No Regrets – Refinance To A Better Home Loan To Save
Today’s mortgage market pool is teeming with home loan choice, which means it pays to keep refinancing top of mind.
Lenders eager to win over customers are introducing competitive incentives to encourage them to switch. These lures include interest rate discounts, waived fees and limited special offers.
A savvy borrower will regularly check to see if their existing home loan has a competitive interest rate, charges minimal fees and offers useful and value-for-money features suited to their current lifestyle and needs.
Interest rate drop
According to the Mortgage Choice’s 2010 Refinancers Survey, 68% of Australians who refinanced their home loan in mid 2009 to mid 2010 saw their interest rate drop.
Of these, almost one quarter (23%) were now saving more than $300 per month while close to nine in every 10 (88%) were saving more than $50 per month.
Let’s look at an example of savings that can be made. Refinancing a mortgage of $300,000 over 30 years at a 8% interest rate to one charging 7.5% interest reduces the monthly principal and interest repayments by around $104 and slashes approximately $37,300 off the total interest owed.
Of course, this doesn’t take into account possible exit fees, set up fees, ongoing fees and lenders mortgage insurance but it does provide an idea of the difference switching can make.
Mortgage Choice suggests six simple steps to finding out whether a home loan refinance is right for you:
Make some preliminary calculations
Before you shop around, get a clear understanding of your loan’s ‘exit’ fee, ongoing costs, features and interest rate. You want to compare the overall costs of switching loans versus the overall savings.
Know what you really need from a home loan
A low interest rate is important but it’s not everything. Decide on the loan features you feel will help you achieve your goals sooner. Keep in mind some might have fees attached, depending on the product. You may be able to save money by dropping features you don’t use.
Research the market for ‘cheaper’, better suited home loans
Do this by trawling loan comparison websites, calling lenders or having an experienced mortgage broker research for you. This will give you a solid idea of how your current loan stacks up in the market place.
Negotiate with your lender for a better deal
Now you have a good idea of your loan’s value see if your lender is eager to retain your business by sweetening their offering.
Consider the pros and cons
If choosing a new lender and loan product, be sure to weigh up your pros, cons, needs and wants such as these: loan cost (upfront, ongoing, exit), loan features (interest rate and type, redraw, offset, portability, term), lender service (loan access, customer query channel, approval turnaround time), lender reputation and your lifestyle and objectives.
Learn more about refinancing
Borrowers wanting to learn more can visit Mortgage Choice’s new infographic.
This was a guest post courtesy of Mortgage Choice - the leading Australian Mortgage Broker.
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