With the current low interest rates, more and more mortgage holders are looking for a better deal on their home loan.
It’s OK to switch lenders but make sure you do it the right way.
Firstly consider your motives for refinancing. It’s important to understand what you are trying to achieve before you can decide which way to switch.
- Do you want a more flexible loan? One with extra features, or more regular repayments?
- Are you trying to consolidate other debts into your home loan (like credit card debt or a car loan)
- Do you need to access the equity for something major (like a renovation)?
- Are you looking for a shorter or longer loan term?
1. Check in with Your Current Lender
Customer loyalty is rarely rewarded and often new customers are offered a better deal than existing borrowers, so if you have a home loan that is a few years old you could potentially be getting a better deal just by checking in.
A difference of just a few percentage points can lead to an overall repayments difference of tens of thousands of dollars.
Telling you your current lender that you are refinancing might produce a better rate than the one you are currently getting. This doesn’t always work, but there’s nothing to lose.
2. Do the Calculations
There are a lot of incentives out there to entice you to switch mortgages quickly, such as cashback offers or very low-interest rates, however you may not be better off in the long run.
Refinancing isn’t free and depending on the loan there can be several fees charged, like application fees, valuation fees, discharge fees and more. If you’re currently on a fixed home loan you might also have a rather expensive break fee. All these costs can add up and may outweigh the benefit of a lower interest rate.
MBC Finance can help you compare loans and decide whether to switch.
3. Pay it off faster
With interest rates so low, many borrowers are aiming to pay off their mortgage faster by making extra repayments. But if you’re worried about tying up all your funds in your home loan, then you can consider switching to a mortgage redraw facility or offset account, which can allow you to make extra repayments but withdraw them if you need to.
4. To Fix or Not?
In this climate of record-low interest rates (which probably won’t be around forever), it is worth considering whether to fix the home loan rate or not?
But did you know a third option exists?
You can fix the rate on some of your mortgage, but not all of it.
This allows you to lock in a low rate for a portion of your home loan, while also taking advantage of some of the flexibility that a variable rate can offer, such as the ability to make extensive additional payments.
We’d be more than happy to help you refinance your home loan, whether that be renegotiating with your current lender or exploring your options elsewhere.
Contact me on 0431 733 881 to book in a time to chat.
