If you’ve already bought your dream home, but you didn’t get your dream home loan, it might be time to refinance.
One of the most commons reasons why people refinance is to save on loan costs.
While refinancing isn’t free, it can save you money in the long run if you switch to a home loan with a lower interest rate.
Interest rates can significantly affect your monthly repayments. Refinancing to a home loan with a lower rate could potentially leave you with more disposable income every month or, if you’re an investor, improve your monthly cash flow.
What might sound like a small reduction in your interest rate can often prove to have a dramatic impact on your home loan, especially when considering the long-term savings.
To show what impact minor changes can make, let’s consider three home loans all with a balance of $400,000 over 30 years. But borrower A is on a 3 per cent interest rate, borrower B is on 2.75 per cent and borrower C is on 2.5 per cent.
Disregarding fees for the sake of example, borrower A, which is the most expensive loan, is paying $648 more than borrower B every year and $1,272 more than borrower C annually.
|Interest rate||Monthly repayments||Monthly savings compared with borrower A||Annual savings compared with borrower A|
It’s best to consider various home loan options before switching mortgages.
As well as a better interest rate, you might also be looking for lower or no ongoing fees attached to your mortgage. This can also save you money in the long run.
Additionally, refinancing may give you access to features you didn’t have previously.
But make sure the new lender you choose is the right lender for you, as if you change your mind, you’ll need to undertake the entire refinance process again, which means paying all the relevant fees.
Here are five refinancing home loans that can put money back in your pocket.