Being loyal to your home loan lender could be costing you thousands of dollars over the course of your loan term. The good news is that the mortgage market is full of lenders offering great deals to all types of borrowers.
Refinance your home loan and you could end up with a cheaper home loan which better suits your needs. For example, if you have an average size home loan on an average variable rate of 4.40% p.a, you’re paying $1,852 a month on your home loan. If you refinanced that average home loan to a rate of 3.59% p.a, your monthly repayments would drop down to $1,680. That’s a saving of $172 per month or $2064 a year. And over the course of 30 years, you’d save $61,920.
Refinancing is when you switch your home loan to another bank. This can be by moving your loan to a new lender, or just by changing the type of home loan you have with your existing lender. Usually, refinancing is done to get a lower rate or a loan suitable for pursuits such as renovations. More often it's done by switching to a new lender that may offer an interest rate or features that better suit your situation
While most people refinance to get a better rate, there are a whole range of reasons you might want to say goodbye to your existing lender and look for a new one.
A better interest rate
It's a good idea to approach your existing lender first to ask for a better interest rate if that's your main concern (and why wouldn't it be).
Staying with your existing lender could mean that you save on discharge or exit fees plus application fees of your new loan, not to mention the amount of paperwork you've saved. If your lender is unwilling to help, then it might time to move on.
To access your equity
If you've paid down your loan on your home you might like to access equity to purchase other properties or reasonable assets such as funding a renovation for your home or purchasing a new car. One of the advantages to this is that you can purchase an item with the same interest rate as your home loan, rather than the higher interest rates charged on personal loans or credit cards.
However, one of the risks of accessing this equity is that it might take a bit longer to pay off your mortgage but we can look at structuring your new loan in such a way that we can help minimise this risk
To consolidate some debts
Juggling debts can be hard. This is where a debt consolidation loan could help. It can roll all your existing debts into a single manageable loan. If done correctly, you can save on fees and reduce the amount of interest payable by combining your debt into a single repayment with a competitive rate. It's important to ensure that you actually save money in this process. Again, there's the risk of increasing the loan terms on some of your short term debts (such as a credit card) and you may end up paying more but the right structure can help mitigate this.
To get better customer service
A difficult question to answer but not all banks are equal and some offer less service that others. Often it can just be that your circumstances have changed and your lending requirements no longer suit your current banks lending policies. Ask yourself the following questions;
How much guidance and support are you going to require?
Will the support align with my needs?
Is it you that I'll speaking to the whole time?
Having one person dedicated to your home loan application and needs is a lot easier and more convenient than speaking to multiple departments.
What sort of guidance will you be providing through this process? The amount of support they're willing to offer generally reflects the standard of their customer service. The reality of modern banking is that managers come and go and some aren't even people, they're computers and algorithms.
EquityLend has been serving customers since 1998 and some of the very first people we helped are still our customers today.