Most borrowers switch loans because they’ve found a better interest rate. It’s pretty straightforward: the lower the interest rate, the lower your repayments will generally be, leaving more money in your pocket to pay the bills, plan a holiday or save up for a big-ticket item.
If you can access a lower interest rate but keep your repayments the same as before, you could pay down your home loan quicker. Now could be a good time to make a switch.
There’s more to a mortgage than the rate. Today’s loans range from the basic to the highly tailored, with extras and options to help you save as much money as you can over the years or have more flexibility with how you pay your mortgage. Generally, extra features and options attract a higher interest rate and fees than a basic mortgage product.
More bells and whistles:
A simpler loan
Your current loan might have a variety of features you’re paying for, but not using, such as an offset account. Our Basic Home Loan has minimal fees but still lets you get ahead. It allows you to make unlimited extra repayments and allows you to redraw those funds should you need some extra cash later.
Can you access much of the equity in your home? Home equity is the difference between your property’s current market value and what you still owe on your current home loan. So, if you have a home valued at $800,000 and a mortgage balance of $500,000, you have $300,000 equity in your home. If your new home loan allows you to borrow up to 80% of your home’s value ($640,000), your usable equity is $140,000 (total equity of $640,000 minus the $500,000 you owe on your mortgage).
So that’s $140,000 you could use. Maybe you want to renovate, study full-time, take a sabbatical or write a No. 1 bestseller.
Refinancing could also be a good opportunity to consolidate any debts you have – such as personal loans, car loans and credit cards – into a new home loan with a lower interest rate. Not only can you save on interest, your finances may also be easier to manage under the one repayment.
Just keep in mind that you don’t want to stretch short-term debts over 25 or 30 years, so you might want to make some extra home loan repayments to wipe off that debt quickly.
Switching is easier than it used to be
If you bought your home a while ago, you’ll be pleased to learn that the introduction of online applications allow you to go at your own pace. Some lenders, like St.George, can even offer refinance approval in a matter of days, depending on the borrower’s situation. They’ll also do a lot of the work for you: settle your new loan and discharge you from your old one by paying the balance with your new loan funds, including any fees and break costs. They’ll even shift the property title from the old loan to your new loan.
As with everything money-related, you have to weigh up the pros and cons. Here are some things to consider:
So, all food for thought. Do a little refi-research and some robust comparison and then you could be on your way to paying off your home sooner.
A home loan expert will call you once you have submitted your application to talk through next steps.
Any recommendation made in this article does not take your objectives, financial situation or needs into account. Read the terms and conditions before making a decision if the product is right for you. Subject to St.George's approval. Conditions, credit criteria, fees and charges apply, credit provided by St.George.
LVR stands for the initial loan to value ratio at loan approval. LVR is the amount of your loan compared to the Bank’s valuation of your property offered to secure your loan expressed as a percentage. Home loan rates for new loans are set based on the initial LVR and don’t change because of changes to the LVR during the life of the loan.
Advantage Package Terms and Conditions apply. A $395 annual package fee applies and is payable from an eligible St.George transaction account. An Advantage Package discount has been included in the advertised eligible rate. The discount and fee savings apply for the duration of the package. Before deciding to acquire a St.George transaction account, read the terms and conditions, and consider if the product is right for you.