Is it time to refinance?
Most Australian home buyers are paying too much for their home loan. While average mortgage rates are low, many lenders have not passed on all of the recent Reserve Bank of Australia interest rate cuts, leaving their borrowers paying much more than they need to be.
Borrowers have responded by giving the big banks declining customer satisfaction scores. But are you paying so much that it’s now time to look around and refinance to a cheaper loan?
Simply answer these four questions to find out if refinancing is right for you
1) What is your current home loan interest rate?
Your interest rate is the most important factor in your home loan. Do you know what your current home loan rate is? Do you know what the lowest rate in the mortgage market is right now? You can compare home loans from all the significant lenders in Australia here at Infochoice.
2) What are the other costs charged by your home loan?
A great headline interest rate may not be so great if it hides the costs of large fees and other costs. Check the comparison rate to determine the real cost of your loan. Sometimes a lender may waive some fees for good borrowers who can negotiate. Fixed rate home loans come with large exit fees for borrowers wanting the break the loan before the end of the fixed period. Variable rate home loan can only charge reasonable exit fees and standard variable home loans less than about five years old can’t charge exit fees at all.
3) Does your lender have good service?
Often borrowers will choose a lender with a branch nearby. However a branch may not mean good service. Some experts believe service standards have declined for home loan customers as lenders slash costs. Customer satisfaction ratings indicate that many Aussies report better service from smaller lenders. A lender should respond effectively to concerns you have and should operate on more than one channel. You may not need a lender with lots of branches if they have excellent phone and internet banking, a good mobile app and respond quickly to questions through social media.
4) What is your plan?
Where are you are heading financially over the next few years? Are you saving for other expenses (holiday, baby?). Are you renovating? Planning to move somewhere else?
Does you home loan match your financial plan? If you need to borrow money soon for another purpose, you may like to consider adding that cost to your refinancing loan.
Keep on top of what is happening with your own loan and the general home loan market to make sure you are always getting the best deal available.