Traps around refinancing loans and how to avoid them
Refinancing is an option that can make saving money on your home loan a simple and seamless process. It's a breath of fresh air when you're looking for ways to lower your monthly bills, offering financial flexibility when you need it the most. But with every good thing comes a catch — it's easy to fall into traps that could have you paying back even more than you should.
But don't worry! Having the right resources and financial assistance can keep you afloat and help you save as much money as possible during the refinancing process. Here are a few traps to keep in mind and how to avoid them:
1. Getting the right structure in place
Anyone can write a home loan. Making the mistake of working with the wrong person can cost you in the long run.
How to avoid it: Making sure you have an experienced advisor who can explain and show you a better structure to help pay down the loan quicker is necessary. This person can help you determine if and/or how much to fix and how much to keep variable, and if an offset account worth having is worth having or if you should go with a cheaper rate instead.
2. Finding cheap rates
You could find a cheap rate one day that sporadically changes the next. Some lenders are notorious for "rate creep" where the rate is cheap to start then over time they gradually increase.
How to avoid it: Work with someone who understands how lender trends work and won't scam you out of a good rate.
3. Paying the new minimum repayment
Many people are quick to pay the new minimum repayment rate instead of sticking with the one they're used to. While it may save you money in the short term, it can ultimately impact you in the long term.
How to avoid it: Pay the higher amount if you can to reduce the loan term quicker on the cheaper rate.
4. Overlooking the future planning process
It's easy to think about the short-term goals, but how will refinancing impact you in the long run?
How to avoid it: Make sure that the loan you refinance to will suit not just short-term goals but also middle- to long-term goals to allow you to build on your portfolio or to reduce rates as you build equity.
Interested in refinancing? Work with the trusted mortgage specialists at SmartMoney Wealth Management. We can provide you with tailored advice that enables you to make the best possible financial decisions for your future.
With our assistance, we can help you pay off your mortgage and become 100% debt-free. That means you can enjoy your home, have fun with your children and grandchildren, and invest in the years to come.
Interested in learning more about our financial assistance offerings? Contact us today to schedule your free consultation.