Stuck with a bum deal on your home loan? Perhaps it’s time to refinance…
More than 100,000 Australians fixed their mortgage rate prior to the GFC and have had to sit back and watch the RBA repeatedly reduce the cash rate during the crisis.
And even though the cash rate has come back to 4.75%, there are good deals on the market for borrowers coming off three-year fixed terms, according to the national mortgage broking group Loan Market.
“The good news for these borrowers coming off fixed rates is that they are entering an extremely competitive market where lenders are wooing customers with a range of special offers and rate discounts,” said Dean Rushton, chief operating officer of Loan Market.
For those about to refinance – here’s a quick step by step guide to help you save more on your next home loan:
Compare: Loan comparison sites can help you determine if a cheaper and better suited loan exists. Remember that the cheapest loan is not always the best for your situation. You’ll need to compare features, interest rates, fees of each loan plus the cost of switching lenders and/or loan. Mortgage brokers can also help you determine the right loan for your situation.
Wants vs needs: Don’t pay a higher price for features you don’t need. While professional packages give you access to a wide range of loan features, but you’ll end up paying more in fees if you’re not using the features to your advantage. A basic loan could suit your needs and reduce your costs.
Boost savings: Consider getting a loan with an offset account or redraw facility. Putting extra funds into an offset account reduces the interest owed and the loan term. An additional incentive is that funds are not taxable whereas interest earned from an ordinary savings account is. Loans with a redraw facility allow you to reduce your interest owed, as well as the loan term by paying extra into the account and redrawing if necessary. Bear in mind that some lenders require a minimum redraw amount and/or charge a fee per withdrawal whereas others may have unlimited redraw.
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