Home and apartment owners should be looking to refinance their loans to offset the higher costs to the mortgages caused by the Reserve Bank’s decision this week to lift cash rates by 0.25 per cent, according to the Executive Chairman of Aussie Home Loans, Mr John Symond.
He said: “Borrowers should seek to reduce their interest costs by switching loans to a lower basic rate – a process that mortgage brokers like Aussie can manage.
“Aussie’s research shows that borrowers who refinance through Aussie generally save up to 0.75 per cent on the rate, which can amount to tens of thousands of dollars over the life of the mortgage. Meanwhile 50 per cent of customers who walk through the doors of Aussie’s outlets do not have the best mortgage deal available in the market”, added Mr Symond.
Mr Symond said that borrowers should ask a series of questions to ensure they will not incur greater costs on their loans by refinancing.
Some questions worth considering are:
- What are the penalty costs of getting out of your existing loan arrangements?
- What are the fees to start a new loan and other, ongoing fees for switching from variable to fixed rates, extra payments, monthly management fees and using a redraw facility?
- What will be your savings over the remaining term if you did switch?
In the past penalties for switching loans or refinancing were severe, representing, in some cases, up to six months’ interest. However, the Consumer Credit Code now provides that lenders can only charge a fee representing their actual economic loss.
Aussie has gone a long way in dealing with these important issues by offering choice, trust and objectivity, as well as accredited mortgage advisers who can manage the refinancing process at no charge to the customer.
Advisers with Aussie represent 17 lenders, including the four major banks – providing borrowers with a good, credible snapshot of the market – backed up by a computer software system called Mortgage Explorer that ranks the best loans.
Mr Symond concluded, “Now is a great time to refinance but borrowers need to get sound, well research advice from a credible broker or lender before taking this step”.