People refix mortgages for a number of reasons
Typically, a mortgage is refixed at the end of a loan term. Most of us tend to set and forget our mortgages: we fix a rate for a set period, budget how much to pay each week/ fortnight/ month and walk away. But interest rates change, life changes and plans change, and these changes could cost you thousands.
Getting money matters sorted
Looking at refixing your mortgage provides a good opportunity to reset your financial situation. Before making any big financial decisions though, you need to figure out whether refixing your mortgage and for how long works for you. So, make use of an experienced expert. Help from a mortgage broker makes the process of evaluating your financial situation a great deal easier.
Don’t let the bank decide for you
If your mortgage term is coming to its end, don’t put your head in the sand and ignore it. Do not leave it to the lender, and they will put you on a new fixed-rate or floating-rate loan happily enough, but this convenience could end up of not considering all the options available to you to make your loan better. Taking the time to find a better deal could save time and money off your mortgage.
Working with a mortgage broker many times helps. We’ll look at the interest rate you’re currently on, the structure of your loan, your income, and expenses as well as your near- to medium-term goals and we’ll present a mortgage package that works in your best interest.
There are many valid reasons for wanting to reorganise your mortgage at the time of refix:
A mortgage can be reassessed or fixed if it is floating. Refixing and shortening the terms of a loan can make you debt-free sooner. Sometimes a mortgage is refixed early to take advantage of cheaper interest rates.
Questions to ask yourself before refixing
• What’s the best rate available?
• Does it make sense for you to refix a loan early?
• Is there a right time to refix?
• How long for I refix for?
• How to restructure your loan to make you mortgage free sooner within your capacity? This technique is not very well known but Global finance has an expertise in it and being used by them for over 20 years and thousands of their mortgage customers are benefited through their “ Mortgage Genius Plan®”
It’s about finding the balance that is right for you
The answers depend greatly on what type of mortgage you’re on: when your current term ends and your view on and how much you think interest rates will increase. What is your risk tolerance? You need to consider your current financial situation and how financially secure you feel. What sort of mortgage you choose will also be affected by how long you want to hold on to your property, and whether you are likely to be able to pay off a lump sum.
An experience mortgage broker can negotiate better rates for you and can suggest most suitable loan structure while banks are generally are interested to refix only that too on line.
What is the forecast looking like for fixed interest rates?
Locking in rates for a long time is great if interest rates continue to rise but doing so also stops you from benefiting if rates go lower.
Choosing the kind of mortgage, you want depends on your personal circumstances. You need to consider cash flows, how you feel about uncertainty, and your ability to deal with changes in mortgage payments as interest rates change.
Do you prefer the security of knowing exactly what your repayments will be for the next few years? Or perhaps you’re happy to take the chance with a shorter-term fixed period and are willing to see how the markets react. Predictions are that we should see a bit of relief in interest rates in maybe 18 months’ time. If you can afford the risk and aren’t going to be too affected should interest rates not drop, look at taking the short-term option. If you can’t afford the risk, you need to look at your budget, work out what you can afford, and fix for longer.
Another option to consider is dividing your mortgage and fixing portions on different terms. You could split your mortgage between one and three-year loans. You won’t be as exposed to interest rate movements on the entire loan. Not having all your mortgage maturing at the same time will mitigate the impact of payment shock if interest rates were to drastically increase a year from now.
What is life looking like in the short term?
To make the smart refixing move, it’s worthwhile sitting down and forecasting your life for the next couple of years and how it may affect your mortgage. If you think there may be change ahead, it will affect how long you fix for. What does your income look like? If your income is looking uncertain, you may decide to commit to locking in lower interest rates. Are you planning a family and if so, what could this mean for the household income? Make sure any payments you fix now will still be manageable.
Are you likely to sell your house any time soon?
If you sell your house during a fixed interest rate period, you may have to pay a break fee to the bank. Keep these costs in mind when deciding whether to fix an interest rate and for how long.
Getting down that debt
Refixing is the time to look at lump sum payments if you are able. There won’t be any break fees and the money will not be available to tempt you to spend it.
If you’re expecting a pay rise, ask whether your bank allows an increase in regular payments without penalty. The only caveat in some banks is that you cannot reduce those payments again until the end of the fixed rate.
Get a mortgage that works for your goals and circumstances
Finding one takes skill and an up-to-date understanding of the market. This is where the expertise of our mortgage brokers is helpful.
Call Global Finance on 09 255 5500 or email@example.com today, and we’ll talk you through all the best mortgage options available. We can shop around on your behalf and compare all the ins and out to find the best fit. We’ll explain the differences and then negotiate the better rates, terms and products which are according to your goals and most preferred by you.
**These are general guidelines, and they are not meant to reflect the policies of any bank or lending institution. This blog is for general information only. It is not personalised advice, as each situation is unique. Each reader should seek the advice of an adviser before taking any action. For personalised advice, please contact your financial advisor or one of the Global Finance team.