Three Factors to Consider Before Discharging Your Home Loan

Thinking to refinance your home loan? We explore three factors to consider before discharging your home loan.

Check the length of your new loan

Some lenders may only allow you to refinance with a 25- or 30-year loan term. This means you could end up with a longer loan term than the years left to pay off your current mortgage.

The longer your loan, the more interest you’ll need to pay. Before you decide to discharge your home loan, consider negotiating a loan with a similar length to your current one.

Consider the additional costs and fees

Check with the lenders on your shortlist whether there will be any start-up fees, break fees or other costs involved, and factor them in your calculations.

If your LVR is more than 80%, you may need to pay Lender’s Mortgage Insurance again with your new lender. This can increase the cost of switching and outweigh the savings you'll get from a lower interest rate, so be sure to take this into account when deciding whether to discharge your home loan. Your new potential lender will generally be able to inform you if any lender’s mortgage insurance will apply.

Check the comparison rate

The interest rate might look great, but how does the comparison rate stack up against your current home loan interest rate? The comparison rate includes the interest rate as well as the fees and charges associated with the loan. Ultimately, it helps you to get an idea of the actual cost of the loan, so it usually pays to compare the comparison refinancing rates rather than the interest rate alone.

Learn more about discharging your mortgage and how long it takes to discharge.

This article is intended to provide general information only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product advice. Please consider seeking financial advice before making any decision based on this information.‍

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