Re­fi­nanc­ing mort­gage can land you $4000

The Advertiser - - MONEYSAVER­HQ - SO­PHIE ELSWORTH

THE lure of cash­back of­fers by banks is be­ing used to at­tract new cus­tomers but ex­perts say you should crunch the num­bers be­fore rush­ing in to sign up.

Fig­ures from RateCity show there are 11 banks of­fer­ing cash­back deals of up to $4000, and nine of these are on re­fi­nanc­ing deals.

RateCity spokes­woman Sally

Tin­dall said it was “hugely com­pet­i­tive” for banks to at­tract new busi­ness and that’s why many were still of­fer­ing a bag of cash as an in­cen­tive.

“At the mo­ment banks are strug­gling with all these ap­pli­ca­tions for hard­ship and their call cen­tres are jammed,” Ms Tin­dall said.

“A low in­ter­est rate typ­i­cally trumps a cash­back spe­cial most of the time, es­pe­cially in the long run. How­ever, the tide is shift­ing be­cause we are see­ing big­ger amounts of $4000 in cash back be­ing put on the ta­ble by banks.

“Don’t get sucked in by a cash­back deal. Sit down and do the maths. Work out whether you would be bet­ter off with a lower rate loan or tak­ing the cash­back of­fer.”

Project man­ager Court­ney Shaw, 34, and her hus­band David, 35, who works as a scaf­folder, re­cently re­fi­nanced their home loan to save money.

They switched from ANZ to the Bank of Mel­bourne and are wait­ing to re­ceive $4000 cash back, which they will put straight on their loan.

The bank’s cash­back of­fer has since dropped to $2000.

“We’ve tried to smash off as much as we could on the mort­gage,” Ms Shaw said. “We pay at least dou­ble the re­pay­ments each week and are try­ing to get it paid down as quickly as we can.”

She said their last bank “wouldn’t budge” on the in­ter­est rate. They were pre­vi­ously pay­ing a rate of 3.18 per cent and now are pay­ing a vari­able rate of 2.74 per cent.

A re­fi­nanc­ing cash­back deal through West­pac on a $300,000 25-year loan with a vari­able rate of 2.92 per cent would give a bor­rower $2000 cash back and monthly re­pay­ments of $1412.

Com­pared with re­fi­nanc­ing on one of the low­est vari­able rates on the mar­ket at 2.43 per cent with no cash­back of­fer, the West­pac cus­tomer would end up pay­ing an ad­di­tional $4484 in charges within five years if they did not put the cash­back pay­ment straight into their loan.

Home Loan Ex­perts man­ag­ing di­rec­tor Otto Dar­gan said cash­back deals could be a good op­tion but other loans costs must be con­sid­ered.

“Re­fi­nance re­bates are some­times a good deal and some­times not,” he said. “It all de­pends on the cost of the loan, in­clud­ing the rate, fees and de­duct­ing any re­bate over the term that a bor­rower will keep it for, which is usu­ally four years.

“Bor­row­ers should be care­ful with the fine print.”

SWITCHED BANKS: David and Court­ney Shaw, with son Kaiden, 11 months, re­fi­nanced their home loan to get a $4000 cash­back of­fer and a lower in­ter­est rate. Pic­ture: Nicki Con­nolly

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