Whether your lender passed on the RBA rate cut or not, it’s definitely worth reviewing your mortgage and assessing other options – if you haven’t already.
After all, on Canstar’s database there’s a record 110 home loans (at the time of writing) with an advertised interest rate of less than 4%.
So it seems that on the home loan market at the moment, there are plenty of opportunities to save big $$$ by refinancing.
To find out a bit more about the current situation and gain some tips on how to make the most of it, Canstar recently caught up with Kate Herschell, director of lending services firm Synergy Brokers.
Q&A with Kate Herschell – Synergy Brokers
Q: What makes now a good time to refinance/negotiate to a better rate?
A: Any rate change can “shake up the market”!
Whether the rates are moving up or down, it prompts the Big Banks and the smaller lenders to consider what offers they are wanting to make, and which customers they are trying to attract.
This is when it is easier to pit them against each other, and get yourself a fantastic deal. It increases competition and often there are incentives to move as well, including cashback offers which can ease the financial pain of switching banks.
Q: What tips do you have for people wanting a better deal on their home loans?
How can they boost their chances of getting a great rate?
A: Always use an intermediary – it shows the bank that you are out there researching your options and you’re not afraid to move! The real threat of losing a customer can often result in a sharper discount – knowing what offers are in the marketplace means that you can negotiate intelligently.
Q: How can someone go about the refinancing process in a way that will make it as smooth
and easy as possible?
A: Knowing exactly what is required of you is the first step, so find someone who speaks your language. Most brokers will have a ‘cheat sheet’ which breaks down the steps and the documents required so there is no going back and forth. Then it never hurts to put a little pressure on the bank you are leaving…that is of course once the new loan is formally approved! This can really speed up the booking between the financial institutions and before you know it your loan has been switched. It is also important to decide what to do with your transactional banking – if you are moving it to the new bank, try and set this up earlier. It will make repayments easier once the new loan is established.
Q: How much have some of your clients saved by switching?
A: I have had clients save as much as $5,000 in the first 12 months. It is important that if you are going to go to the trouble of switching banks that you make a great return in the first 12 to 24 months – reviewing the loan ongoing should be at the very least on an annual basis.
Everyone’s situation is different but even if you can put $50.00 back in your pocket a week, that is still $2600 every year. I’m sure most people would rather $50.00 in their wallet rather than in the Banks.
Kate Herschell is the director of Victoria-based Loans Advisory service Synergy Brokers and has over 12 years’ experience in lending both residentially and commercially.
See what’s out there.
A refinancing success story
The act of refinancing a home loan can lead to some great savings stories. One such story comes from Sydney resident Garry Patterson. His family built a new home in Sydney’s Hills District with a construction loan, but when the house was completed in 2014, he wanted a better deal.
“I wasn’t overly happy with the rate I was being offered so I decided to look around at what else was on offer,” Garry said.
“Although it takes time to do research, I am very glad I looked elsewhere.”
Garry initially refinanced $670,000 with IMB Bank on a one-year fixed loan term at 3.99% before that expired and he took up a three-year fixed loan at 4.05%. He recently negotiated a further $75,000 with IMB Bank for an Essentials Home Loan with a variable rate of 4.30% which changed to 4.05% with an interest rate cut.
The rate offered by his previous lender at the time he refinanced was 1% higher than what he switched to – meaning he saved almost $7,000 per annum because he shopped around.
“That is a lot of money in anyone’s terms and, if you add up the three-year period of the fixed term, that is more than $20,000,” he said.
“Saving that much money just makes life easier all round.”
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