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.
With the Reserve Bank holding the official cash rate at 0.1% for the last few months, first things first is to check if you're on a good rate or not by checking your loanScore.Check your loanScore now.
Paul Sealey, UNO expert broker explains that whether she’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.”
How much can I save by refinancing? Use UNO's calculator to estimate your savings.Refinance calculator
Even leaving aside interest rates, Sealey 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,” Moore says. “It’s a massive amount of money you can put back into your mortgage to help pay that home loan off quicker.”
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,” Sealey 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 - but with the cash back offers available, often this can be reduced.”
The best plan is to look at your options and weigh up the best deal for your current circumstances, Sealey 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.”
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