INTEREST rates are at record lows and banks are hungrier than ever to get your business but many borrowers don’t bother to refinance.
One in three Australians are mortgage customers and for many a home loan check-up is well overdue but it’s the only way to ensure you are getting the best deal possible.
The cash rate is resting at a record low of two per cent so lenders have been rolling out the best home loan deals in living memory but it won’t stay like this forever.
Here’s five simple steps to making the most of bargain interest rates by refinancing.
The first thing you should do is check the current fees and charges associated with your loan including the interest rate.
Comparison website Mozo’s database shows the lowest home loan rate for a $300,000 30-year loan is 3.98 per cent.
For a three-year fixed it’s 3.94 per cent, so if you’re paying much more than this then it’s time to shift lenders.
2. PROPERTY VALUATION
Mozo spokeswoman Kirsty Lamont says getting a valuation on your home is always important if you are looking to change your mortgage.
‘Get your property valued to work out what it’s worth, your local real estate agent could do this for you,” she says.
‘It will determine the loan-to-value ratio of your property and if that’s over 80 per cent you could be up for paying lenders’ mortgage insurance.’
This is a one-off charge that can cost thousands of dollars and it may not make switching worthwhile so it’s important to check it out.
3. GET HELP
If you’ve got this far and you think you are in a good position to jump lenders then seek advice.
Contact your bank and find out if you can get a better deal from them without having to move or alternatively use comparison websites to compare home loans offered by other lenders.
Mortgage brokers can also be useful, they can scan through thousands of mortgage products and help you find one that best suits you.
4. FEES AND CHARGES
Don’t just get sucked in by low interest rates.
Look at the comparison rate on loan products to work out what the true borrowing cost – this rate includes all the fees and charges associated with the loan.
It allows the customer to compare apples with apples.
Mortgages have lots of attached fees and charges including loan establishment fees, annual fees and exit fees and charges.
These add up so make sure you factor these costs in before jumping lender.
5. MAKE THE MOVE
Once you’ve done your homework if you’ve decided to jump lenders then you’ll be on your way to paying back your loan sooner.
On a $300,000 30-year loan your monthly repayments could fall by $125 per month by making a simple switch from the average variable rate of 4.69 per cent to the lowest rate of 3.98 per cent.
On a fixed-rate loan the average rate could fall from 4.47 per cent to the lowest rate of 3.94 per cent and save you $93 per month.