Should I re-finance my home loan?

With the official cash rate at its lowest on record, there are some lenders that are offering very competitive deals to attract new customers. This is good for borrowers but it is important to understand all that re-financing involves. When you re-finance you are paying off your existing mortgage and creating a new one. For most people, their home is their most valuable asset so this is not a decision to take lightly.

First steps to consider

Is the interest rate on your home loan higher than 4.6% pa? If so, it would be worthwhile looking at all the available options.
If you find a better deal try speaking with your existing lender first. Let them know that you are looking to re-finance your home loan, mention that you have found a lower rate and ask if they could match this rate to retain your business.

Potential one off costs

This will differ from mortgage to mortgage, however, in general these costs can include:

Mortgage discharge fee on existing loan
Government charges to change the registration of the loan
Application fee for new loan
Break costs if you have a fixed rate loan
Lenders Mortgage Insurance (LMI) if applicable

For example:

You currently have a $500,000 loan and your variable interest rate is 4.80% and you are looking at re-financing to a new loan interest rate of 4.38%. The saving on interest will be
$500,000 x 0.42% (difference in rates) = $2,100 pa
This is the equivalent of saving $175 per month.
If your re-finance cost worked out to be $800 (assuming you have no break costs or LMI), it would take under five months to recoup these once off costs.

We can assist

There is a lot to consider when it comes to choosing a suitable lender and mortgage. It can often feel overwhelming trying to take into account all the different aspects of a mortgage when doing a comparison. There are different terms, types of mortgages, costs, penalties and rates just to mention a few. Shopping around, comparing and negotiating may save you thousands of dollars. We can assist with this research and decision making process free of charge.
At Harvest we provide independent advice about home loans based on your personal financial situation, and therefore, do not favour any particular lender. We have access to 27 loan providers to make sure you get the best value home loan by customising a package for you that best meets your needs.

Reserve Bank interest rate announcement – April 2015

Today the Reserve Bank of Australia met to review the official cash rate. They have decided to leave this rate steady at 2.25% for the second consecutive month. We expect that most lenders will leave their rates unchanged, in line with the Reserve Bank’s decision.