One of the simplest steps to shaving years off your mortgage – and potentially saving thousands of dollars in the process – is to refinance. Yet many homeowners are missing out on the huge benefits that switching lenders can deliver.
Refinancing can cost as little as a few hundred dollars and take just two days to complete. And while the cash rate is at a record low, lenders are more competitive than ever, offering lower rates to homeowners.
UNO Home Loans has calculated that the average Sydneysider can save $3408 a year through refinancing. For Melburnians, it’s $2532.
UNO’s head of home loans Jason Azzopardi says UNO has made it quick and easy for customers to refinance. “From the moment we receive proof of income and identification and a few other details from our customer, we can have the application lodged the same day,” he says. “The turnaround time to refinance is about two to four days, depending on the lender.”
Azzopardi says it’s a mystery why more Australian mortgage holders don’t refinance to unlock a better deal. “It could be that they can’t be bothered refinancing or may have a misconception that it’s expensive,” he says.
“Banks used to charge customers significant fees when they refinanced but, fortunately, regulation has removed exit fees in most cases. It can now cost as little as a couple of hundred dollars to refinance a variable rate loan.”
Use UNO's calculator to estimate your savings.
How UNO helped a customer shave thousands off their mortgage
UNO recently helped a couple who were two years into their mortgage. Starting on a fixed rate with ING, the couple’s fixed period had ended and they’d been moved to a standard variable interest rate. The couple had taken out a personal loan for a car and had four credit cards. The interest they were paying on their car coupled with their credit card debt was higher than the interest they were paying on their home loan.
UNO helped the couple by switching their lender to MAS and got them a new, lower interest rate. UNO also consolidated their debts. The couple was able to reduce their monthly expenses quite considerably, get rid of their credit cards – and they had enough cash leftover to pay off their car loan.
“Because we’d only paid off two years of our 30-year loan term, going back on a 30-year loan wasn’t a big deal to us,” the customer says. “We have no credit card repayments or car payments, are in a better financial situation and are able to save a lot more money and put it back on the mortgage.”
What many people don’t know
At the completion of the fixed rate term, lenders generally automatically switch their customers to their much higher “standard” variable rate. Borrowers should be aware of this if they want to avoid paying a higher rate than they need to be.
UNO actually has reminders built into its system to alert customers about the end of their rate term and check if they want to stay with their current rate or move to a different one – and a different lender.
UNO takes the face-to-face element out of refinancing, making it easier for people with busy lifestyles to learn about their options. A UNO adviser will find the loans that suit an individual’s needs and make the application on their behalf.
“The benefit is people don’t have to come into an office when refinancing and have their day disrupted,” says Azzopardi. “At UNO, we do all the work for you to find a more affordable rate. Our technology accesses 95% of the Australian home loan market.”
Review your mortgage frequently
Azzopardi encourages homeowners to regularly consider refinancing. “People look at their mobile phone bill and credit card bill every month but don’t assess how much their home loan costs, so it’s important to have an annual review of your loan to see if it’s still competitive.
“There is no point paying more than you have to for a home loan under any circumstances,” he adds.
Reasons to refinance:
- Lower your mortgage repayments
- Pay your mortgage faster
- Get rid of unwanted loan features
- Debt consolidation
- Unlock equity in your home
What to do next
UNO will do the refinancing calculations and assess your unique requirements to see if you will come out on top when switching loans. Ask about how refinancing will improve your financial situation and suit your goals as well as how much you’ll save over the course of the loan. A loan with the lowest rate will not always have the right conditions and may cost more in the long run – we can help decipher the ins and outs for you.
Here are two good ways to refinance according to UNO’s CEO Vincent Turner:
- Look at loans on the same loan term as your current existing mortgage and compare rates; or
- Look at your existing monthly repayments and calculate what those would be with the new loan.
This information is general in nature and you should always seek professional advice when making financial decisions.