Many Australian mortgage holders have a set-and-forget attitude where they take out a home loan and then they pay it off over the term without comparing it to other mortgages on the market. This attitude could potentially be costing mortgage holders in Australia billions.
According to research, over 35 percent of mortgage holders say that they have not changed lenders over the last decade. Yet, if these 1.17 million households considered switching their home loan to a variable rate that was 1 percent below their current rate, then they could potentially save themselves thousands over the term of their home loan.
Refinancing a Home Loan is Now More Affordable
With home loan rates being the lowest that theyve been in years, its more affordable to switch lenders. Plus, excessive fee charging by lenders for switching home loans has now been banned. The only charges a lender can now charge is break fees for a fixed-term home loan.
For those home loan holders who have loans over $300,000, banks and lenders are often willing to negotiate a better than advertised rate with you to gain your business. This means that youll be able to negotiate a rate that is up to 1 percent lower than what is advertised. Currently, major Australian banks are advertising an average rate of 5.61 percent.
However, according to research, variable rates for owner-occupiers are now as low as 3.99 percent for a no-frills home loan, and more than 150 lenders now have a variable rate that is lower than 5 percent. So if youre looking to refinance, then make sure you shop around to find the best deal.
How to Make Refinancing Easy
If youre unsure of how to research and compare your mortgage to others on the market, or you find the prospect of wading your way through refinancing paperwork daunting, then enlist the help of a mortgage broker. A broker does the hard work for you. They will shop around for you and compare home loan products to find you the best deal, and they do the paperwork on your behalf. This makes refinancing effortless.
Many Australians who refinance save hundreds per month, which they then either put back into their home loan so that they can pay this off quicker or they use this extra money for other expenses, such as school fees. Despite the savings though, many Australians prefer not to refinance. In fact, according to a recent survey of over 1300 Australians, only 6 percent said they were considering switching lenders and 20 percent of those surveyed said that they had switched lenders in the last 10-years for a much better deal. Of those who had not refinanced, 24 percent said that the paperwork deterred them, 13 percent said that they thought refinancing would be costly, and 9 percent felt that trying to do the research and comparing home loans was just too difficult.
Refinancing Facts and Statistics
On a generation basis, data suggests that Baby Boomers are least likely to switch lenders. Generation Y were the most likely.
State-by-state, research suggests that Victorians were the most likely to switch lenders, and Tasmanians the least likely. Around 63 percent of New South Wales and Western Australian mortgage holders said that they had never changed lenders. However, 18 percent of respondents in these states said that they had changed lenders over the last 5-years, but had since stayed with this new lender.
According to data collected from a well-known lender, a rise in home loan refinancing had been experienced by this lender over the last 3-months, which had seen their customers save on average $86,000. The rise in refinancing, for this lender, was estimated to be 16 percent over this period, with refinancing making up 35 percent of this groups total settlements.
This rise, said a spokesperson for the company, shows that Australians are beginning to think more about their home loan expenses and how they can save. Low interest rates, property market price drops and economic uncertainty is seeing more Australians look for ways that they can give themselves greater financial security and control over their spending.
Owner-occupiers are said to be driving the refinancing trend with a rise of over 2 percent being recorded when compared to figures 2-years ago. Investors refinancing, on the other hand, had fallen by 5 percent over the same period, or by 16 percent when compared to last years figures.
Home owners who refinance are typically saving around 0.71 percent on their interest rates, or approximately $6000 on a 30-year home loan when they refinance.
Are you thinking about refinancing your home loan? If you said YES, then now is the time to contact eChoice. We can help YOU find the right home loan so that you can save more.
Written by eChoice
Since 1998, eChoice has helped more than 50,000 Australians secure a home loan through its network of over 25 lenders and hundreds of loans. Best of all our service is cost and obligation free!