Now is the perfect time to discuss refinancing a little further with borrowers, given the major banks and others have increased their variable home loan rates. Lenders have done this in order to offset the recently increased cost of wholesale funding (the money they receive to supply Australians with their mortgages).
Regardless, most people who are watching their mortgage interest rate, and therefore repayments, rise will be considering their options. Which is best – leave as is, refinance to a fixed rate, extend the loan term, refinance to a new loan or refinance to a new lender altogether?
Before making any decisions, it is important that you first weigh up the rates increase against your needs, wants and financial situation. There are many aspects to a home loan apart from the interest rate and which are most important to you depends on your individual circumstances.
With new home loans regularly entering Australia's competitive market, it is the savvy borrower who annually researches their options to ensure their home loan is still working for them. While considering refinancing, it is of utmost importance to take into account break costs, application fees and the like when estimating the dollar benefit provided by switching loans. Borrowers must also remember that today's best interest rate may not be tomorrow's.
The cost to switch can range from hundreds to thousands of dollars, depending on the lenders and loans involved. But, often, the positives far outweigh the inital spend. It may prove worthwhile to ask your mortgage broker to calculate any potential savings and costs if you find this process to be all too difficult.