After more than 2 months stuck at home, you’ve probably put a lot of time to good use; whether it’s clearing out the storage, catching up on Netflix series, or perhaps you just developed a new routine of daily activities whilst staying at home.
Refinancing might be the last thing on your mind with everything that’s happening, but here are five solid reasons why it should be considered now than later.
1. You can (most likely).
Since you moved into your new home recently you might not even be aware you could refinance now. Predominantly many home loans are refinanced with the intention to save money, the timing could be better than ever.
However, while that sounds too good to be true, the decision made by your bank or lender will be based on your eligibility for refinancing. So, for a lot of Australians facing job loss or reduced hours, now may not be the best time. But if you have seen minimal impact financially from COVID-19, it’s worth a look to take advantage of record low-interest rates.
2. Lockdown the low rate.
In 1989-1990 (when the original Full House was airing – you probably ‘never saw that’ either), home loan interest rates hit an all-time high at 17% p.a.
At this point in time, the RBA interest rates are at the lowest they’ve been in 60 years, at just 0.25% p.a.
There is no doubt that COVID-19 has delivered a serious financial blow to many homeowners, however, now could be the time to take advantage of the lowest rates in Australia’s recorded history and start saving big or starting to pay off the loan sooner.
3. Help with cash flow.
It is a pretty unpredictable time financially, and while a few months off expensive shopping spree, fine dining out and new threads to show off have helped, there are always other ways to keep on track.
Perhaps you’d like to release some equity to have some cash on standby? You may continue the lockdown into renovation mode. Plus, domestic and international flights will reopen in the future and if anyone deserves a holiday in 2020, it’s absolutely everyone.
Or you could be wanting to consolidate your debts into your home loan, reducing your repayments and likely interest on credit cards or personal loans.
Speaking of cash, current cashback offers from lenders can be tempting – but be careful of low-hanging fruit and take into account other factors like ongoing rate, reputation and even customer service.
4. Make sure you’re on the right loan for you.
You’ve probably stumbled upon enough dating reality shows recently to know that not everything’s a perfect fit – and the same goes with you and home loans.
You could be on a variable loan and want to take advantage of the current low fixed rate.
You may want to access different features or flexibilities of a loan that you currently can’t, such as extra repayments without penalty. Or your bank or lender just isn’t delivering you the way you deserve. Whatever your reason, it may be time to make the move to a different home loan to best suit your needs.
5. You’ve never refinanced – or haven’t in a long time.
If you’ve had a home loan for a while and never refinanced, turn off Netflix immediately. Because studies show 58% of Australians spend about the same time watching an episode of their favourite show as they do inspecting a property. And if you're putting that little effort into finding your next dream home or investment, imagine how little you're putting into choosing your loan. Refinancing and saving thousands could even be done on the couch when you’re not in charge of the remote.
The five reasons above are all worthy considerations, but the main one is just to make sure you’re not being taken for a ride. It quite literally pays to look around. Turns out all that time locked down at home might’ve been the perfect time to start saving on it?
Please be aware that you should always consider getting a mortgage or financial advice first and be aware of the potential downsides and risks. Talk to your finance broker for a full list of potential risks, obligation-free health check, and rewards.
This article is prepared based on general information. It does not take into account individual financial objectives or needs and is not financial product advice. (ME Share feed online at https://www.mebank.com.au/the-feed/5-reasons-why-now-could-be-the-time-to-refinance/ (15/06/2020).