Refinancing to get a better interest rate
An InfoChoice survey revealed that two-thirds of mortgage holders are planning to refinance in the near future.
This shouldn’t come as a surprise with the RBA’s aggressive interest rate hikes of late, and if you are one of the 800,000 Australians on an ultra-low fixed rate home loan, you will likely rollover from a rate of 2-3% to a rate of 6% or higher. This will likely come as a “shock to the system” to say the least.
Finding the right product with the best rates and features can save you thousands of dollars every year.
So, if you haven’t refinanced already, what are you waiting for?
Unfortunately, banks do not reward loyalty. In fact, it’s common to see them offering lower interest rates to new customers then they do to their current customers.
They can do this because customers are accepting it. The good news is you don’t have to any longer.
The first thing you should do is call your bank and demand a lower rate. If they don’t want to come to the party, request a discharge form. This will show them that you mean business. Most banks have a retention team and by requesting a discharge form, you will get their attention and they will offer you their best deal to retain you.
The next thing you should do is start looking at what other lenders are offering. With more than 40 lenders in Australia and over 1,000 products its likely that there is a better deal out there for you.
But before you get excited about the low rate offered by a competitor, take a breath, and review the fees and charges, and the flexibility the product has.
Refinancing fees can include application fees, valuation fees, settlement fees and in some cases exit fees from your current mortgage.
Next, investigate the features offered. Does it offer flexible repayment options? Can you make additional repayments without penalties? Can you use your savings to reduce the interest you pay?
Get ahead of your mortgage, save money and pay off your loan faster!
A simple, yet effective strategy is to use the savings you made by refinancing to make an extra repayment into your home loan.
For example, an $800,000 mortgage with a loan term of 27 years on a rate of 6.5% has a monthly repayment of $5,244.44 per month. If this mortgage could be refinanced to a rate if 5.5% the new monthly repayment would be $4,745.09 per month- that’s a saving of $499.35 a month.
If the saving of $499.35 was to be made as an extra repayment into your home loan, the loan would be repaid 5 years and 1 month sooner and interest savings of $159,768.20.
Speak to a Build & Protect Finance Strategist.
Did you know that Build & Protect can complete a FREE Home Loan Health Check and give you the opportunity to save you thousands of dollars?
Get it touch today, we would love to help.
Have a great week!
The Team at Build & Protect Financial Services
