WHILE always a worthwhile consideration for mortgage holders, refinancing has become even more attractive in recent months in light of the fierce competition between lenders to grow their market share.
"There's no doubt that there are some great offers currently available, which make refinancing more appealing for a larger number of people with a home or investment loan," says Smartline Personal Mortgage Adviser Karen Le Comte.
Interest rates are a key focus for many people. While the RBA has announced a cut to the cash rate in November, lenders have been lowering their fixed home loan rates for the past couple of months.
"While much of the public and media focus has been on the RBA's deliberations each month, fixed home loan rates have been considerably reduced of late and are now significantly lower than variable rates, making them extremely attractive for those suited to a fixed home loan," she said.
"In the current environment it's not uncommon to see fixed rates that are at least 0.5 per cent lower than a good variable rate, which equates to a saving of about $1500 per year on a $300,000 loan."
"In light of this, a good strategy for an owner-occupier might be to split the loan. For example, clients can choose to fix part of the loan to capitalise on the great interest rate and know what future repayments will be for a set term, and put the other portion into a variable loan which offers the flexibility of additional repayments, redraw or offset, and the like."
"For investors looking for certainty with managing their property's cash flow, it may be a good option to consider fixing the entire loan."
"Some lenders are also prepared to significantly reduce their interest rate to attract customers with large loans. It's not unusual to see a reduction of a full one per cent on the standard variable rate for a large loan, say $500,000-plus, where previously they might have offered a 0.7 per cent reduction."
Smartline's Jillian Clifford adds that those clients who are currently on a fixed rate should check with their mortgage adviser before looking for a new loan. Refinancing is still worth investigating, but it may be that the costs of breaking out of the fixed loan negate all the benefits and it may be best to wait until the fixed term is up.
"For those not in a fixed loan, all in all, it makes for a pretty compelling argument ? a good interest rate, no upfront costs and in some cases, fees to leave your existing lender paid for by your new lender," she said. "It removes many of the barriers to refinancing."
Jillian stressed that those considering refinancing shouldn't be focused just on the interest rate.
"You need to do your numbers carefully to ensure that refinancing will improve your overall financial position for the long-term. That's why working with a mortgage adviser will ensure that you make the move for the right reasons and that you fully maximise the associated benefits."
For more information, contact Smartline Cleveland's Karen Le Comte and Jillian Clifford on 3821 2539; website www.smartline.com.au/cleveland; address Suite 2, 20 Masthead Drive, Cleveland.
(Smartline and their representative have made every effort to ensure that the information is free from error, neither Smartline nor its representative makes any representation or warranty as to the completeness or accuracy.) Readers must decide if this information is suitable for their personal situation or seek advice.)
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