Five ways to a bet­ter deal

Central Telegraph - - REAL ESTATE | INDUSTRY NEWS -

HOME loan cus­tomers look­ing to re­fi­nance to snare a bet­ter deal need to con­sider five im­por­tant fac­tors be­fore jump­ing ship.

The Re­serve Bank of Aus­tralia board had kept the cash rate on hold at 1.5 per cent – it hasn’t moved since Au­gust 2016 – but it shouldn’t stop bor­row­ers from snif­fling out bet­ter deals.

Here are five things to con­sider be­fore sign­ing the dot­ted line with an­other fi­nan­cial in­sti­tu­tion.

1. Check your rate

Check to see what in­ter­est rate you are pay­ing.

New data from fi­nan­cial ser­vices firm Canstar shows 45 per cent of bor­row­ers have no idea what home loan rate they are pay­ing.

Fi­nan­cial com­par­i­son web­site RateCity’s spokes­woman Sally Tin­dall said there were plenty of ra­zor-sharp deals avail­able and lenders were hun­gry for new cus­tomers.

“For an owner-oc­cu­pier cus­tomer pay­ing prin­ci­pal and in­ter­est they should be aim­ing for an in­ter­est rate un­der 3.8 per cent,” she said.

“Find rates that are lower and more com­pet­i­tive.”

RateCity’s data­base found the cheap­est in­ter­est rate avail­able is by Re­duce Home Loans at just 3.44 per cent.

2. Are you on a fixed rate?

If you’re locked into a fixed rate home loan your bank will be happy with that – it’s much harder and more ex­pen­sive for you to switch.

But if you do de­cide to jump lenders and you’re locked into a fixed rate you’ll be hit with charges in­clud­ing break­ing costs.

You need to find out what these are and whether it’s worth mov­ing lenders.

3. Fees

Once your lender gets wind that you’re mov­ing to an­other fi­nan­cial in­sti­tu­tion there’s a very good chance they’ll try and talk you out of it. They don’t want to lose ex­ist­ing cus­tomers. This is when they reel off all the nasty fees that come with re­fi­nanc­ing, in­clud­ing dis­charge fees, break costs and up­front fees with the new lender, just to name a few.

Ms Tin­dall said it was up to you to do the maths.

“Sit down and crunch the num­bers, work­ing out the dif­fer­ence in the rate and the fees, be­cause there’s no point re­fi­nanc­ing if it’s go­ing to send you back­wards.”

4. Get help

For some bor­row­ers this may all sound too hard, so don’t be afraid to ask for a help­ing hand.

Home Loan Ex­perts manag­ing di­rec­tor Otto Dar­gan said en­gag­ing a mort­gage bro­ker could cut down the grunt work.

“Home loans are far more com­plex than they used to be,” Mr Dar­gan said.

“Mort­gage bro­kers are great at iden­ti­fy­ing your spe­cific needs and long-term ob­jec­tives and then rec­om­mend­ing a small num­ber of loans that suit your needs.

“There’s literally thou­sands of prod­ucts out there and many have hid­den catches that bor­row­ers aren’t aware of.”

5. Loan term

When most bor­row­ers sign up to a mort­gage, it’s usu­ally for a 30-year term.

But when you’re re­fi­nanc­ing there’s a good chance you’re al­ready a few years into the loan term and have made some good head­way.

So Mr Dar­gan said when re­fi­nanc­ing, “con­sider hav­ing a shorter term than the stan­dard 30 years”.

“Oth­er­wise each time you re­fi­nance you ex­tend your loan out,” he said.

He also sug­gested an­other al­ter­na­tive – tak­ing out a 30-year loan term but in­creas­ing your re­pay­ments so you pay off the debt more quickly.

PHOTO: JACOBLUND

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