As competition between lenders heats up again, borrowers need to recognise the tell-tale signs that it could be time to refinance and see if they can get a better deal.
Whilst it’s common for many borrowers to occasionally feel frustrated by their mortgage, it is another thing altogether to determine whether it’s financially worth acting and the time is right to move to greener pastures.
The main issue for borrowers is taking time out to look around and see what else is available and many times this doesn’t happen until someone tells you what a good deal they’re on – and it stirs you into action.
But there are several triggers that you can identify prior to reaching this point:
- When you look at comparable loans, is your rate still competitive?
- When you look at your loan features, are they still suitable for your current circumstances or are you paying for features you don’t need anymore?
- Are you satisfied with the level of customer service with your lender? Do they know you personally enough to provide direction to you on reaching your financial goals – or do you feel like just another customer?
- When you do hear good stories about other lenders and loan options, are you constantly feeling like you have nothing to brag about in relation to your own?
The critical step then is to look at the break costs on your current loan to calculate if switching loans is financially worth it.
If there is a break cost you need to see if it can be easily recouped with the interest you will save over the first few months of taking out a new loan.
Now that Australia is in a rising rate environment and there is more competition between lenders for a borrower’s business, the incentive to refinance is significantly greater than it was two years ago when the mortgage landscape was dramatically different.
However, the stumbling block for many mortgage holders is that they’re so busy juggling their finances they don’t take the time instead to think about whether they can change the actual terms of those finances to make the juggle easier.
A borrower only has to consider what benefits they can gain from refinancing i.e. potentially saving tens of thousands of dollars in interest over the life of a loan and giving them more flexibility over their household cash-flow to convince them that the time may be right.
Tags: Budget, Fixed Rate, Home Loan, Home Loans, Interest Rates, Lender, non-bank lenders, rate rise, Refinance, Variable loan, variable rate
For homeowners that have increased equity in their home, refinancing their mortgage can also be a way to get some “cash out”, pay off high interest rate credit cards, home improvements, or other recurring payments.