If you’re wondering whether it’s a good time right now to refinance your home loan, you’re not alone. The combined impact of the coronavirus (COVID-19) restrictions on the economy and Reserve Bank interest rate cuts have led to the cheapest home loan interest rates Australia has ever seen. The economic effects of COVID-19 are likely to continue well into the future.
All of these factors make it a good time to compare home loan rates that are available in the Australian lending market at the moment. Right now, home loan fixed rates for owner-occupiers in Australia are as low as 2.09% (comparison rate 3.77%) and variable comparison rates are as low as 2.69%!
Ultimately, the decision about whether or not you should refinance your home loan depends on your individual situation, but here are four good reasons to do it:
- To get a lower interest rate.
- To fix your interest rate if your circumstances are likely to change.
- To lower your repayments.
- To consolidate your debts.
Let’s look at each of these reasons to refinance in turn.
A lower interest rate
Did you know that even a small difference in home loan interest rates can make a HUGE difference to how much you have to repay on your home loan? The average mortgage in Australia is now $500,000, and the table below shows how repayments a home loan for this amount over a 25-year home loan term at 2.69% comparison interest rate, 3.19% (half a per cent higher), and 3.69% (half a per cent higher again). As you can see, it’s a BIG difference.
You might notice that lenders often advertise two interest rates on their loan products: the nominal rate and the comparison rate. The nominal rate is lower, but it doesn’t include the cost of loan fees. The comparison rate, on the other hand, is higher, but it does include additional loan fees. The comparison rate, therefore, gives you the real cost of the loan.
Make sure you look at the comparison rate when making a home loan comparison. It’s a legal requirement for lenders to tell you the comparison rate on their product before you take out a loan.
A fixed interest rate
The lowest home loan fixed rates Australia has ever seen are available in the market right now. That means it could be a good time to lock these rates in on your home loan, because rates are unlikely to fall much further with the Reserve Bank cash rate being just 0.25%.
Lower repayments
Refinancing to lower your home loan repayments can be a good idea if your income is likely to drop. For example:
- If you’re planning on starting a family and you and your partner will drop down to one income (or a reduced income) for a while.
- If you (or your partner) have lost your job due to the impact of the coronavirus restrictions on the economy (or if you’re likely to lose your job).
There are two ways that you can refinance to reduce your home loan repayments:
- by refinancing to a lower interest rate, and
- by increasing your loan term (for example, from 25 years to 30 years).
Debt consolidation
Debt consolidation is a smart home loan refinancing strategy if you have multiple debts with high-interest rates. For example, credit card debts and personal loans. Both of these forms of finance have much higher interest rates than home loans. You can refinance them into your lower-interest home loan to gain the following benefits:
- paying less interest on your total debt
- easier debt management. Instead of having to make multiple loan repayments every month, you’ll only need to one home loan repayment to cover all your debts.
How we can help
At ARG Finance, our experienced team of finance and mortgage brokers can help you with home loan refinancing. We’ll take the time to understand your situation so we can provide you with the right loan and lender for your needs.
We arrange loans from our panel of over 30 lenders across Australia, saving you time and hassle. We can help you to compare home loans and to find the lowest home loan rates. Best of all, our service is free!
Contact us today for an obligation-free chat to find out how we can help you!
In addition to refinancing, we also help our clients with:
- first home buyer loans
- property investment loans
- construction loans
- bridging loans
- commercial and business loans.
WARNING: If you select a fixed-rate loan, break costs may be payable if, at any time before the fixed rate expires. A comparison rate is calculated on a $150,000 secured loan, over a 25-year term. A comparison rate is true only for examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate.
Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.