Kim Davie's Tip #10 of 10 for 2016
By Kim Davie
I hope you have enjoyed, and used, the Top 10 tips I have provided over the last ten weeks and have saved money, protected yourself, found money or just learnt something! I have left the best tip to last – refinancing – the easiest way to save money.
Australians aren’t making the most of refinancing their mortgage and it’s costing them. Do you remember the story about the couple who spent an hour filling in their paperwork and pulling together their documents and how I saved them $30K. $30K for one hour of work?
There are lots of reasons people don’t refinance their mortgage, but the oldest chestnut is always that we’re all too busy. Work, family, kids, friends and social lives – there’s no time for research and meetings with lenders – that’s where a broker can save you time When things get hectic, one of the first things we put in the ‘too hard basket’ is looking at our finances, but it’s got to stop and it doesn’t actually take that long.
A survey by finder.com of Australian mortgage holders found that 39 per cent of borrowers have stayed with the same lender for the last decade, which totals a staggering 1.17 million households. The value of the extra payments all those households are wasting each year because they haven’t refinanced could be a combined $9.9 billion over the next 30 years. That’s a lot of money going to waste.
Interest rates are currently really low, 30-year mortgage rates are dancing above four per cent, so if your home is financed at a higher rate, it may be a great time for you to consider refinancing. Here are a few things to consider before you do:
1. Know what it will cost to end your current mortgage. It seems like a simple point to make, but some mortgages, particularly fixed rate loans can have expensive break costs. Knowing what it will cost you to break your mortgage is the first thing you need to do because this will become your benchmark. If you’re not going to save more than the break cost – maybe refinancing isn’t right at this time. To find out your cost, ring your bank but beware that they may ring you as they won’t want you to leave, however, why would you stay with a lender if they are not looking after you, their current client, and giving better deals to new clients?
2. Think about the term of your loan and calculate if you can save interest, or have more money in your back pocket each month by lengthening the term, or shortening it. You could just give a quick call to your broker and get them to work out for you what you could potentially save.
3. As a part of refinancing, you should also consider if moving to a fixed interest rate will work for you – your broker will help and advise you if this will work for you.
4. Remember you can refinance more than just your mortgage. Bringing all of your debts together could reduce your monthly fees and streamline your repayments. You’ll have one lump sum leaving your account each month and if you have any questions, you’ve only got one number to call. Think about consolidating your credit card debt, car loans and home loans all into one when looking at refinancing.
Don’t waste any more time, or money, and give your broker a call and let them see what they can do for you.