Most people with a mortgage understand that refinancing can save thousands, but knowing how to do it is another thing.
John Tindall, of Accumulus Home Loans in Sydney, says the benefit of refinancing is simple – “more money in your pocket”.
Now more than ever, big and small lenders are offering lower interest rates, better features and switching incentives, he says.
Tindall saved one client $6000 a month and netted 250,000 frequent flyer points, enough for a trip to the US, just by refinancing and getting a better interest rate.
To get independent advice about home refinance, go DIY or use a mortgage broker, Tindall says.
Refinancing a home loan
“You can do it yourself, by internet and branch-by-branch research, which is free, but time consuming. Or use a mortgage broker, who can easily compare dozens of lenders, usually free of charge to the borrower,” he says.
Brokers get paid by the lender chosen, Tindall explains.
“Just be aware that they don’t cover all lenders across Australia, such as building societies and credit unions.”
Review your mortgage
Tindall suggests reviewing a mortgage every three years to ensure it’s still appropriate.
“If there’s an alternative, I seek a minimum benefit of $1000, possibly from lower interest rates or an incentive from the lender, to compensate for the costs of refinancing,” he says.
Working out if a new deal is better in the long run can be tricky.
“I would start by looking at the annual cost of the loan, which would include the interest payable, plus fees. I would then keep an eye out for similar offers from other lenders and use these to ask the current lender if my loan was still competitive,” Tindall says.
If you see a better deal advertised, act, he advises.
“See if your bank can match it, particularly if the benefits of switching are less than $1000. When appropriate, I give my clients a free report comparing three different lenders side by side, including their own, as ammunition in challenging their current lender to do better,” he says.
Don’t just look at the interest rate though, Tindall says.
“A loan is not just interest rates, but a bundle of services of products that will appeal differently to different people.
“Do you want a local branch? Are you happy with just ATMs and internet? Do you want an offset account, which can only be offered by lenders with a banking licence?”
Consider all factors before switching, he says.
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