When it comes to refinancing, Australians are becoming increasingly savvy. According to the Australian Bureau of Statistics, over $80 million worth of properties were refinanced in the last year alone.
Refinancing your mortgage, put simply, is the act of transferring your loan from one lender to another and in the process negotiating better terms (such as a lower interest rate or additional features). If done right it might save you thousands, however when it comes to home loans there is no one-size-fits-all solution.
Here’s a list of some things to consider to help get the best deal when refinancing your home loan:
1. Low interest rate
The main way to save money through refinancing is to find a home loan with a better interest rate than what your current lender is offering. This will ultimately bring your interest down and result in lower total mortgage repayments. This however is not the only feature of a home loan you need to consider…
2. Offset account
The mechanics of an offset account work similarly to that of a regular savings account, however the amount of funds in this type of account is used to offset against your loan balance before any interest is calculated on it. The funds held in an offset account can usually be accessed through normal means with a debit card in shops and at ATMs, however the difference being that the more money you hold in the account, the lower amount of home loan interest you will pay.
Many home loans are tied to the property, however when refinancing, consider looking for loans that are transferable. These portable loans allow you to take it with you, should you sell your home or purchase a second property. If you meet the criteria of a portable loan, such as the new loan amount being of similar or lesser value to the original, you could be able to avoid set up costs and exit fees that would otherwise be incurred.
4. Free redraw
A free redraw facility is a home loan feature that will allow you to make additional repayments on your loan with the aim to reduce the interest rate charges, however you are free to withdraw any or all of that extra money. This feature is similar to the offset account and could give you peace of mind should you ever need to access additional money in an emergency or at a time of need.
5. Revised repayment calendar
An often-underutilised home loan feature and one infrequently considered when refinancing a mortgage, is to negotiate your repayment schedule. While most loans have monthly repayment calendars by default, consider setting up either weekly or fortnightly repayment plans to better suit your personal financial cash flow situation. Not only can these shorter repayment periods better fit in with when you are paid, but if you pay half the monthly repayment amount each fortnight, may also result in you making more annual payments in total which can reduce the life of the home loan overall.
When you refinance and change to an alternative lender, ALI Group’s Loan Protection Plan still protects you, unlike most other bank protection products. To find out more about our plan and to get a quote, speak with your local ALI-authorised broker or please get in touch.
Loan Protection Plan is jointly issued by Hannover Life Re of Australasia Ltd ABN 37 062 395 484 (Death, Terminal Illness, Living and Accidental Injury Benefits) and QBE Insurance (Australia) Limited ABN 78 003 191 035 AFSL 239545 (Involuntary Unemployment Benefit). It is distributed by Australian Life Insurance Distribution Pty Ltd ABN 31 103 157 811 AFSG 226403 (ALI). ALI receives commission for each policy sold. Any advice provided is of a general nature only and does not take into consideration your personal objectives, financial situation or needs. You should consider the Product Disclosure Statement when deciding if this product is appropriate for you.