Despite the current COVID crisis, homeowners have actually found themselves in an enviable position.
As the RBA moved quickly and decisively to cut interest rates earlier in the year, the result is that Australian’s are now in a position where they can access the best mortgage rates in history.
While accessing lower interest rates is important, there are also a number of other reasons that homeowners should consider refinancing sooner rather than later.
Refinancing effectively means taking out a new home loan to replace your old one and by doing so you can access a range of benefits that you might be missing out on.
The RBA has made it clear that not only are rates currently low, they will be staying low for the foreseeable future. If you haven’t yet looked into refinancing your home loan you still have the opportunity to do so.
As it stands, there are a range of lenders offering interest rates in the low 2s, which is the lowest level we’ve seen since the 1950s.
Despite the fact that you might have been with one bank or lender for decades, that doesn’t mean that you’ll be getting the best possible interest rate. In fact, it is normally quite the opposite.
Generally speaking, borrowers that haven’t spoken to their bank and reviewed their loan in many years will likely be paying a higher interest rate than they need to be. Banks will normally not cut rates unless they absolutely have to so you could well be paying far more than you need to.
At the same time, when you refinance, you have the ability to not only get a better rate but to get one with better features. This is oftentimes something like a 100% offset account, which allows you to save on interest when you park your excess cash in it.
Using loan products with features such as an offset account is a must and can save tens of thousands of dollars or many years from your home loan.
In the current climate, we’ve seen just how important it is to have access to spare cash. With COVID putting a lot of industries and people out of work, having access to money when you need it is paramount.
One way to do that is to keep your extra money in an offset account so you have it sitting there if you need it when that rainy day finally comes along.
You can also free up some cash through a refinance and leave it sitting in an offset account. In years gone by, having a loan product with a redraw facility was common practice, but as we’ve seen in recent times, the bank still has ultimate control over whether you can access that money. In some instances, lenders have actually blocked the ability to redraw, which highlights why you should look at different options.
When you refinance your current loan, it also gives you the opportunity to roll over some other debt into your home loan.
An example of this might be those people that have debts that come with higher interest rates, such as car loans, credit card debt or personal loans. By rolling the debt into a new loan, you can access residential home loan interest rates which as we’ve seen can be very low at the moment.
This has the benefit of saving you thousands of dollars on interest and putting you back in control of your finances.
Some people are concerned that they might need to pay significant fees to change over their loans. Fortunately, there are also lenders that offer a cashback rebate of up to $4,000 when you change loans.
This is important, because some loans, such as fixed rate, often do have break fees associated with changing loans. A cashback rebate is a great way to save on those fees and access all the benefits of a new loan.
If your goal is to get ahead through property, one of the biggest hurdles you’ll face is not having the cash flow you need to grow your portfolio.
It’s critical to get the lowest rate you can on your current home loan, so you have more money at your disposal to invest in other properties and grow your capital case.
Cutting your interest rates by refinancing can not only give you more cash, but it will also help boost your serviceability, which is often an issue for many property investors looking to build a large portfolio.
If you need to speak to an expert to see if you are eligible for a home loan with mortgage insurance you can speak to us by completing a Free Assessment Form and get started on your property purchase journey today.