With many Australians experiencing financial uncertainty during the COVID-19 crisis, refinancing your home loan is a viable option for those looking to save money on their mortgage repayments or free up some cash, and you can do so without walking out the door.
“With record low rates, now is a good time to compare your existing loan with what’s available across the market,” Domain Loan Finder’s inside sales director Sam Hyman says.
“This simple comparison may potentially save your household thousands of dollars.”
Refinancing is the process of replacing your home loan with a facility from a new lender who’s prepared to offer you better terms. You could also negotiate a more attractive rate and terms with your existing home loan provider.
“People usually refinance to lower the interest rate on their current loan or increase the facility’s value for something like a renovation,” says Ryan Watson, chief executive of Melbourne-based financial advice firm Tribeca Financial.
The average interest rate has dropped significantly in the past 12 months, so if you have been with the same lender for a while, there is a good chance you’ll be able to find a loan with a lower rate and still access all the features you’re looking for.
“You’ll be able to cut your monthly repayments. Or, you could shave years off the life of your loan if you decide to pay the same amount as you have been paying on a loan with a lower rate,” he says. “It’s worth doing a health check on your loan every year.”
While the RBA’s cash rate has come down from 1.5 per cent in May 2019 to 0.25 per cent, banks have not always passed on the full cut in the interest rate. If your rate is more than 3 per cent, you could be overpaying on your home loan.
For those who have been longtime clients of a single lender, the loyalty tax is another incentive to refinance. New clients to the lender are offered a lower rate to incentivise sign-ups that established clients are not, leading to premiums that continue to increase over time.
“It pays to shop around to find a better interest rate.” Watson adds.
You can also consolidate personal loans, car loans and credit cards into your home loan, and substantially reduce the overall interest you pay. For instance, car loans can accrue interest at a rate of between 4 and 15 per cent, while home loans typically attract a rate less than 3 per cent.
“You can also refinance to get access to features like an offset account or redraw facility or to make extra payments so you pay off your loan sooner,” Hyman adds.
Simple steps to refinance
Despite social distancing restrictions that are currently in place, it’s still possible to refinance your home without even walking out the front door.
Using Domain Loan Finder, home owners can search, choose and settle a home loan, in their own time, without visiting a bank or broker.
Using Domain Loan Finder you can enter details like how much you need to borrow, the value of your property and the loan features you want. You’ll then be able to compare the best loan matches based on the information you have provided, including access to real-time rates from a large range of over 35 lenders including the big four.
The team of Home Loan Specialists are on hand over the phone, by email or via live chat to guide you every step of the way.