There are few financial commitments that carry as much weight as your home loan.
So it makes sense that when the Reserve Bank cuts interest rates to such historic lows, that now is the time to review your home loan and see if you could potentially save thousands.
There are a few reasons why the RBA decided to cut the cash rate this month. Sustained national dwelling value falls, consistently lacklustre inflation and mixed messages from the labour market, may have encouraged the Board to shift its long-held stance on monetary policy.
This months rate cut is good news for the Australian property market which could now see a boost from lower interest rates. According to the latest CoreLogic Hedonic Home Value Index, national dwelling values fell 0.4% in April and 7.3% annually.
While the RBA’s decision will no doubt bring relief to borrowers across the country, the question now is how soon, and by how much will the nation’s lenders pass on the savings to borrowers?
In the past week we’ve seen most of the big banks did not pass on these savings to its customers. This is not that surprising as in recent history, very few of the bigger lenders passed on the full rate to borrowers.
If you’re with one of the bigger banks or lenders, it is absolutely worth checking to see if another lender can get you a better deal.
How could you save on your home loan
If you’re keen to secure a better interest rate or enjoy more loan features, refinancing your home loan can be the solution. You could end up saving thousands off your home loan. Refinancing is also an opportunity to get control of debt or tap into any home equity you’ve built up.
Secure a lower rate on your home loan
One of the main reasons people choose to refinance their loan is to get a lower interest rate, and put more money back into their pockets instead of paying the banks. When done correctly, refinancing your home loan could save you thousands over the life of your loan, and free up cash now. With rates sitting low at the moment, now is the perfect time to see if you can save by refinancing.
Switch between variable & fixed rates
Another way to save on your home loan is to switch between a variable rate and a fixed rate. With a fixed rate, some want peace of mind – knowing exactly how much their monthly repayments will be without the possibility of it changing is worth a slight increase in rate. Conversely, you may decide you’d like to take advantage of a lower variable rate as you can accept the risk that rates may rise in future.
Get a home loan with better features
There are some great home loan features around at the moment, and refinancing could help give you some of the features that weren’t available to you before. You might want to switch to a home loan that allows you to make lump repayments without fees or open up an offset account to reduce your interest.
There are some pretty cool boutique features as well like getting a repayment holiday (a break from repayments), or the loan portability feature which allows you to take your home loan with you when you move without much hassle.
Consolidate your debt
Many of us have multiple debts like car or credit card along with our home loan. Often our car and credit card loans have pretty high interest rates, meaning more out of your pocket. Refinancing could give you the opportunity to streamline your debt and potentially reduce the overall interest you’re paying through ‘debt consolidation’, streamlining all of higher interest debts into one lower interest debt, reducing your monthly repayments.
Release some equity in your current property
You may be thinking about joining the thousands of Aussies that have invested in property, renovate your home or go traipsing around Europe on that trip of a lifetime. With your current home usually being your most valuable asset, it only makes sense to release as much of the value in your home as possible.
Not so long ago, the only way home owners could access their home equity was by selling up and upgrading to another property. These days, home loans are flexible and it’s possible to get access to the equity in your home without having to sell up. Reviewing your home loan can help you see exactly how much equity is available to you, and refinancing can help you access the equity to use for other things.
Let us help you save on your home loan
When it comes time to make a decision about refinancing your home loan, the best suggestion is to sit down with our team and go over your current home loan.
We compare your current loan with hundreds of others from our lenders to see if we can find you a better deal.