With interest rates at a record low of 1.75 per cent, now is the best time to make sure that you are getting the best possible deal for your home loan. And one of the best ways to do this is through refinancing.
Refinancing allows you to get a better deal with a new lender or at least negotiate one with your current lender. However, you should not only concentrate on the interest rate, as some low-rate loans come with high fees and charges. Make sure that you get the full picture of the cost of refinancing before committing to one.
Another benefit of refinancing is that it shortens the term of your loan. Low interest rates mean that repayments on a shorter mortgage term are no longer much more expensive than what you are currently paying. Hence, it can also lower your monthly repayments, giving you flexibility especially if your employment or income has changed.
You may also find that with the currently low interest rates, it is better to switch from a variable rate loan to a fixed one, as this will protect you from a potential rise in interest rate in the coming years. It can also help you consolidate your debts and manage short-term debts that have a higher interest rate, like personal loan and credit card debts.
As a rule of thumb, you should complete a home loan "health check" every three years. Borrowers often sign up to a deal at the best time but never follow up over the term of the loan to make sure that they are still getting the most competitive rates, fees, and customer service that they originally signed up for. Refinancing could result in significant savings or new loan features that could reward you with extra peace of mind.
It can be confusing to know whether to get a variable rate or fixed rate mortgage, and what features are important. That's why it's important to not only check the right rates, but make sure that you're getting the right features in your home loan. Get help choosing the right home loan