After this month’s cut to the official cash rate to 1.5% it is time to take advantage of the current environment to pay down your mortgage.
There are many different factors borrowers need to consider when thinking about refinancing a home loan as refinancing might not be worth it if it’s only going to save a couple of hundred dollars a year, taking into consideration exit and application fees. But if it’s going to save upward of $1000 a year, refinancing might be a sensible approach.
The good news is that not only are some lenders likely to waive the start-up costs but the interest saved can be astronomical. If you’re delaying a switch to a cheaper home loan because you think the costs will outweigh the savings, think again.
We crunched some numbers on a very common example based on a recently completed mortgage review with a customer that settled her loan some time ago but never reviewed her current offer. She was offered a discount of 0.85 per cent off a Major Bank’s standard variable loan making her rate at the time 5.05 per cent (now 4.5 per cent).
She was able to refinance her $750,000 loan from 4.50% to 3.79% and save over $111,000 in interest over a 30 year loan term. A 0.71% p.a. in rate differential saved this customer $3,761 in her first year alone. (This calculation is based on repayments, fees are excluded. The analysis assumes the borrower qualified for both lenders and met the conditions of both deals. It does not take into account other features and benefits available from either lender.)
If you do decide to go down the refinancing path, working with our team at Simplify Finance rather than going straight to a bank has advantages because we have access to loan options from scores of different lenders.
The first step is to understand your needs and whether you can afford to service a different loan structure. At this point, our brokers will also need to find out about your existing loan, repayments and the structure of the facility.
The current value of the property is also taken into consideration, so we will have access to current data that will indicate what the asset is worth.
Then our team will have a look at the various loan options and figure out whether it’s worth it for you to refinance depending on your particular circumstances.
We can compare lots of different lenders and, if there is a better opportunity, we will able to access it.
To find out if refinancing is a viable option for you, contact our team at Simplify Finance today!