10 May 2021
Interest rates may be at record lows but that shouldn鈥檛 stop you from getting the best deal on your home loan.
Laura Higgins, ob体育鈥檚 Senior Executive Leader Consumer Insights and Communication, recently joined ABC Melbourne Drive鈥檚 host, Raf Epstein, to discuss how to make the most of your mortgage and things to consider when refinancing.
Laura noted in the last year, many people had already looked to see if they could get a better deal. Whether due to changed financial circumstances or suddenly having more time to review their options, ob体育鈥檚 had record usage in 2020, Australia-wide. In Melbourne, 320,000 people used the mortgage calculator in 2020, an increase of 75% from the previous year.
This supports data from the Australian Bureau of Statistics, which shows last year, refinancing hit a record high.
Laura says, 鈥榃hen considering refinancing, the first thing you should do is ask your current lender for a better deal. Many times, new customers are offered a better deal than existing borrowers, so if you haven鈥檛 if you have a home loan that is a few years old you could get potentially better deal that saves you thousands of dollars over time.
鈥楾ell your current lender you are planning to switch to a cheaper loan offered by a different lender. To keep your business, your lender may reduce the interest rate on your current loan.
鈥業f you have at least 20% equity in your home, you'll have more to bargain with and having a good will also help with negotiations.
鈥楨ven if you鈥檙e happy with your current lender, it鈥檚 worth checking you鈥檙e not paying for features or add-ons you鈥檙e not using鈥�.
There are a lot of incentives out there to switch mortgages, but Laura reminded consumers that it is important to closely compare these offers. For example it鈥檚 worth doing the maths to ensure a cashback offer still puts you ahead over the long term when considered against other aspects of the loan, like interest rates and fees.
鈥業f you decide to switch lenders, you may end up with a longer term loan. Also consider whether lenders mortgage insurance or other costs like discharge and loan arrangement fees may be payable 鈥� these additional costs can outweigh the benefit of a lower interest rate鈥�.
People can compare the cost of switching home loans using Moneysmart鈥檚 A mortgage broker can also help you compare loans and decide whether to switch but you need to ask how they鈥檙e getting paid and what鈥檚 in it for them. Visit Moneysmart for tips on .
With interest rates so low, many people are looking to and making extra repayments.
鈥業nterest rates may be low now, but probably won鈥檛 be this low forever. Making some extra repayments now can benefit customers in long term鈥� Laura said.
鈥榊ou can still save while paying off your mortgage without a separate savings account. For example, a mortgage redraw facility will allow you to make extra repayments but withdraw them if you need to. Additionally, some mortgages come with offset accounts, where the funds you save in that account reduce the amount of interest you have to pay on the loan.
鈥楨ither of these options might work for you depending on your goals. Not all home loans can be linked to an offset account, and often those that can may have a fee charged or a slightly higher interest rate, so it鈥檚 worth making sure you鈥檇 be saving enough in there to warrant any extra costs鈥�.