The term ‘refinancing’ gets thrown around a lot – but what does it actually mean? Refinancing your mortgage means switching your home loan in order to get a lower interest rate, decrease the length of the loan, or switch the terms of the loan. It’s also possible to draw down on the value of your home’s equity in order to help you deal with a financial emergency or to finance a large purchase. To put it simply, refinancing your mortgage should save you money or benefit your financial situation.
Refinancing can cost as little as $1,250 and it’s an easier process than you might think, but it’s still helpful to weigh up the cost benefit before you move forward with refinancing.
Whatever your situation is, refinancing can have benefits. Let’s explore some of these below…
Is now a good time to refinance your mortgage?
There’s no doubt that times are uncertain and many Australians are holding onto their cash more tightly than normal. Between the bush fires and the COVID-19 pandemic, it’s a scary time financially for most people in the world. However, if you meet certain conditions, refinancing your home could equate to giving yourself a mini raise.
Because interest rates are at an all time low, refinancing your home can make a big difference in your journey to cut costs or save money (more so than skimping on groceries or skipping the second coffee run). The Reserve Bank of Australia (RBA) decreased the official cash rate by 25 basis points to 0.25% and refinance rates are more competitive than ever.
How much could you save by refinancing your mortgage?
Let’s look at the numbers.
If you have a 30 year home loan of $800,000 at 2019’s average of 4.34%, you’d currently be paying about $3,978 in monthly repayments.
However, if you were able to refinance that 30-year loan to another loan with a more competitive interest rate, like 2.19%, your monthly repayments would go down to $3,033 instead.
That’s a huge difference to the tune of $945 per month. Let’s repeat that… you’ll save almost $945 every month, just by refinancing your mortgage.
Use our loan comparison calculator to see how much a difference refinancing your mortgage could make to your monthly repayment amount.
What should you consider before refinancing your mortgage?
There are a few things to carefully consider before you refinance your mortgage. You’ll want to make sure that it makes financial sense to upgrade from your original home loan.
Why choose LiveInvest as a first time home buyer?
There are a few things to carefully consider before you refinance your mortgage. You’ll want to make sure that it makes financial sense to upgrade from your original home loan.
- Is the new rate a big enough jump? The general rule of thumb is that the difference between your current loan rate and the prospective new loan rate is at least .5 percentage points
- Have you considered additional costs? Refinancing your home loan will come with the same costs that your original home loan did – including loan application fees, mortgage discharge fees and possibly break costs.
- Do you have Lenders Mortgage Insurance (LMI)? Unfortunately, if you put down less than 20% deposit on your home and if your loan is not under 80% of the current market value of your property, you may have to pay LMI again. You can’t transfer the existing LMI to your new loan.
To summarise, if you took out a home loan during 2019 or earlier, and your loan provider hasn’t passed on the most recent RBA cuts to you OR if your home loan interest rate doesn’t start with a 2, you’re probably paying more than you should be!
Why choose LiveInvest as a first time home buyer?
- Fast Approvals: It’s always a competitive market when you’re a homeowner looking to refinance their mortgage and time is one of the most important factors in your home success. We get results as quickly as possible. With relationships with all major lenders, we’re able to fast track your loan and streamline the application process so that your loan can get approved fast.
- Convenience: You’re busy! And you work hard. Your time is valuable and LiveInvest ensures that you don’t spend time waiting at the bank to lodge your application. We’re also available to answer all your questions at a moment’s notice. And best of all – our brokers come to you!
- Range: We offer a range of products that will suit the needs for every first time home buyer. Give us a heads up if there are certain details we need to be aware of to fit your situation and we’ll find an affordable solution for you!
- Relationship: Unlike your average broker, our refinancing service goes beyond the approval of your loan. We provide ongoing support to ensure that you continue to have access to the best finance solutions on the market! We’re always here to answer your burning questions.
- Network: We partner with the best local professionals and businesses no matter where you’re located!
If you’re a homeowner interested in exploring your options to refinance your mortgage, call us today at 1300 831 288!