Making the decision to switch home loans could save you a lot of money in the long run and provide additional features. Before taking the step, sum up all the costs that this change comes with.
Although some credit providers might give you a better interest rate, the total costs of changing lenders won’t be worth it.
Instead of looking around not knowing what to search for, follow these steps that will ensure you get the best deal possible.
Get an Idea of The Market and Use a Key Facts Sheet
Always start by using a comparison website and search for alternatives that may incorporate extra features that will allow you to make changes and pay less in the years to come.
A key facts sheet contains all the things you’ll consider when changing home loans, so whenever you think you’ve found a better deal, ask for this type of sheet from the credit provider.
Talk to Your Current Lender about a New Deal
Especially if you’ve made payments on time, your lender could choose to lower interest rates instead of losing you as a client. Talking to him first will also bring you more offers on the table.
The benefit of getting a better deal from your current lender is that you already have a relationship with him, so you know you can trust and rely on him.
Compare Notes by Balancing Interest Rates, Features, and Fees
Even with all the key facts sheets around, borrowers sometimes have difficulties in deciding what the best home loans are and which one is the right one for them.
A mortgage broker could help you out by pointing the most important features of the loan. He/she will also help you choose a lender.
Consider the Costs of Switching Lenders
- Exit fees
In case you’ve taken the current loan before the 30th of June 2011, your current lender could charge you exit fees, although nowadays that’s not allowed anymore.
A lender’s mortgage insurance or LMI is like a security blanket for the lender. If you fail to repay the loan, your credit provider is secured because you’ve also paid this insurance.
To avoid having to pay LMI again, calculate the equity and savings you have and borrow less than 80% of your home value. This will lead to smaller fees.
Increase Payments Even If You Get a Better Deal
Switching home loans doesn’t mean that you’ll only make smaller payments, but also that you’ll be able to repay your loan faster.
Some lenders will take you back where you’ve started, meaning that they’ll divide the loan throughout a period of 25 to 30 years. Even though the interest rates and fees will be reduced, you can choose to increase the payments and get out of debt quicker.
Always consider all these points before changing home loans and ask for all the extra fees and costs to be printed, so you’ll know exactly what you’ll have to pay and not get yourself dragged into a worse deal.