By Guest Blogger, Louisa Sanghera, Principal Broker,
Zippy Financial
With interest rates now back to the same levels they were around three or four years ago, many borrowers are paying close attention to the rate they’re paying for their mortgage.
Some people are keen to refinance to a better deal, but they’re worried they won’t qualify for loan approval. Others figure that the potential savings on offer won’t be significant enough to compensate for the time, hassle and fees involved in getting a new home loan.
So just how can you work out what your options are and whether you’ll be approved for finance? And when is it actually worthwhile refinancing your current mortgage?
In my view, there’s nothing to lose by reviewing your current loan, but there’s potentially a lot to gain.
In an online forum this week, I saw someone write that their loan “wasn’t big enough” to make switching loans worthwhile. I don’t know about you, but in my view, I think any dollar back in my pocket instead of the bank’s is worth the effort of switching!
Where do you start?
First, call your bank and ask what your current interest rate is. Then, ask if this is the very best rate they can offer you.
You’ll be surprised at how much flexibility and discretion they have to offer you a rate discount, if you threaten to refinance and take your loan elsewhere.
Once you’ve spoken to your bank, whether they give you a discount or not, it’s time to review the other options out there.
After you’ve gone straight to your bank to get the best possible deal they can offer, it’s time to shop around and see what other loans you might be eligible for.
There is a BIG difference in interest rates between various banks, which is why refinancing can be a powerful way to save money.
If you have a $750,000 loan and you find a mortgage you can refinance to, and the rate is just 0.5% less than you pay right now, you could save around $220 a month, or $2,640 per year. The more properties you own and loans you have, the more you stand to save.
Are there any hidden refinance costs to watch out for?
Yes, there can be a few fees to look out for. These include:
- Application fees - lenders often run promotions to waive application fees for new borrowers.
- Rate lock fees - if you want to take out a fixed rate loan, some banks charge an optional “rate lock” fee to secure the advertised rate at the time of applying (as it can change by the time your loan settles).
- Monthly or annual account keeping fees.
- Government fees and charges to register the mortgage - these vary between states and territories, but often amount to a few hundred dollars.
- An annual “package” fee of up to $400 - keep in mind this package comes with an interest rate discount, credit card fee waiver and other benefits, which can more than offset the cost of this fee.
- Loan settlement fees.
- Break fees, which may be applicable if you end a fixed rate loan in order to take out a new loan (even if the new loan is with the same bank!) In the current rising rate environment, these break fees are likely to be low.
I know what you’re thinking - this seems like a lot of fees, and it is!
But if you work with a mortgage broker, we can help you find a bank or lender that offers value for money when it comes to both the interest rate and the fees and charges that apply.
We may also be able to find you a suitable loan with a cash-back offer of up to $5,000. A home loan cashback promotion is exactly what it sounds like: it means that once the loan settles, you get a lump sum payment in your nominated bank account. It can be a great way to offset some of these rising interest rates!
With mortgages climbing and putting plenty of pressure on household budgets, we're likely to see more mortgage stress in the year ahead. Refinancing can be a relatively low-effort way of reducing your costs and saving potentially thousands of dollars per year, especially if you engage a broker to do all of the heavy lifting on your behalf.
If you’re keen to learn more about your refinancing options, contact your broker.
To see what your options are, contact a Mortgage Broker to see what your options are.
Contact us today on 1300 855 022 or visit www.zippyfinancial.com.au
Louisa Sanghera - Director and Principal Award-Winning mortgage broker at Zippy Financial
Louisa created Zippy Financial after a 25-year career in banking, with the goal of using her expert financial knowledge, vision for exceptional customer service and passion for property to help her clients grow their wealth through smart property financing. Whether you are looking to buy your first home, re-finance or build your property investment portfolio, Louisa and her team of experienced brokers can help guide you through the challenging maze of finding & securing exactly the right loan for you.
M: 0414083522 or 1300 855 022
E: louisa@zippyfinancial.com.au
Connect with Louisa Sanghera on LinkedIn
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