Moving Home Loan Hidden Costs

Zaxxon on 01/06/2020 - 10:33
Last edited 03/06/2020 - 11:49 by 1 other user

I was thinking about the real, underlying costs of moving home loans (say every few years). It's the interest that is charged (verse principle) that I would like confirmation one.

To make it simple let's ignore discharge fees, legal fees, annual account fees, etc, … just focus on the interest rate.

Is this a correct statement: If I move from one lender to anther and the interest rate is more attractive, I am in a better position IF I KEEP THE SAME DURATION OF THE LOAN. This is the part I was not sure about, as you know you always pay more interest in the first 5-7 years before you eat into the principle. If, when moving, you keep the duration of the loan the same, then the interest payment formula would not disadvantage you? Is that right? … I picture that repayments graph that is very flat in the first few years and if you move lenders will you ultimately be paying more interest they you would have if you stuck with the original loan?

Is this probably a no brainer for some, and I'm 90% sure I don't think it disadvantages you to move, but just wanted to check (there is no internal bank wizardry and/or trickery at play)… thanks.

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  jorf on 01/06/2020 - 11:21

  If you're starting a new loan term each time and then accepting the (lower) minimum repayments that come with it, then you'll pay more. If you keep your repayment the same, then ignoring any other costs, a lower interest rate will pay it down faster, regardless of the loan term.

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  Seraphin7 on 01/06/2020 - 12:51

  The first principle of reducing interest charges is to reduce the principal.

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  onetwothreefour on 01/06/2020 - 13:28

  I refinanced my home loan after 2 years and the new lender asked me to go back to a 30 year term, I just kept my minimum repayments at the higher amount that I had already been paying.

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  Kinko82 on 04/07/2020 - 19:10

  As long as you keep the repayment the same as your previous loan then the new 30 year loan term doesn't make a difference. Having a 30 year loan term gives you the option to reduce your repayments to the min should something happen to your financial situation. Such as job loss, unexpected issues etc.

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    hamcp820 on 08/07/2020 - 22:10

    would it be the same scenario if you paid the minimum repayments but the difference that you saved from previous repayment amount is accumulated into the offset savings account instead?

    always thought refinancing to a new 30year term would be a bad idea, say if interest rates went up?

    anyone got a good homeloan spreadsheet with repayment intervals to see the differences?