Interest rates are at record lows. Banks are hungry for your business. Could now be the time to refinance?
The official cash rate is 2.5% – the lowest in recorded history, and there’s a swag of fixed home loans priced below 5.0%. It’s an exceptionally low rate and the banks are clamouring for your business.
It all means borrowers are in a great position to drive a better home loan deal.
Does that mean you should consider refinancing?
The answer is both ‘yes’ and ‘no’ depending on where you stand with a few key factors. Ultimately it comes down to what works for your own individual circumstances.
First, check the rate you’re currently paying by reviewing your latest loan statement or pick up the phone and ask your lender. If you reckon your loan is overpriced or you want additional loan features, it’s a no-brainer you should look around for a more competitive or better-featured loan. In many cases you can use this to talk your current lender down as well.
Talk to your broker
Some of the lowest rates are with fixed loans – like Aussie Select Basic 2 year fixed at 4.64% p.a. (comparison rate 4.98% p.a.*). Be sure to talk to your Aussie broker before fixing to see if it’s the right option for you. A mix of fixed and variable rates could be a moneysaving solution if rates fall further in the future.
…and here’s the catch
Unless you have more than 80% equity in your home you could be asked to pay lenders’ mortgage insurance (LMI) if you refinance your loan. This can apply even if you paid LMI when you first purchased the property.
LMI isn’t portable between lenders so before you start thinking about switching, speak to a local real estate agent for an idea of how much your home is worth. Compare that figure to the balance of your home loan and if you have at least 20 per cent equity it may be a smart move to think about refinancing.
Where that’s not the case, contact your Aussie broker, who can crunch the numbers to see if the savings of a lower rate would still put you in front even if LMI applies. Some lenders may capitalise LMI, meaning it is rolled into your repayments rather than an upfront cost.
Information current as at 25/09/13.
*Aussie Select Basic 2 Year Fixed Rate is available with a loan to valuation ratio of 95% (including Lenders Mortgage Insurance). Loan reverts to the Aussie Select Basic Variable Rate (currently from 4.90% p.a.) at the end of the fixed period. Applications subject to lender approval. Rates subject to change. Approved applicants only. Conditions, fees and charges apply. Comparison rate above is based on a home loan of $150,000 for 25 years.
WARNING: This comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. If you have any questions call 1300 44 55 66 and talk to an expert Aussie Mortgage Broker.