With record low interest rates in response economic challenges , there has never been a better time for Owner Occupiers & Investors to refinance their existing mortgages to secure lower interest rates.
Although, would you believe me if I said that a lower interest rate does not always mean a lower cost to you?
When refinancing its beneficial to look at your loan and the associated costs over the FULL TERM.
When I work with my clients to refinance their existing loans, we focus on 2 core functions:
Loan term, What is the current term on your existing home loan? If you have already paid off 5 years of your loan, it does not always work to your benefit to refinance up to the highest term of 30 years and land yourself in a never ending cycle of interest repayments. If you have a remaining term of 25 years, then it would make sense to refinance to a 25 year loan term.
Loan Limit, its always comforting having money in the bank for contingencies and leveraging an offset account or redraw facility, only paying interest on the balance of the loan. Although the minimum monthly repayments are usually calculated on the limit of the loan and does not change. Based on an individuals financial position & borrowing objectives it may be beneficial to refinance to the existing balance or a little bit above for contingencies. I always disclose this with my clients before they choose to refinance up to 80% of the properties value.
If you take these to factors into consideration when doing your calculations it could certainly propel your financial position getting you to that title deed sooner than originally anticipated.
**Note: Loan eligibility is based on servicing, these are only tips and certainly not instructions**
T&C's are dependant of selected lender.