February 17, 2016
Is your home loan’s interest rate less than 4.50%? If not, you may be paying more on your home loan than you should.
Everyone is talking about the fact that this is a great time to refinance your home loan – and I agree!
I believe you should check your home loan every 12 months and seriously look at your options every 3 years.
Why? Let’s look at the data
Three years ago in December 2012 the standard variable interest rate (SVR) was around 6.40%. Also looking back over the last 3 years the Reserve Bank has cut interest rates 4 times – each time by 0.25%. Let’s assume for the sake of it the Banks dropped their interest rates by the same margin each time.
That would make the today’s SVR around the 5.40% mark - which sounds about right (although the Banks have just increased the variable rate just recently).
And hopefully at the time of your loan you, or your Broker, negotiated a customer discount off your interest rate (SVR) of at least 0.50%. For the purpose of the exercise let’s say you used a Mortgage Choice broker ;-) and they negotiated up to 0.90% discount.
Therefore your interest rate in December 2015 should be less than 4.50%.
It’s not?? Then it’s time to review.
That 0.50% difference? may cost you around $1,400 each year – a saving of $34,000 in interest and take around 3 years off your home loan or
If you are like me
That’s a plane ticket for you and your partner to a south pacific island each year, or birthday dinner at a 5 star restaurant or two bottles of Moet each month!!!
Reviewing your home loan doesn’t mean that you have to move away from your current lender either – you could negotiate a discount with the same Lender.
That’s where a Mortgage Choice broker can help – most lenders have a special relationship with brokers and sometimes we can negotiate a better discount via our broker channel than you can via your local branch
Even better most Brokers should offer this service to you as part of their service – So send me your last home loan statement to email@example.com and I can quickly check how much I can save you. It’s that easy.
The other reasons we find our clients consider refinancing;
- To consolidate debt i.e. credit cards where interest rates are 15%++)
- To switch to a fixed loan if you want certainty with your budget each month or
- To get some extra cash to go on that holiday or add the swimming pool or renovate the bathrooms or just accessing some additional home loan features that weren’t available when you first took your home loan out i.e. Offset accounts, flexible repayment options to pay your loan off sooner.
As I said. You don’t have to move banks to refinance. It may not be the right time for you. But it would be good to know where you stand. It can save you a lot of money and it’s better off in your pocket than theirs!!
That’s why you should engage me to help. I will take the time to understand your needs and clarify all the costs and benefits of refinancing and, if you decide to move, be there every step of the way through the process.
For more information check out my Refinancing Guide and checklist on my webpage or give me a call on 02 8883 1606 and I can answers any questions you have and walk you through what’s needed