November 17, 2017
Christmas is right around the corner, which means an uptick in spending for most people. It’s also a time to slow down with a few days off work and to reassess your finances before 2018 begins. A lot of people choose to refinance their mortgage during the jolliest of seasons to help them start the New Year with a loan that better suits their current financial lifestyle.
When you refinance, you can potentially save money through a lower rate – or perhaps you want to refinance to make an investment or free up your budget with lower repayments. Whatever your motivation, switching to a new variable rate loan could help you meet your financial goals and offer you the flexibility that often comes with variable rate financing.
When you refinance to a variable rate loan, make sure you are aware of the advantages so you can get the most out of your loan. But, you also should be familiar with the drawbacks.
With a variable loan:
- You’ll have a good chance of getting a full-featured loan, freeing you up to do more with your mortgage whether you want to pay it down faster or use a free redraw facility for your spending needs.
- You can refinance when you want to. There are no break fees as there are with fixed loans.
- When the cash rate goes down, the rate on your loan decreases as well, which means your monthly repayments will go down.
Whilst you’ll get plenty of flexibility, you won’t enjoy the stability and predictability of a fixed loan:
- It is more difficult to budget with a fixed rate loan because when the cash rate changes, so will your monthly repayments.
- If the cash rate does go up, so will your monthly repayments. This can force you to adjust other areas of your budget.
As you shop for the right variable rate loan to refinance to in the next couple months, it’s helpful to get a feel for what’s out there right now. As of the beginning of November 2017, these were the top variable rate refinancing deals on our panel for a 30-year, $400,000 loan, on a property valued at $500,000.
The five cheapest variable rate loans use the following criteria:
- Rates – as of 17th November 2017
- Minimum loan amount – No greater than $50,000
- Maximum loan amount varies for each product
- Loan amount – $400,000
- Property value – $500,000
- Loan term – 30-years
- Repayment type – principal and interest
- Borrower type – refinancer
- Loan purpose – owner occupied
- Repayment frequency – monthly
- Interest rate type – variable
- Based on – full documentation and exclude construction and line of credit loans.
Ezy – Economiser
Ezy’s Economiser loan offers the full package – a low rate at 3.59%, no application fee and plenty of flexible features with an offset account and a redraw facility. Borrow up to 80% LVR, as with all the top variable options. The maximum loan amount is $750,000. There is an annual fee of $395.
With Ezy’s loan, your monthly repayments would be $1,816.
Bank of Sydney – Variable
Just slightly pricier, Bank of Sydney’s rate is 3.63%. The fees are identical to Ezy’s top variable loan product. You’ll have access to a free offset account and redraw facility. You’ll likely have no problem with the bank’s maximum refinancing loan amount of $4,000,000.
Your monthly repayment would be $1,825.
Resimac – Horizon
This loan offers an attractive variable rate at 3.71%. However, Resimac’s fees are relatively high. The application fee is $599. You’ll also pay $345 a year in annual fees. You can borrow up to 80%, up to a maximum of $1,500,000. Resimac offers a free offset account and redraw facility, giving you plenty of room to make your new loan work for you.
Your monthly repayment with Resimac would be $1,843.
Bank Australia – Basic Home Loan Special
Bank Australia is currently offering a 3.74% interest rate. Whilst slightly higher than the other top deals, you won’t pay any fees, making the overall price of the loan more appealing. If, on the other hand, you planned on depositing your extra income into an offset account to save on interest, this is a loan that won’t give you everything you are looking for as there is no offset account option. It does come with a free redraw facility.
Your monthly repayment amount would be $1,850.
Macquarie – Offset Home Loan
A global bank with a huge presence in Australia, Macquarie usually has loan products worth looking at when refinancing. It has a variable rate of 3.79% and no application fees. The annual fee you’ll pay is $248. You’ll get all the flexibility you need with an offset account and a redraw facility.
With Macquarie’s variable loan, your monthly repayments would be $1,861.
Rates change so make sure you keep an eye on the variable loan products on the market before Christmas. It’s an excellent time to refinance so you can enjoy a new loan by the start of 2018.
Things you should know:
This information does not constitute as financial advice. Terms and conditions, fees and charges and normal lending criteria apply. Information & interest rate is current as at 17th November 2017 & is subject to change. The comparison rate is based on a loan amount of $150,000 over a loan term of 25 years. WARNING: This comparison rate is true only for the example given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate.
Written by Refinancing.com.au
Refinancing.com.au is an end-to-end service that helps people refinance their home loan. We empower you to search for your home loan, and choose the process that suits you.
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