Does a Home Loan Refinance Really Save You Money?

If you could save thousands of dollars every year by simply switching lenders today, why wouldn’t you? After all, your bank isn’t going to call you up once a year to tell you that a competitor down the road is offering a better deal than they are – that just wouldn’t make any commercial sense.

While a refinance may save money on your mortgage, it is essential to be aware of any potential costs involved in the process.

In most instances, the costs to refinance are minimal – generally in the $500–$1,000 range, though this can vary dramatically from one lender to the next. Many lenders offer incentives and switching bonuses, or simply have a far lower rate than your current one.

As an example, if the switching cost were $700 and the annual savings were $300, it might not feel worth the trouble. On the other hand, if the savings were $2,000, $5,000, or even $10,000 per year, then the refinance pays for itself several times over, putting more money back in your pocket each month.

This is why reviewing a mortgage at least once a year is beneficial. This doesn’t necessarily mean switching lenders every 12 months – that would be overkill – but having a conversation with a mortgage broker can help identify potential long-term savings.

Generally, the initial conversation only takes 10 to 20 minutes, either over the phone or face-to-face. From there, a mortgage broker can assess whether alternative lenders offer sufficient savings. If not, it affirms that the current loan is on the right track; if savings are available, a change may be worth considering.

It is also an opportunity for forward thinking. Whether planning a holiday, early retirement, home renovations, or investing in property, an annual review provides a practical opportunity to plan towards these goals.

The lending market changes regularly, and mortgage brokers take a proactive approach to managing home loans. Spending 20 minutes once a year to review existing market offers could result in substantial savings – or offer peace of mind that your home loan is still working effectively.