March 24, 2015
In February 2015, the Reserve Bank of Australia cut the official cash rate to the historically low level of just 2.25%.
Within a few days, most of Australia’s lenders jumped to follow suit, trimming up to 30 basis points from some already pretty competitively priced standard variable rates.
This basically means some good news all around - the mortgage rate cuts mean the cost of borrowing is now more affordable than it has been in a pretty long time. In fact, the recent rate cut has taken home loan interest rates to 60 year lows.
If you've been in a mortgage for a while now, you might find that there are some significantly cheaper and better deals for you on the market.
So how can you find out whether or not there is a better deal and a sharper priced product available?
Thankfully, there are a few easy steps that you can take to not only see if there is a better deal out there for you, but secure a better mortgage for your needs, including:
Do your research:
With so many different products on the market, it is important to do your due diligence and research what options are available to you before diving in with both feet.
Get to know your mortgage:
Recent research showed more than half of Australia’s mortgage holders do not know their mortgage interest rate. It is one of the biggest financial commitments a person can make, so it is good to know all about it. Furthermore, the better you know your mortgage, the better placed you will be to determine which features are important to you and those that you currently have but could live without.
Consider the mortgage features:
Once you have understood exactly what features your mortgage has, you can determine exactly what you don’t need and what you do. Does your loan have a range of features you don’t use? You might be able to switch to a ‘cheaper’ loan with fewer options. Or, you may benefit from a loan with more features, such as an offset account.
Compare lender interest rates:
Understand what interest rates are being offered by Australia’s lenders at the moment and then compare and contrast them against what else is on the market. While interest rates aren’t everything, your perfect lender should be very competitive on rates.
Investigate the associated fees:
Many lenders will charge various fees, so make sure the lender you are contemplating partnering with offers competitive fees and charges. Get your mortgage broker to compare how the lender stacks-up in terms of the fees and charges on the loan (eg. for loan features, transactions, late penalties, early repayments, top ups etc.).
Consider lender support capabilities:
If weekend branch access and phone support are high on your priority list, it is important to partner with a lender that offers such facilities.
Contemplate future commitments:
Before you decide to partner with one lender, investigate whether or not they offer a wide range of loan options to suit you, should your personal or financial situation change (eg. if you need a loan top up, access to funds for renovations or you wish to refinance an existing loan).
Liase with a professional:
Once you have done your research and determined whether or not there is a better product out there for your needs, it pays to engage a professional – someone who can organise the best loan for you and do all of the paperwork on your behalf.
Check if there are 'breakup' costs:
It is important to note that there are often fees associated with refinancing into another home loan. A professional mortgage broker will be able to help you identify whether or not the cost of switching to a different mortgage outweighs the benefits of doing so.
Look carefully at the contract:
Once you have decided to refinance, it is important to go through your new home loan contract with a fine tooth comb. Remember: the devil is in the detail, so it pays to make sure you know what you are getting yourself in for. Are you happy with the mortgage features and the fees associated with this product?