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Do you want to transfer or convert a mortgage?
Many people who took out their mortgage a few years or more ago no longer know exactly how it works. More and more homeowners are therefore asking themselves whether they should transfer or convert their mortgage. After all, interest rates are historically low. And perhaps another form of mortgage is cheaper or more sensible. What is wisdom: do you have to switch or convert the mortgage now, or not? And if so: how exactly?
There is no general answer to the question of whether to refinance loan, convert, or do nothing at all. In addition to financial aspects, other matters also play a role. For example, it may be interesting in the medium to long term to adjust your mortgage, but you must invest in your mortgage now. Not everyone wants or can do this. The answer to the question: “Do you want to refinance or convert a mortgage from variable to fixed or vice-versa?” .
Nevertheless, it is wise to study your mortgage again. Especially now that over a third of Victoria homeowners have potential residual debt. Your home and mortgage are important parts of your assets. Therefore, these assets deserve to receive at least as much attention as, for example, a stock portfolio.
Mortgage Refinance: important considerations
Do you live in a house for sale and has your situation changed recently or is it going to change in the short term? For example, because you have taken another job, become unemployed or you fear that this may happen in the short term? Certainly then it is wise to investigate how your housing costs are doing. Transferring the mortgage can then be a good choice.
The most important questions when transferring a mortgage are:
- how much lower are the monthly costs in the new situation?
- how much penalty interest do you have to pay if you now sign a new contract?
- how high are the additional costs, such as the costs for advice, mediation and notary?
- can and do you want to invest in refinancing your mortgage?
- how much time do you recoup the investment?
When considering whether or not to transfer your mortgage, it is usually calculated whether you will earn the investment back within five years. Of course, this is not an established law. Especially if you still have to pay a substantially higher interest rate for years within your current contract and you would fix your new mortgage for a longer period of time, a longer ‘payback period’ may also be interesting.
Certainly if you want to convert a mortgage, it is wise to seek advice. Since the rules have changed in last few years, the question is: “Convert mortgage or not?” even more complicated than the question: “Mortgage transfer or not?” In addition to tax and other financial aspects, personal preferences also play a role.
But actually it is always wise to seek advice before breaking open a large and expensive contract like a mortgage. The advice of a Our Mortgage Professional will definately help.
Want to talk more about your home loan options?
If yes, then please get in touch with me today and I’ll be happy to help. All my home loan and mortgage services (from the initial meeting, right through to home loan settlement) are completely free to you.