Refinancing should be a prime consideration for those who qualify, as more and more Australians feel the squeeze from interest rate rises.
The Reserve Bank of Australia lifted rates in March 2023 for a 10th consecutive month in its relentless bid to rein in inflation.
The rise of 25 basis points took the official rate to 3.6%.
In November 2022, ABS figures revealed the average mortgage size for owner-occupier dwellings in Australia was $601,797.
That 0.25% rise will cost anyone on the variable rate with an average size loan over 25 years an extra $85/month.
That’s an extra $1092 per year – gone.
Interest rates have now climbed 3.5% since May 2022.
That equates to an extra $270 per week, $1083 each month and $12,996 a year needed to service Australia’s average home loan.
But you don’t have to sit back and cop it on the chin. You can and should take positive action.
Refinancing your mortgage
Nobody gives you the best deal unless you ask for it.
Whether you are haggling for a leather jacket in Mexico, asking for the best price on a new car, or calling your energy provider for a better electricity and gas deal, you have to make some effort to save some money.
And you have to be prepared to walk if someone is not prepared to meet your price.
Home loans are no different.
The difference is, by refinancing your home loan, you stand to reap much greater rewards and savings.
This in turn can save you years on the length of your home loan and your total interest bill.
Doing the sums on refinancing
Let’s say you are paying 6% interest on an average Australian mortgage of around $600,000.
By refinancing to a new rate of 4.75%, you can instantly reverse the effects of the last five rate rises.
And it will cut $445 from your monthly payments – that’s $5340 per year.
Why pay more if there is another way?
An Australian mortgage ‘time bomb’
When considering refinancing, it’s important to act fast. Many Australians are sitting on a ticking mortgage ‘time bomb’.
They have avoided rate stress with a lower fixed rate but thousands of them are expiring every month in 2023.
When their fixed rate reverts to the variable rate, an average loan of $600,000 with a rate rise of 3% would see their monthly repayments increase by a whopping $1021.
Don’t delay reviewing your mortgage
It is best to put the wheels in motion for refinancing before your fixed term expires.
This is even more critical in the current economic climate because the cost of some house prices has fallen since their peak in May 2022.
For some borrowers, it may already be too late.
Anyone who borrowed a large sum of money with a small deposit and has seen the value of the property fall could find themselves unable to refinance because their equity has dipped below 20%.
Where do you start?
While it is possible to handle this conundrum yourself, working with a good mortgage broker is the easiest, smoothest and smartest way to refinance.
Mortgage brokers deal with a wide range of banks and other lenders all offering a multitude of products, and can help you sift through them all to find the very best deal for you.
A mortgage broker will show you exactly how much money you can save every month.
They will factor in all the fees and charges associated with discharging one loan and establishing a new one.
These costs are often offset by big cash incentives from lenders keen to attract your business in what is an ultra competitive market.
Find out how much money you can save by refinancing
Calder Finance Broking are specialists in the mortgage broking and refinancing business. We can tell you in a matter of minutes whether refinancing is a fit for you, and how much money you could save.
We have built great relationships with a range of lending institutions so we can broker the very best loan deals for our clients.
At Calder Finance, saving you money with a minimum of stress and fuss is what we do best.
We can also advise you on the most prudent mortgage strategies for your circumstances and pride ourselves on leading our clients into the future with structure, financial stability and confidence.
Contact us today to discuss all of your financial needs and concerns.
The information contained on this article is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser.
Taxation, legal and other matters referred to on this website are of a general nature only and are based on Calder Wealth Management’s interpretation of laws existing at the time and should not be relied upon in place of appropriate professional advice. Those laws may change from time to time.
Calder specialises in wealth management with a focus on advice, investment, sustainability, insurance and finance.
Written by Hayley Walsh from Calder Finance Broking, for more information please visit the Calder Finance website. Please note that Calder Finance Broking Pty Ltd is a Corporate Credit Representative of BLSSA Pty Ltd ABN 69 117 651 760 ACL 391237.