In a market of record-low interest rates, when banks are flirting with us to refinance and switch lenders, borrowers need to weigh up all the options to make sure they are getting the best deal, so that they can get the most out of the refinance and not just be tempted by short-term incentives on offer. Investors and owner-occupiers obviously want the best (lowest) rates; but currently new borrowers are getting sweeter deals. However, rates are just one part of the puzzle.
In a market that is difficult to predict due to global factors, and likewise our own personal lives can be challenging to plan as we live in unprecedented uncertain times; we need to make the most of the opportunities presented and make the benefits count both now and into the future.
There are many things to consider: what’s the cost of leaving one bank? What’s the cost of entry to another? Are there hidden charges? Are you sacrificing the long term for the short term? Will it cost you if you decide to sell or refinance again down the track, and if so, how much? All these questions can be easily answered when a skilled lending professional reviews your existing facilities.
The first thing a competent adviser will do is review your existing loans and compare them to what is currently on offer from all the lenders, then complete a cost-benefit analysis that takes not just the fiscal facts into account but also your short and longer-term financial goals. It may be preferable to negotiate with your existing bank or fix some (or all) of your current loan; or it may be preferable to move lenders to make the most of the current competitive lending conditions. And until you have that discussion and review, you really don’t know. Learn more here.
If you already have a financial adviser or mortgage broker, you probably already know that you may want to act soon to consider locking in some of your lending at these record low rates. Your adviser or broker can also push your existing lender to match competitor rates – the rates they are willing to offer can depend on factors such as your overall lending amount, the loan-to-valuation ratio (the debt compared to the value of the property), your repayment type and whether the loan is for owner occupied or investment use. If your existing lender still isn’t looking too competitive, it may be worth switching to a new lender. However, when switching, don’t just focus on the lowest rates – depending on your needs, you may also benefit from a loan package that can offer multiple offset account linking, multiple loan splits, a fee-free credit card that earns you points (as long as you pay if off each month!), low ongoing fees and future changes to your loans at no additional cost.
There are certainly costs in refinancing your loans, such as discharge, application, and government fees, however depending on the lender, you may be eligible for a refinance rebate or cash back – these can often exceed the cost of refinancing. And if you are in a fixed loan thinking that refinancing is not an option for you due to hefty break costs, it’s still worth reviewing your options – you may find, even after break costs, that you are still better off overall, and the savings from the refinance can recoup the break costs in a relatively short period of time.
The financial landscape is ever-changing, and there’s no such thing as a set-and-forget strategy when it comes to getting the best long-term financial outcomes. It’s important to review your lending strategy at least annually, and there’s no better time than right now to make the most of the current competitive loan environment and access some very low interest rates. However, there may also be some opportunities to restructure your loans to really optimise your strategy, and having expert advice on getting this right can reap massive rewards. When opportunity knocks, you need to answer!
