Five questions to ask before you refinance

Refinancing gets talked about as if it were always a win. Sometimes it is; sometimes the costs of switching quietly eat the benefit. Before you move your loan, work through these five questions.

1. What am I actually paying now?

Not the rate you signed up for: the rate you are on today, plus any package or account-keeping fees. Many borrowers are surprised by the gap between their current rate and what the same lender offers new customers.

2. What would switching cost?

Discharge fees, government registration fees, and application costs on the new loan all come off the top of any saving. If you are on a fixed rate, break costs can be significant, so get the payout figure before you decide anything.

3. Does the new loan fit how I actually live?

A slightly lower rate on a loan without the features you use (an offset account, redraw, the ability to make extra repayments) can cost more than it saves. Compare the structure, not just the headline number.

4. Has my situation changed since the last loan?

Income, family, other debts, plans to move or renovate: lenders assess all of it, and it also changes which loan structure suits you. A refinance is a chance to fix a structure that no longer fits.

5. Is staying put the better answer?

Sometimes the strongest move is asking your current lender for a better deal, or doing nothing at all. A good broker will tell you when that is the case, because a refinance that does not leave you better off is not worth doing.

This article is general information only. It does not consider your objectives, financial situation or needs. Speak to a qualified professional about your individual circumstances.