After more than eight months of interest rates rises, you have probably wondering when this is going to stop and how would that affect your repayments; whether it is time to refinance for a better rate, review your current loan features, or perhaps you just wanted to purchase an investment property using the equity.
Refinancing might be the last thing on your mind with everything that is happening, but here are five solid reasons why it should be considered now than later.
1. You can (most likely).
Since you moved into your new home recently you might not even be aware you could refinance now. Predominantly many home loans are refinanced with the intention to save money, the timing could be better than ever.
However, while that sounds too good to be true, the decision made by your bank or lender will be based on your eligibility for refinancing. So, for a lot of Australians facing job loss or reduced hours, now may not be the best time. But if you have seen minimal impact financially from COVID-19 (as self-employed), paying too much on repayments, or looking for a better rate with cashback, it is worth a look to take advantage of competitive-interest rates and other refinancing offers available.
2. Lockdown the low rate but coming out of it now.
In 1989-1990 (when the original Full House was airing – you probably ‘never saw that’ either), home loan interest rates hit an all-time high at 17% p.a.
At this point in time, the RBA interest rates are at the lowest they have been in 60 years, at just 0.25% p.a. in 2019-2020.
There is no doubt that COVID-19 has delivered a serious financial blow to many homeowners, however, now could be the time to take advantage of the competitive rates and start saving big. Since post Covid-19, the RBA has increased the cash rate consecutively nine months. The banks have passed these rate rises on to their borrowers each time. If you have been affected with reason interest rates rises or coming out of the record-low fixed terms, it is now a better time to speak with your mortgage broker to look for a better rate or discuss your objectives.
3. Help with cash flow.
It is a pretty unpredictable time financially, and while a few months off expensive shopping spree, fine dining out and new threads to show off have helped, there are always other ways to keep on track.
Perhaps you would like to release some equity to have some cash on standby? You may considering into renovation mode. Plus, domestic and international flights have been reopened and if anyone deserves a holiday, it is absolutely well-worthwhile.
Or you could be wanting to consolidate your debts into your home loan, reducing your repayments and likely interest on credit cards or personal loans.
Speaking of cash, current cashback offers from lenders can be tempting – but be careful of low-hanging fruit and take into account other factors like ongoing rate, reputation and even customer service.
4. Make sure you are on the right loan for you.
You have probably stumbled upon enough dating reality shows recently to know that not everything is a perfect fit – and the same goes with you and home loans.
You could be on a variable loan and want to take advantage of the current fixed rate due to rate rises.
You may want to access different features or flexibilities of a loan that you currently cannot, such as extra repayments without penalty. Or your bank or lender just is not delivering you the way you deserve. Whatever your reason, it may be time to make the move to a different home loan to best suit your needs.
5. You have never refinanced – or have not in a long time.
If you have had a home loan for a while and never refinanced, turn off Netflix immediately. Because studies show 58% of Australians spend about the same time watching an episode of their favourite show as they do inspecting a property. And if you are putting that little effort into finding your next dream home or investment, imagine how little you are putting into choosing your loan. Refinancing and saving thousands could even be done on the couch when you are not in charge of the remote.
The five reasons above are all worthy considerations, but the main one is just to make sure you are not being taken for a ride. It quite literally pays to look around. Rising cost of living and managing your household budget is very important to maintain your lifestyle and other essentials in your life.
Please be aware that you should always consider getting a mortgage or financial advice first and be aware of the potential downsides and risks. Talk to your finance broker for a full list of potential risks, obligation-free health check, and rewards.
To discuss your home loan needs, contact ASA Mortgage Brokers today to book your FREE consultation appointment.
The information is a compilation from various sources for your benefit and should not be relied upon instead of appropriate professional advice. This article is prepared based on general information. It does not consider individual financial objectives or needs and is not financial product advice, and the content quoted from ME Bank Blog.