Could now be the right time to refinance? We chat to our Lending Support Services Team Leader, Luke Avis to find out.
Take it away Luke.
Well this may sound like a ‘politicians answer’ but there are no hard and fast rules when it comes to the right time to refinance your home loan. Instead, it’s about the ‘right situation’ and what you’re trying to achieve. So, let’s look at some reasons why you might want to refinance.
1. You want a lower interest rate
More than likely interest rates have changed since you took out your home loan or last refinanced. This means you may be able to refinance to a new loan with a lower rate.
A lower rate means you will be charged less interest each month, so you could either reduce your repayments and have more money in your pocket - or continue your current level of repayments and pay off your loan sooner.
Whatever you choose, there’s no doubt even a small reduction to your interest rate could save you thousands!
So let’s say you owe $400,000 on your mortgage with a variable rate of 5.14% pa, your monthly repayments would be $2,372.
If you change your home loan to a rate of 4.69% pa your monthly repayments would drop down to $2,267.
That’s a saving of $105 per month and $31,324 over 25 years.
Use our Loan Comparison calculator to crunch the numbers on your current home loan.
2. You want better features
There are always new features popping up that give you more flexibility and let you get more out of your home loan. Switching home loans is your chance to take advantage of things such as an extra repayment facility to make additional payments on top of regular ones, or having an offset account where the balance in the account reduces the amount of interest you pay on your home loan.
When you start the process of refinancing your loan, you might find that your property has increased in value. If so, you may be able to unlock equity in your home; it’s an easy way to fund that open-plan extension or the dream pool you’ve always wanted. Not only could a refinanced loan unlock extra funds, but it could also give you a lower interest rate too.
4. You want to consolidate other loans
You can refinance to combine other personal loans and credit cards into a single and possibly more affordable payment. The rate on a home loan, compared with personal and credit card loans, is usually much lower - so it can make sense to roll everything into one. But be warned, home loans are set over a longer period of time so you might find you pay more interest in the long run.
When it comes to a lender it’s important to pick one that has your interests top of mind. Whether it’s convenient access, competitive rates, great customer service or something else that makes you feel valued, don’t settle for second best. Be sure to shop around and ask about any incentives – such as a cashback offer to sweeten the deal and cover your refinancing costs.
Does it cost to refinance?
While there are lots of benefits to refinancing your home loan, you still need to consider the upfront costs involved - to make sure you come out ahead.
‘Exit costs’ were banned in 2011 which means there are fewer fees for you to worry about. But you may still come across refinancing costs like:
- Discharge fees
- Application fees
- Valuation fees
- Government fees.
However, don't let a small upfront cost stop you from making a big saving in the long-term. Let us help you work out just how much you could start saving!
So what do you think, is now the right time for you?
If you think it’s the right time to refinance your home loan, we’re more than happy to walk you through the process and find the right option for you. So why not make an appointment with one of our friendly Mobile Lending Managers by phone, email, video call or home visit. Or call us on (08) 8202 7777, 8am – 8pm weekdays or 8am – 2pm Saturdays.
INFORMATION YOU SHOULD KNOW
This article is intended as general information only and has been prepared without taking into account the personal financial situation, objectives or needs of the reader. Before acting on this information, you should consider its appropriateness, having regard to your objectives, financial situation and needs. You should always seek professional advice or assistance before making any financial decisions.