Do you want to change your house loan The Australian Securities and Investments Commission’s (ASIC) top refinancing tips are listed here

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We've noticed a significant rise in homeowners wishing to refinance this year, thanks to historically low interest rates. So, this week, we'll take a look at some of ASIC's best refinancing recommendations, as well as a few of our own for good measure.

A growing number of borrowers are looking for a better bargain on their mortgage.

According to ABS data, the overall number of consumers switching home loan providers climbed by 27% last year, from 143,664 in 2019 to 182,016 in 2020.

In 2021, an additional 200,000 Australian families are likely to change lenders and start saving.

There is, however, a difference between switching lenders the wrong manner and switching lenders the correct way.

Fortunately, ASIC’s Senior Executive Leader Consumer Insights and Communication, Laura Higgins, recently gave some helpful advice with ABC radio, which we’ve compiled for you below.

1. Check with your existing lender to see if you can get a better deal.

The problem with huge banks and house loans is that customer loyalty is rarely rewarded.

In fact, the RBA discovered that borrowers were charged an average of 40 basis points greater interest on loans signed four years ago than on new loans.

For a $250,000 loan, this may result in an extra $1,000 in interest payments every year.

“New clients are frequently offered better deals than existing borrowers,” Ms Higgins continues, “so if you have a home loan that is a few years old, you might possibly get a better deal that saves you thousands of dollars over time.”

“Even if you’re happy with your existing lender, double-check that you’re not overpaying for products or add-ons you don’t need.”

2. Do the arithmetic before jumping at the easy money.

There are numerous incentives available to urge you to transfer mortgages sooner rather than later, such as cashback offers or extremely low interest rates.

Ms Higgins, on the other hand, advises borrowers to compare these offers to the long-term costs.

“For example, when considering other parts of the loan, such as interest rates and fees, it’s worth doing the math to ensure that a cashback deal still puts you ahead in the long run,” she notes.

“If you transfer lenders, you may end up with a loan that is for a longer period of time.

It’s also worth thinking about whether you’ll have to pay for lender mortgage insurance or other expenses like discharge and loan arrangement fees.

“The benefit of a reduced interest rate may be outweighed by these additional costs,” she adds.

“A mortgage broker can also assist you in comparing loans and deciding whether or not to switch,” says the author.

If we do say so ourselves, this is really true!

3. Consider switching to a redraw facility or an offset account.

Due to the low interest rates, many borrowers are attempting to pay off their mortgage faster by making additional payments.

“Interest rates may be low right now, but they won’t stay that way indefinitely.” Making extra payments now can help clients in the long run, according to Ms Higgins.

If you’re concerned about locking up all of your money in your mortgage, try moving to a mortgage redraw facility or an offset account, which allows you to make extra payments while also allowing you to withdraw them if necessary.

“Depending on your goals, either of these options might work for you,” Ms Higgins adds.

“Not all house loans can be linked to an offset account, and those that can often come with a fee or a little higher interest rate, so make sure you’d be saving enough to justify any additional charges.”

4. Is it better to fix the rate or not? Or perhaps both?

Last but not least, here’s a refinancing suggestion that we think is worth exploring in this era of historically low interest rates (which won’t last forever).

When it comes to refinancing, one of the most typical ‘major choice’ concerns we get is: should I adjust my home loan rate or not?

But did you know there’s a third option?

You can lock the rate on some, but not all, of your mortgage.

This allows you to lock in a low rate for a period of your mortgage while still enjoying some of the benefits of a variable rate, such as the potential to make large additional payments.

Get in touch with us immediately if you’d like to learn more about it – or any of the other refinancing advice in this post.

We’d be pleased to assist you with refinancing your house loan, whether it’s renegotiating with your present lender or looking into other choices.

To learn more, contact Premium Finance Group Australia at (07) 4720 8888 or email us at finance@pfga.com.au

Disclaimer: The content of this article is general and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your situation and may not be relevant to circumstances. Before taking any action, consider your particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced, or republished without prior written consent.

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