Don’t just ‘jump ship’ – test the water first
Mortgage holders should be cautious about making hasty decisions about moving their home loan following offers of cash incentives, reduced interest rates and new product offerings by the major lenders.
Don’t be tempted to ‘jump ship’ without first considering exactly what is on offer and what your long-term home loan needs are.
Testing the water
Moving your mortgage is something that should be done only after careful consideration because decisions made in haste can often have long-term negative consequences.
There are costs involved with moving your home loan, so you need to make sure the benefits outweigh these and, if you’re seeking the recommendation of a mortgage adviser or lender, that they can justify any recommendations they make.
There’s new rules to protect you
Under recently introduced consumer credit regulations, a mortgage adviser needs to:
- show the product and lender are deemed ‘not unsuitable’
- be able to demonstrate the benefits of taking out a home loan with another lender
- explain why a specific product and specific lender is being recommended.
It can be costly to move
One of the key considerations when moving your mortgage is the cost.
While the Federal Government’s intention is to abolish home loan exit fees, your existing lender may also charge ‘other fees’ which can include a discharge fee, administration fee and any other associated fees.
Equally, it’s good to be aware of fees that your new lender may also charge, such as an application fee and government charges associated with the registration of your mortgage and searches.
But, that’s not all
There’s much more to your home loan than just the ‘headline’ interest rate. While you may hope to save money and reduce costs by moving lenders, there are lots of other considerations, such as loan features and loan structuring.
It may be that you have a basic loan now but you want one with additional features, such as a repayment honeymoon or a redraw facility, because one partner is going to stop working for a while to stay at home with a new baby.
Or, you might have a loan with all the ‘bells and whistles’ that you don’t end up using. Perhaps a basic loan with a lower interest rate or one that doesn’t allow you such easy access to your funds is a better fit?
If you’re thinking of moving to another lender, test the water first by speaking to a Smartline Adviser.
DISCLAIMER: The information contained in this article is correct at the time of publishing and is subject to change. It is intended to be of a general nature only. It has been prepared without taking into account any person’s objectives, financial situation or needs. Before acting on this information, Smartline recommends that you consider whether it is appropriate for your circumstances. Smartline recommends that you seek independent legal, financial, and taxation advice before acting on any information in this article.