When is the right time to refinance your home loan?
Interest rates are declining. Lenders are working harder than ever to get your attention. So could now be the right time to refinance?
We chat to our Senior Lending Manager, Yuri Fey to find out.
Yuri has been with us for almost five years now and is a shining light in our office. Not only can he put a smile on your face before you’ve had your first sip of coffee, but he can also tell you anything and everything you need to know about your home loan.
Take it away Yuri…
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.
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 $250,000 on your mortgage with an average standard variable rate of 5.21% pa, your monthly repayments would be $1,492. If you change your home loan to a rate of 3.49% pa your monthly repayments would drop down to $1,250. That’s a saving of $242 per month and $72,600 over 25 years.
Use our Loan Comparison calculator to crunch the numbers on your current home loan.
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.
You want to consolidate other loans
You can refinance to combine other personal and credit card loans 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 that because home loans are set over a longer period of time you might find you pay more interest in the long run.
You want to switch lenders
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 refinance 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 soon you could start saving!
Thanks for a great overview, Yuri!
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. Make an appointment with one of our friendly Mobile Lending Managers who can come to your home or office at a time that suits you. Or call us on (08) 8202 7777 or visit us at 400 King William Street, Adelaide between 8am – 8pm weekdays or 8am – 2pm Saturdays.
This is general advice only and doesn’t take into account your objectives, financial situation or needs. Conditions, fees and lending criteria apply and are available on request.