Find a more appropriate loan, not just a new loan.
The ban on mortgage exit fees has given more flexibility to mortgage holders, but the Mortgage & Finance Association of Australia (MFAA) has warned Australians that their priority should be finding a more appropriate loan, not just a new loan.
The government banned the charging of exit fees on new mortgages as of July 1, allowing mortgage holders to switch to a new loan without incurring early exit fees.
However, MFAA Chief Executive Phil Naylor has urged home loan borrowers to seek credit advice from mortgage brokers as the public is bombarded with marketing by mortgage lenders.
Mr Naylor said that the MFAA Home Finance Index for May showed that 30.9 per cent of the respondents had refinanced their mortgages in the previous 12 months, however, only 52.9 per cent could claim to have benefitted from the refinancing.
"Simply refinancing doesn't always achieve the desired goal," said Mr Naylor. "And switching for a better rate may not be as important as the terms of the loan. A mortgage is an important financial commitment which warrants a professional opinion.
"With a ban on exit fees, the mortgage holder is seen as a potential switcher by the lenders. And that means borrowers are being swamped by extensive promotional advertising."
Mr Naylor said that many people may not know if they were switching to a better deal than the one they were currently in.
He said MFAA Approved Brokers were trained to know which were the most appropriate deals for their clients, and they were bound by a code of conduct and licensed to facilitate credit.
'Mortgage brokers have panels of lenders they can use and their job is to find the most appropriate deal for the circumstances of the borrower," said Mr Naylor. "If you are receiving marketing material encouraging you to switch your loan, at the very least you should show it to a mortgage broker for a second opinion."
Source : MFAA - http://www.mfaa.com.au/default.asp?artid=2614