There’s never a bad time to look at refinancing your mortgage. The best time, though, is when interest rates are at all-time record lows, as they are at the moment.
That’s the view of Joseph Farhat, mortgage coach at uno home loans. “I would definitely say that the interest rate is one of the main points of information when people look to refinance a property,” he says.
With the Reserve Bank keeping the official cash rate at or beneath 2 per cent since May 2015, many lenders are offering variable and fixed mortgage rates that are below 4 per cent. Farhat says whether he’s speaking to a customer, friend or family member, the conversation is always around why now might be the best time to take another look at their mortgage.
“We should be taking advantage of the fact that now you might be able to have cheaper repayments and have extra cashflow,” he says. “And all those extra funds can allow you to make extra payments off your loan so you can own your home quicker.”
Even leaving aside interest rates, Farhat said there are many reasons borrowers choose to refinance. “It depends on whether a person wants to consolidate their debt, whether they want to renovate, or whether they want to make another purchase – maybe buy an investment property. I guess the main reason would have to be reducing their payments, and the way they would do that is by refinancing to a cheaper interest rate.”
He cites the example of uno customers from Queensland who successfully refinanced their home loan. “If we took the money that couple saved from the repayments they were making and put it back into the home loan, they were actually going to shave 11 years off their mortgage,” Farhat says. “It’s a massive amount of money you can put back into your mortgage to help pay that home loan off quicker.”
uno mortgage coach Joseph Farhat
Another factor that leads people to refinance is the chance to move to a more flexible loan. This may certainly be the case for those who borrowed many years ago, and might not have been aware or able to take up options such as an offset facility.
“It’s about people becoming more aware of the functionality of a home loan,” Farhat says. “It might be an offset facility, redraw facility or having a loan where you can fix 50 per cent of your home loan and leave the other 50 per cent variable. People are becoming a lot more conscious of what a home loan product is and what features they can have.”
He says those looking to refinance need to be aware of costs that may be incurred by leaving their current lender. “There could be exit fees and if they’re in a fixed rate, there could be break costs which they might not be aware of,” he says. “Sometimes there might not be any fees but in most cases you will see a fee or two.”
The best plan is to look at your options at uno home loans and weigh up the best deal for your current circumstances, Farhat says. Sometimes the best way to avoid costly exit fees is to find a better deal with your current lender.
“A lot of people have comfort in where they are and they’re possibly not aware that their lenders might have different products that are more suitable for their current needs,” he says. “We’re more than happy to recommend or even explore whether their current lender has a better, more suitable product.”
Take 30 seconds to calculate how much you could save by refinancing your home loan here.