Refinancing your home loan might seem like a daunting task, but it’s a surprisingly simple and potentially lucrative move that could save you thousands of dollars.
If you haven’t reviewed your mortgage recently, you could be missing an opportunity to make significant savings.
The secret lies in the fiercely competitive nature of the mortgage market. Lenders are constantly vying for your business. They are offering enticing deals and lower interest rates to attract borrowers.
The Reserve Bank of Australia’s (RBA) interest rate decisions play a crucial role in influencing the mortgage market, and staying informed about these changes can help you identify opportune times to refinance.
By switching to a new lender or renegotiating with your current one, you may secure a more favourable interest rate and significantly reduce your monthly repayments.
Consider this scenario
You have a $625,800 mortgage with an interest rate of 7.36%. By refinancing to a loan with a 6.21% interest rate, you could save approximately $488 per month or $5,856 annually. That’s a holiday!
Over the lifespan of a 30 year loan, that amounts to a staggering $175,348 in savings over 30 years.
However, the benefits of refinancing extend beyond interest rate reductions.
It also offers you flexibility:
Consolidate debts
Combining high interest debts, such as credit cards or personal loans, into your home loan may save you money on interest and simplify your repayments.
Access equity
If your property has appreciated, you may be able to tap into your equity for home renovations, investments or other financial goals.
However, it’s important to be aware of the risks associated with accessing equity as it can increase your overall debt.
Change loan features
Refinancing allows you to switch to a loan with features that better align with your current needs, such as an offset account or redraw facility.
Refinancing might seem complex, but the process is surprisingly straightforward. Here are the steps:
- Review your current loan
As your finance team, we can assess your current interest rate, fees and features. We will then compare it to other loan options available in the market to see if we can find alternate finance options that could be more beneficial to your circumstance. - Seek expert advice
Our experienced finance team can be an invaluable resource. We can help you compare loans from various lenders, negotiate with your current lender and guide you through the entire refinancing process. - Apply for a new loan
Once we’ve identified a suitable loan, our finance team will assist you to complete the application process to ensure a smooth transition. - Settle your new loan
Your new lender will pay out your existing loan and you’ll commence repayments on your new loan with potentially lower interest rates and improved features.
While refinancing does involve some costs, such as exit fees, application fees and government charges, these are often outweighed by the long term savings you can achieve.
Don’t let apprehension deter you from exploring refinancing. With the assistance of our knowledgeable finance team, refinancing can be a seamless and effective way to take control of your mortgage and unlock substantial financial benefits.