Is your home loan interest rate nudging 4%??If this is the case, there?s a good chance you?re paying too much for your mortgage ? and you could save thousands (if not tens of thousands) of dollars by refinancing.
Interest rates in Australia are at all-time lows, thanks to yet another cut by the RBA in October, which has taken the cash rate to just 0.75 per cent. In the days that followed this announcement, homeowners and investors held their collective breath as they waited to see if their lenders would pass on the cut, in part or in full. And for many, the result was disappointing.
None of the big banks passed on the full 0.25 per cent saving on to all their customers, across both owner-occupier and investment loans. The Big 4 held on to part of the rate cut, citing a number of different reasons for doing so.
However, smaller lenders including Athena Home Loans and Resimac were quick to give their borrowers the full benefits. If your lender hasn?t discounted your rate, it might just be the perfect time to refinance.
Why refinance your loan?
Refinancing to a loan with a lower interest rate could save you tens of thousands of dollars over the life of your loan, and it could even help you pay off your home sooner.
It could free up some cash in your monthly budget, which you could redirect to saving for that new car or holiday you?ve been craving. Or, you could continue paying your current repayment amount, and see the principal on your mortgage shrink much faster. Refinancing to a more affordable loan may also give you some wiggle room to redraw for much-needed renovations.
Consider this: if you have a $500,000 loan and you refinance to a rate that is just 0.4% lower, you?ll save around $1750 per year. If you keep your repayments the same as they are and inject that money into your home loan each year, you?ll pay off your home at least three years sooner ? and save $42,000 in interest over the loan term.
If having extra money in your pocket each month sound good to you, then the sooner you get the ball rolling, the sooner you?ll start seeing those savings.
So, how do you get started?
The first step is to approach your current lender and explain that you?ll be taking your business elsewhere if they can?t match the other great offers out there on the market. If you?re not satisfied with their response, you need to be prepared to follow through on this threat.
The next stage in securing yourself a great interest rate ? which could include a sub-3 per cent interest rate at the moment ? is to speak to your mortgage broker. Not only do we have access to the best deals out there, including those that aren?t necessarily advertised to the general public, but we also take your unique family circumstances into account, to ensure you end up with the right product.
If you have your own business or are seasonally employed, going directly to the bank can leave you feeling discouraged ? and this is where a broker can help.
Do you have some spare cash you?d like to park in an offset account, or perhaps you?re planning on making extra repayments? A broker can find you a loan to suit. Maybe you want to take advantage of a linked credit card or rewards schemes, or you?re eligible for special products thanks to your occupation?
We?ve got all this covered too, and we can also answer any questions you may have and make all of the tricky financial jargon more accessible.
Your broker will look over your current financials, listen to your needs and wants, and like a matchmaker, we?ll find you the ideal loan that meets these requirements.
It won?t cost you a cent ? the lenders pay our commissions ? and you could walk out with a little more breathing space in your budget, just in time for Christmas.
There are loads of excellent home loans deals out there right now, so get in touch with us today to find out how we can help!
Louisa Sanghera is a Finance Broker for Residential Mortgages, Vehicle and Asset Finance, Commercial Lending and Budgeting and Cashflow Coaching with Zippy Financial.
She has gained more than 30 years in the Banking and Finance Industry, and since founding Zippy Financial, has become a multi award nominated expert in the field of finance featuring regularly in industry press and speaking at finance and investment seminars across the country.