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16

September

2014

Mistakes Investors make when refinancing

1. Not shopping around. Many investors except a reduced offer from their current lender without asking any other financial institutions.

2. Not doing any sums with regard to overall savings. Sometimes the lower rate verses extra fees is not a saving at all! Make sure you count all the costs including stamp duty, establishment fees etc.

3. Waiting for interest rates to drop and procrastinating over that the rates will reduce.

4. Make sure your financier is willing to put the rate in writing. This gives you more bargaining power when competing with other offers.

5. Making sure how much you will save by decreasing your mortgage by every .25%. 

On average, .75 - 1% will save about $100 a month on every $150,000 of mortgage

6. Switching loans or lenders without clarifying whether the total costs (including establishment fees, legal fees, stamp duty fees, ongoing fees) are outweighed by the savings in interest.

7. Not reviewing your financial position on a yearly basis. A broker or lender should be evaluating your position at regular intervals. These lenders are paid from the financial institutions and as such, their services are free.

8. Investors sometimes fall prey to a honeymoon deal, which will ultimately revert back to it's original or higher rate at the end of the introductory period. There are also exit fees if you terminate or try to refinance during this period.   

9.Taking out money from your home loan line of credit to pay off credit cards. This reduces your equity in your home from overspending habits.  Don't turn what could be a short-term debt into a long-term debt.

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