Refinancing to a new mortgage product can help you to save money over the term of the loan. Provided the right product is selected, you could save thousands of dollars in interest and fees. If you choose the wrong product, you might not save any money at all, or you might even put yourself in a losing position compared to keeping your current home loan.

In order to make the right decision as to whether you should refinance, and what product in particular you should choose, you should first have a close look at the various costs involved in refinancing your mortgage.

Interest

The biggest cost of a home loan is interest. Over the life of the loan you might pay as much in interest as you do principal. It follows that by selecting a mortgage with a low interest rate, you could save a lot of money. By selecting a product with high interest, your home loan could prove costly.

It is important to be aware that some product have introductory rates – also known as honeymoon rates – that last for only a short time. This means that the interest rate you pay might be low at first, but it will increase over time automatically. The Reserve Bank, or your own lender, does not have to increase rates across the board for your introductory rate to rise. Instead, interest rate increases are factored into the initial contract and will happen regardless of rate movements in the market.

Exit Fees

Your current lender might charge you an exit fee if you refinance to another mortgage product. Exit fees are not charged if the mortgage is paid down in full at the end of the agreed term. Instead, they are charged when the home loan product is exited early. For this reason exit fees are sometimes known as early repayment charges.

If you are looking to refinance your home loan, you should check to see whether any exit fees are payable and factor them into your decision making.

Establishment Fees

When applying for a new home loan you might be charged application fees or establishment fees by your new lender. It is common for such fees to be charged by lenders to cover adminitration costs.

If you are looking to refinance your home you will likely need to factor establishment fees into your calculations as well as exit fees and interest rate changes.

Weighing Up The Costs

Once you have discovered what fees you will have to pay to refinance, and how much your outgoing and incoming lender will charge, you will need to weigh up whether it is worth refinancing. You should also factor in any changes in your interest payable to determine whether you will save money by refinancing or whether you are better off sticking with your current home loan.

If you find the process of making the decision too difficult, contact a mortgage broker for help. An independent mortgage broker can help find the least costly product to refinance to and help you decide whether to refinance at all.

Author Bio: We are a firm of Brisbane Mortgage Brokers here to help you with your home loan needs. Contact http://www.moneynet.com.au/ today. http://www.moneynet.com.au/

Category: Finances
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