Gone are the days when people will get a home loan and stay with the same lender for the full 25 or 30 year loan term. In Australia, the average homeowner changes their loan every four to five years because people continually seek a better deal, which I think is a very good thing.
Over the last two years home buyers have been enjoying some of the lowest interest rates in our history, but I think every borrower should be aware of the market and do regular home loan health checks every 12 months or so. Why? Because a simple conversation could save you thousands.
COSTS OF REFINANCING
While refinancing is ultimately done to save you money over the long run, it will usually cost you some money in the process. I bought my first property some 15 years ago and then bought two more over the next four years, all with the same lender. I was young and very naïve at the time with no idea that I could shop around for a better rate or jump to another lender if mine didn’t fit my needs.
Looking back on my mortgages over the years I’m 100% certain that I would be a lot healthier in the hip pocket if I’d had a broker working for me. That is one of the many reasons why I got into mortgage broking in the first place.
YOUR INTEREST RATE
If you regularly see advertised interest rates more than 0.5% less than your current interest rate, it might be worth considering a change or at least asking your lender for a better rate. A general rule of thumb I use is, if you have a rate of 4.50% or higher owner occupied or investment loan than it would be worth getting in touch with a mortgage broker and seeing what our sharpest rates are.
CHANGING GOALS AND NEEDS
Over time your goals and needs change so it’s important to make sure your home loan is still right for you. Is it flexible enough and does it have the features you need, like an offset account to reduce your interest, or the option of an interest only home loan for your investment property? Planning a renovation or accessing some equity might also be reasons to refinance.
BEFORE TAKING THE PLUNGE MAKE SURE YOU:
01. Know what your current interest rate is;
02. Know if it’s a fixed interest rate and if so, when the fixed term ends;
03. Speak to your lender and find out what is the best rate they can offer you and what it will cost to exit your loan; and
04. Get an expert second opinion from an accredited mortgage broker like Aussie to find out what other lenders could offer you. They can also help you calculate all the costs involved in a switch and do the paperwork for you if you want to go ahead.
Meeting with my team at Aussie The Junction doesn’t cost you anything and there’s absolutely no obligation, so even if you just want to talk a bit more about your options, we’re here to help.