New figures suggest Australian homeowners have refinanced around $200 billion in mortgage loans since the Reserve Bank started raising interest rates to fight inflation 12 months ago.
Up to 30 lenders have been competing for this potential business, offering lucrative cashback offers to win your signature. Owners have been promised incentives from $2,000 to $10,000 to make a switch.
If you’re one of those owners who decided to shop around for a better interest rate, you’re to be congratulated on your impeccable timing.
The clock now appears to be ticking on these great deals with the Commonwealth Bank – Australia’s largest – announcing it was stepping back from its $2,000 cashback offers.
It is essential to keep a constant focus on their mortgage costs. Mortgage products can be complicated, and the ones with the lowest interest rate don’t always work out to be the cheapest because of fees and lock-in clauses that penalise you if you leave or pay off your mortgage earlier than scheduled.
With mortgage costs being such an important part of our real estate thinking at the moment, we’ve made a quick list of issues you should consider when switching lenders.
Research – With more than 30 lenders offering incentives to jump from your current lender, your research must be diligent. Aim for lower monthly payments and savings across the life of the loan. Contact a mortgage broker if you don’t want to do the legwork.
Your needs – Ask why you need to switch lenders. Are you looking for a lower monthly repayment, an adjustable mortgage rate or a fixed-rate deal that will give you peace of mind? Clear goals will help guide your decision – and help you put the heat onto your current lender.
Costs – Fees often come with refinancing a mortgage. Fees for an application, the value appraisal of your home and closing costs all mount up. Be confident that you’ll recoup these costs from the savings you should be making.
Equity question – Do you know how much equity you have in your loan? Lenders will focus on a Loan-to-Value Ratio, an accurate picture of your mortgage situation. If you bought more than five years ago, your home’s value has likely increased. That stronger equity position can be leveraged when refinancing.