April 06, 2020
The world has certainly changed over the past month. COVID-19 (Coronavirus) has changed the way we live, work, shop and the way we spend.
Before this all started, interest rates were already at historic lows, and now the official cash rate is now at 0.25% - the lowest it has been for over 60 years.
Banks are also competing hard for new customers because just like many of us, their business is struggling to find or keep customers.
What this means is that many lenders are offering some incredibly low interest rates and some amazing home loan deals.
Refinancing your home loan during the COVID-19 could not only help you to save money or depending on your strategy, even make money.
To help you decide if refinancing is a good option for you, our expert home loan team has put together a list of the ways refinancing during COVID-19 can help you.
You could secure a lower rate on your home loan
One of the main reasons people choose to refinance their loan is to get a lower interest rate, and put more money back into their pockets instead of paying the banks.
When done correctly, refinancing your home loan could save you thousands over the life of your loan, and free up cash now when you need it the most.
With rates sitting low at the moment, now is the perfect time to see if you can save by refinancing.
Get a home loan with better features
There are some great home loan features around at the moment, and refinancing could help give you some of the features that weren’t available to you before.
You might want to switch to a home loan that allows you to make lump repayments without fees or open up an offset account to reduce your interest.
There are some pretty cool boutique features as well like getting a repayment holiday (a break from repayments) for when the unimaginable happens (like what is happening right now!) or the loan portability feature which allows you to take your home loan with you when you move without much hassle.
Consolidate your debt and free up your cash flow
Many of us have multiple debts like car or credit card along with our home loan. Often our car and credit card loans have pretty high interest rates, meaning more out of your pocket.
Refinancing could give you the opportunity to streamline your debt and potentially reduce the overall interest you’re paying through ‘debt consolidation’, placing all of higher interest debts into one lower interest debt and reducing your monthly repayments.
This can help you save long term but also frees up your cash flow right now, when you may need it the most.
You could switch between variable & fixed rates
Another popular reason to refinance your home loan is to switch between a variable rate and a fixed rate.
With a fixed rate, some want peace of mind - knowing exactly how much their monthly repayments will be without the possibility of it changing is worth a slight increase in rate. With interest rates so low, a fixed rate may be a way for you to ensure your long term financial goal.
You may also decide you'd like to take advantage of a lower variable rate as you can accept the risk that rates may rise in future.
The cost of refinancing
While refinancing has some amazing benefits, there are costs associated with refinancing your home loan - costs that may outweigh the potential benefits. We’ve included two of the main costs associated with refinancing, but we have put together a complete list here.
Exit fees
Exit fees may apply when you pay out a loan early, usually in the first three to five years of your term. It could be a percentage of the remaining loan balance or it may be a set charge. Check your loan contract for more details. Although exit fees have been banned on new loans taken out after 1 July 2011, they could still apply to loans taken out before this date.
Borrowing costs
When you refinance, your new lender may charge a range of upfront fees. However not all lenders charge these fees and some may be negotiable.
We’re here to help you
We’ve gone through the potential benefits of refinancing and the costs associated. As you home loan experts, we can tell you what loan products are going to benefit you the most, and the costs that might be associated with them, so you can make an informed decision.
Your financial wellbeing has and always will be our priority. Together we will get through this challenging time. Speak to our team of home loan experts to help you make the right financial decisions.
Get in touch today. We can do phone, zoom, skype or emails - whatever suits you best!
