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Useful tips for refinancing your home loan

Homeowners looking to take advantage of record low interest rates should be scouring lenders for the best refinancing deals. Here is what you need to know.

As the property market reels in economic uncertainty, homeowners are taking advantage of record low interest rates and scouring lenders for the best refinancing deals.

The volume of mortgage holders looking to refinance rose 42 per cent from the same time last year, according to CoreLogic data, amid a lack of confidence in the buying and selling of property.

“Overall we are seeing a general elevation of the refinance of loans since the Easter long weekend – the levels seem quite elevated,” CoreLogic’s head of residential research Australia, Eliza Owen, said.

She said the current cash rate of 0.25 per cent and the nation’s uncertain economic conditions were influencing factors.

“The RBA [Reserve Bank of Australia] has signalled that the cash rate is going to stay at its current level until inflation is in the 2-3 per cent band and unemployment moves toward the full employment rate,” Ms Owen said.

“There’s an increasing number of people out of work or working reduced hours so they are really looking at ways to reduce household costs.”

Mortgage Choice CEO Susan Mitchell said mortgage holders should only refinance with good purpose.

“Don’t refinance for the sake of it – do the numbers to ensure the new deal is actually saving you money in the long run,” she said.

“Borrowers who have been in the same variable rate home loan for more than two years without negotiating a better deal should review their home loan as soon as possible.”

Ms Mitchell said borrowers with 20 per cent or more equity in their property were in a good position to refinance but those who were not might incur additional charges such as lenders’ mortgage insurance (LMI) to move to a new lender, outweighing the savings.

James Symond, CEO of broking giant Aussie, said it had received an influx of calls from existing and new customers interested in minimising repayments, reverting to interest only loans or requesting repayment deferrals.

“As households feel the strain of the pandemic, it is more important than ever to know what interest rate customers are paying on their home loan and what options are available to them,” Mr Symond said.

“A mortgage broker can guide consumers through the process and ensure the options are right for their individual circumstances at this tough time.

“Importantly, every lender has their own way in which they are approaching their customers and the options and benefits that are available to them.”

Originally published as Useful tips for refinancing your home loan

Original URL: https://www.adelaidenow.com.au/moneysaverhq/useful-tips-for-refinancing-your-home-loan/news-story/b161faebabe6534d801a5c8665b2ca0e