An article written by Alison Mifsud: Head – Corporate Banking and Mortgages, MeDirect

We are all great at spending money, with many of us shopping around for the best deal before committing to a large purchase like a holiday or new car. So, it is surprising to find that many of us don’t apply the same notion when shopping for a home loan deal.

In today’s low-interest environment, refinancing a home loan could save you money by lowering your monthly payments, amongst other things. Refinancing is the process of switching your current home loan to a new deal. You can choose to stay with your current lender, or you may want to move to a different provider. The idea is to ‘shop around’ for the best deal you can get on your home loan, so that you have an opportunity to save money.

The following are some of the most common reasons homeowners decide to refinance:

1. Reducing your monthly bills by refinancing your home loan.Because for many of us our home loan repayments are our biggest expenditure, benefiting from a lower interest rate and thus reducing the monthly repayments, can lead to substantial savings.
2. Your current home loan Fixed Rate period is nearing an end.The typical length of a home loan deal on a fixed interest rate would last between two and five years. However, due to a fluctuating market, when your time is up, your lender will automatically put you on its variable rate. This will likely be a higher interest rate and more expensive than other deals available on the market. That is why it may be time to refinance to a cheaper rate.
3. Your home is worth more now.Property prices in Malta have been on the increase year on year for the past decade, meaning that since you took out your original home loan, you may be in a lower loan-to-value (LTV) band. The LTV is the size of your home loan in relation to the value of your property.  The important thing you need to remember here is that the lower your LTV, the less risky it is for the lender to offer you a loan against your property, hence, you will be able to access better interest rate deals on the market. If your property value has skyrocketed since you took out your home loan, you’re definitely missing a trick if you haven’t already searched around for a better deal.
4. You want to borrow more to make home improvements.You may want to undertake some expensive home improvements such as an extension to your current property, changing your kitchen or investing in eco-friendly solutions for your home. In this scenario, refinancing with another institution may enable you to raise the money needed, whilst benefiting from cheaper rates on your current home loan.
5. You are concerned that interest rates might be rising soon.Many people are considering the possibility that base rates are likely to rise once more. If the base rate rises, this could affect your monthly repayments, specifically if you are on a variable rate, so shopping around for reasonable fixed rates could be worth considering.

There are also some scenarios, when refinancing your home loan might not be a good idea, like for example if:

1. Your outstanding home loan is close to its maturity.
2. You are currently on a fixed interest rate.
3. There is a large early repayment fee that you will need to pay if you refinance.

If it sounds like refinancing your home loan could be the right move for you, we recommend you start searching for a new deal as soon as possible. Like with any big financial decision, refinancing should be treated with an appropriate amount of attention and consideration toward its long-term impact.

Understanding that this could sometimes result in a time-consuming process, banks should make their processes simpler and easier for their customers to refinance their home loan.  This is what we’re aiming for at MeDirect, where our qualified advisors are set up to ease out this process, helping you every step of the way. Our team is flexible to set meetings in a digital environment and has all the resources required to provide you with a faster than market response time.

If you’re interested into exploring your refinancing options with one of our licensed advisers, you can simply contact us on 25574400 or on MTMortgages@medirect.com.mt.

MeDirect Bank (Malta) plc, is licensed to undertake the business of banking in terms of the Banking Act (Cap. 371) and investment services under the Investment Services Act (Cap. 370). 

MeDirect Bank (Malta) plc, is regulated by the Malta Financial Services Authority as a Credit Institution under the Banking Act 1994. Applications are subject to the Bank’s lending criteria. Terms and conditions apply and are available on request.