Refinancing is the new black
Mortgage refinancing is switching your home loan to another lender. You do this by applying for and taking out a new loan on the same property and using it to repay the existing home loan.
Refinancers are looking for a better home loan deal. Refinancing means taking control of your finances and making sure your biggest liability – your home loan, is costing you as little as possible.
People who switch to a cheaper mortgage can save thousands of dollars year. A one percentage point drop in the rate that a home loan is charging you can mean tens of thousands off the interest bill on an average $300,000 loan.
Good news – Mortgage exit fees have been banned
Mortgage/home loan exit fees are also called early termination fees, deferred establishment' fees or early discharge fees. These used to act as a disincentive to refinance because exit fees could run into more than one thousand dollars. Exit fees often apply if you refinance and pay out a home loan in the first few years. Up to five years is an average time for exit fees to apply.
Exit fees on new home loans were banned on 1 July 2011. Exit fees may still be charged on old loans started before July 2011 but this is unlikely given most of these loans are now five or more years old. Home loans started after 1 July 2011 are not permitted to charge exit fees.
Why now is a great time for refinancing
New data indicates that the average ‘mortgage buffer’ is now two and half years. That means Aussie borrowers have taken advantage of low interest rates to get two and half years ahead on their home loan. These big mortgage buffers means borrowers will look favourably at refinancing possibilities. It’s no surprise then that refinancing to lower rates and better home loan products is in demand in Australia right now.
The Treasurer Scott Morrison, said yesterday that while housing affordability has become harder for new entrants, for those who have already purchased a home, mortgage serviceability remains better than its 20-year average.
Mr Morrison said the average buffer in mortgage offset accounts and redraw facilities had risen to around two and a half years' worth of repayments.
Refinancing is easy with InfoChoice
You don’t need a mortgage broker to organise a new home loan for you. Refinancing is easy with InfoChoice.
Step one: is to find your own home loan at InfoChoice’s home loan comparison tables. You may need to sort the listings by lender name.
Step two: Enter your loan interest rate and repayments and other loan details, into the InfoChoice Refinancing Calculator. Home loan rates for refinancers start from 3.36 per cent so you can enter a lower rate to see how much you could be saving.
Step three: The more equity you have, the better deal you can get. Borrowers looking for a loan with a low loan to valuation ratio can get a better rate than borrowers looking for 90 or 95 per cent home loans. For example, this very low rate (3.40 per cent) is available on LVRs under 50 per cent.
Step four: Find a great deal today. InfoChoice lists hundreds of home loan products from all of Australia’s major banks and credit unions. And there is no need to limit your search to the big four banks. Australia has a highly regulated banking sector with more than one hundred large, stable, reputable lenders.
To get your search started, check out some interesting deals on offer now.