Borrowers are saving thousands by reviewing their home loans

Home loan interest rates are at record-low levels but many borrowers don’t know what they are paying until it’s too late. These are the savings you can easily make by refinancing your loan.

BORROWERS sitting idle on their mortgages are bleeding cash when they could easily save themselves thousands of dollars a year.

The Reserve Bank of Australia has cut the cash rate twice this year, and with further cuts on the horizon borrowers should be checking their loan costs.

Nichole Makene, 49, and husband Peter, 54, left it seven years before reviewing their mortgage, costing them a small fortune.

Mrs Makene said the desire to buy a new family car and do home renovations prompted the couple to examine their loan.

“We were paying about 4.3 per cent and we ended up getting a rate of 3.18 per cent,” she said.

“I’m now probably saving about $300 per month.”

They purchased their four-bedroom home in southwest Sydney in 2000 and have now opted for a shorter loan term of just 20 years to try and pay it off more quickly.

Online home loan platform Lendi has revealed some of the exorbitant interest rates customers were paying before refinancing:

• An ANZ owner occupier customer with a $440,000 loan and a rate of 4.96 per cent refinanced to the Commonwealth Bank at 3.54 per cent, saving them $366 per month.

• A Bankwest owner occupier customer with a $485,000 loan on a rate of 4 per cent switched to a rate of 3.38 per cent, savings $170 per month.

• A CBA investor refinanced from interest only to principal and interest on a $400,000 loan with a rate of 4.94 per cent, switching to a rate of 3.64 per cent and savings of $305 per month.

Mrs Makene said the drain of refinancing prevented her from taking action earlier.

Nichole and Peter Makene with their sons Zintori, 16 and Tat, 13 have made significant savings by refinancing their home loan on their four-bedroom Sydney property. Picture: Monique Harmer.

“I looked into refinancing several times but when we were sent paperwork and asked to fill it out I just thought I can’t do this and I put it off,” she said.

“I really wish I did it earlier.”

Lendi co-founder David Hyman said rate cuts in June and July had resulted in financial institutions in a previously dormant rate market being suddenly prodded.

“Lenders are being more competitive because there’s so much change in the market,” he said.

“Customers were saving about 1.2 percentage points when they were refinancing with us.

“On a $400,000 loan customers that’s a saving of over $4000 in the first year which is pretty material.”

MORE: HOW NOT TO GET REJECTED FOR A HOME LOAN

MORE: THE BEST WAYS TO QUICKLY SAVE A HOUSE DEPOSIT

Tribeca Financial chief executive officer Ryan Watson said customers should be checking exactly what rate they were paying to see if they could do better.

“Competitive rates on a principal residence mortgage are certainly in the low 3s, somewhere around the 3.2 per cent mark,” he said.

“If you are paying above 3.5 per cent, then you need to seek professional advice.”

Mr Watson said sometimes just a phone call to your lender could result in an on-the-spot rate cut, but those needing help should seek professional advice.

“It can be easier than you think to refinance your home loan and lock in an interest rate saving, especially for those clients who are PAYG employees and have a borrowing ratio of less than 80 per cent of the value of their home,” he said.

@sophieelsworth