While it seems like a hassle, it remains true that refinancing your home loan is one of the better options to get the best deal. Many people have been refinancing which was driven by the record low interest rates and property boom in 2021. PEXA reported that Australians were refinancing their homes at record rates, with around 364,000 refinance transactions recorded, up 28% from 2020.
The common factors people consider in refinancing may include: lower interest rates, increase in their property’s value, or their fixed rate is due to expire. Savvy homeowners are taking action on their home loans because this can have a positive impact on their savings. Many are also seeking to lock in a lower starting rate, anticipating interest rate rises in the future.
If you’re planning to go for it, consider these tips to get the best deal when refinancing.
Are you aware of ‘loyalty tax’?
Although it isn’t really a tax, but rather, ‘loyalty tax’ is a premium – extra interest paid by existing customers.
Banks and lenders offer big discounts to attract new customers. You’ll notice this when you check the introductory interest rates on offer, which are commonly lower than the average rate being paid by existing customers. This is something you’ll miss out if you remain ‘loyal’ and will cost you thousands every year.
It’s not easy to switch home loans. But the fact of the matter is, you often have to leave your existing home loan provider to get the best deal.
Improve your finances
Refinancing with a new lender often comes with passing all relevant credit score and repayment history checks. So make sure to pay off your debts and to pay your bills on time. Basically, this is to prove to the new lender that you’re a low-risk customer.
Switching lenders may involve costs, so make sure to include those into your calculations. Consider exit and establishment fees, other lending charges, and cashback offers.
Note: It’s better to have more than 20% equity in your home when you refinance.
Compare lenders to get the best deal
There are lots of home loan products on the market, so cast your net wide. It would be worth it going beyond your current lender to compare and make sure you get the best deal.
There are loan comparison websites that can help you compare across all kinds of lenders, including the Big 4 banks, smaller banks, and other financial institutions.
Always negotiate and ask, because “if you don’t ask, you won’t get”. Don’t just accept an advertised rate as the lowest a lender will go. Negotiate and ask for less.
Use a mortgage broker
Comparing lenders can be tricky, so it helps to have an expert on your side when it comes to refinancing. Use a mortgage broker who doesn’t just compare rates, but also considers fees, cashback offers, timing, lender pros and cons, among others.
You may find a licensed mortgage broker through:
- a professional association such as MFAA or FBAA
- your lender or financial provider
- family and friends’ recommendations.
Use the ASAG Reverse Mortgage to get the best deal
For our customers, refinancing a home loan without ongoing payments is possible. If you’re a senior homeowner looking to refinance, our equity release facility, namely the ASAG Reverse Mortgage, may be what you’re looking for.
Refinancing is also a great way to unlock some equity in your home to fund your retirement. Our reverse mortgage solution allows you to unlock the wealth in your home to access funds without selling or losing your property. The funds can be used for different acceptable objectives, such as Senior Refinancing, as you enjoy a comfortable retirement.
There are no ongoing payments with our reverse mortgage as it is paid off when you permanently leave your home, either you downsize, move to aged care, or pass away. However, you may choose to make early repayments without penalty.
The ASAG team can assist you with further details on how the loan works by calling us on 1300 002 724 or sending your enquiries at firstname.lastname@example.org.
You can also get started by using our tool below to assess your available equity.