How can I take advantage of low interest rates?

May 18, 2020

Taking advantage of low interest rates

It’s no secret that interest rates are low; and mortgage holders stand to save thousands that is, if action is taken to secure a better rate.

For almost a year, interest rates have been on a steady decline.

Less than 12-months ago, the Reserve Bank of Australia’s official cash rate (a major influencer of bank interest rates) stood at 1.50%, and the average Australian fixed interest rate was 4.38%.

Fast forward to today, and rates are much lower. The average fixed interest rate is now just 3.60%. Likewise, after March’s emergency rate cut the official cash rate is sitting at only 0.25bps.

Lendi managing director, David Hyman, agrees that rates are possibly some of the lowest seen.

Only a couple of months ago the cheapest headline rate started with a threeIf you look back to this time last year rates were in the high threes, he told Domain.

For someone with a half a million-dollar mortgage, that is well in excess of $10,000 a year in savings. It’s never been a better time to refinance quite frankly.

For those who want to take advantage of lower interest rates, refinancing is the possible key.

The process of switching your home loan to another deal, refinancing means finding a new mortgage that is rightly suited to your current circumstances. Often, this includes changing lenders.

Through the dramatic rate cuts of late, those who refinance stand to potentially save thousands of dollars in interest.

Although refinancing can seem a difficult process, if done correctly it can be a smooth journey, especially when you compare it to how much it can pay off in the long-term.

Although they are not the right option for everyone, adding an offset account to your home loan is a valid consideration to make when refinancing your mortgage.

In function, an offset account is similar to your everyday savings account, only it can help reduce the interest you have to pay.

When you have an offset account, its balance will be offset’ against your loan balance. This means you only pay interest on the difference between your principal loan (debt still owing) and the money sitting in your offset account.

For many, an offset account is a good option because it offers the security of knowing the money is there to help cover mortgage repayments and other expenses in case of emergency (such as job loss), but unlike a regular rainy-day savings account, it might also help reduce mortgage costs.

  • Your interest rate is far higher than what is on offer on the market
  • Your LVR (loan to value ratio) is 80% or lower (to avoid lenders mortgage insurance)
  • The long-term savings from refinancing outweigh the initial fees/costs
  • You have held your current home loan for several years and have outgrown it

Although many everyday services have shut down due to the ongoing pandemic, it is still possible to refinance your home loan remotely.

Services such as eChoice exist entirely online/over-the-phone, allowing you to safely refinance from the comfort of your own home.

The process to refinancing through eChoice is simple.

To start, simply call eChoice on 1300 302 914. During your initial 20-minute call, a Home Loan Consultant will ask you a few questions and let you know whether you qualify, before passing your details onto a Home Loan Manager (your new mortgage broker).

Your Home Loan Manager will then do some research and present you with a choice of lenders. Once a lender/home loan package is chosen and your paperwork is done (your broker will help pre-fill for you) your application will be sent off for approval.

Once approved, you will be sent a letter of offer to sign. After this, all that’s left is settlement then your refinance will be complete!

Are you looking for a more competitive home loan rate? If so, then contact eChoice. Our brokers have access to 100’s of products and have helped thousands of Australian’s secure the right home loan at more affordable rates.

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