Our Early Christmas Present: Refinancing Our Home Loan

December 16, 2016

Our Early Christmas Present: Refinancing Our Home Loan

Christmas time is undeniably a time of celebration for many people. It is something that many look forward to all year, as well as the gifts under the tree. Perhaps one of the best Christmas gifts you could give yourself and your family this year is a freshly refinanced mortgage. It could mean extra money in your pocket each month and a little less stress in trying to meet that large bill every month.

Interest Rates Are Now at their Lowest

If you have ever wanted to refinance, now is certainly the best time. Some banks, such as Westpac and some of its subsidiary banks, have already started to raise their rates. They did this on their own, even without the Reserve Bank of Australia changing its rates. It is quite likely that other banks will follow soon, so right now is the best time to get the low rates that are currently available.

Why You Should Consider Refinancing

The biggest reason to consider refinancing your home loan is to reduce your payment size and to pay less interest. Some homeowners have been able to save an extra $1,100 per month and an additional $190 in fewer fees.

A few of the people who refinanced were able to add an offset account to their mortgage, and also added the option of being able to make extra repayments. When using these options, they found that they were able to save tens of thousands of dollars in interest and pay down the mortgage much faster.

Refinancing Now Gives You a Real Advantage

If you have a mortgage that is going to be exposed to the rising interest rates in the near future, it will help you to refinance now. Getting in on the lowest rates now will enable you to make larger payments, which will reduce your payment size in the future. After your rates go up each month, and possibly a few more times, your ability to make extra payments will not be so easy.

This can also help you if you have other debts as refinancing will allow you to consolidate you debts, and instead of only being able to make the minimum payments, a lower mortgage payment could enable you to reduce your other debts faster by letting you pay more on them each month.

How Much You Can Save

While everyone’s mortgage is slightly different, you can calculate your savings with a Refinancing report, it was discovered that the average mortgage holder today can save some real money. In Sydney, it was found that the average homeowner could save just over $3400 per year. The same was true for Melbourne, where it was seen that they could save more than $2500 on average by refinancing.

The Current Rates

The highest rate is now at 5.64 percent, and the lowest rate is 3.35, which is quite a difference. If you had a home loan at the highest rate on a $500,000 loan and you refinanced it at the lowest rate, you would be able to save just over $11,400 each year. If you were to apply that to your loan, you would save more than $123,000 on a 30-year loan and you would reduce the payment term by as much as 12 years.

Look for a Loan with an Offset Account

One of the best ways to save money is to get a loan with an offset account. The advantage is that this account will earn the same amount of interest as your loan so that it reduces your interest payments by the same amount. In other words, if you have a loan of $450,000 and there is $60,000 in your offset account, you will only be paying interest on the $390,000.

Before you do any serious Christmas shopping for a new mortgage, be sure to shop around for the best deal. Besides looking at just the rates, be sure to look at all the fees; you might consider getting away from the big four, which often charge higher rates than the smaller lenders.

Written by Refinancing.com.au


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