayments. You can have your income paid into this account to help pay off the mortgage sooner, but interest rates are usually higher.
Honeymoon Periods: Usually designed for First Home Buyers, lenders will make switching more attractive by offering a lower interest rate for the first six to 12 months, and then the rate returns to the standard variable rate.
Low Doc: These are popular with self-employed people because they need less documentation or proof of income. However, they usually have a higher rate of interest or need a larger deposit, or both.