Despite the financial turbulence of recent months - from the impacts of the summer bushfires to the global economy-altering Coronavirus and the recent RBA rate cuts - there’s a shining light of financial hope for mortgage holders: home loan refinancing. Mozo’s done some digging and found that switching home loan lenders now could provide big returns down the road.
The new Mozo research based on a survey of borrowers has found approximately 81% of Australians have never refinanced their mortgage, despite a switch in home loans potentially saving them up to $100,000. The present financial climate presents an opportune environment in which to refinance, and Mozo’s research has identified how Australian homeowners are missing out on massive savings by not doing so.
Time is money
Borrowers could save more than $100k across the life of their home loan when switching from a bricks-and-mortar bank to a more competitive smaller player.
“The reward for refinancing is high. From the moment you pick up the phone to signing on the dotted line, the average amount of time it takes to refinance is five days. So if you can save $106K over the term of your home loan, it could feel like you’re pocketing $21K a day during the refinancing process,” says Mozo Director Kirsty Lamont.
That’s a savings of around $3,552 per year over the term of a 30-year home loan just for refinancing with a competitive online lender. A rather pretty penny for a few day’s work.
Your home loan is just as important as your new four walls
Despite the prospect of essentially getting an instant cash prize, people are spending next to no time finding the most effective payment plan for this massive financial commitment.
Respondents in Mozo’s survey admitted to spending as little as one-two hours securing a home loan, while dedicating more than 50 hours to trawling through property listings for the perfect new pad. Sure, the latter is essential for meeting your ideal home criteria, but continuously monitoring the financial side of the commitment will benefit you and your loved ones for decades to come, even if sums aren’t your strong suit.
“With almost 300 home loans on offer, it can be overwhelming to find the best mortgage for your needs,” says Lamont. “Mozo has done the leg work through the Mozo Experts Choice Awards, identifying the top low cost lenders in the market.”
Big banks aren’t always best
New things are scary. We get it. But we also get the potential benefits of neobanks and online lenders over some traditional home loan options. Mozo’s research found 65% of Australians would never consider using neobanks and online lenders for a home loan, and 75% have their loans tied to a bricks-and-mortar bank.
Many lenders have passed on the recent RBA rate cuts to customers in full, resulting in record low interest rates for homeowners. According to Mozo’s research, the most competitive interest rate is 2.44% (with last place coming in at 5.60%) for a 80% loan to value ratio home loan. So you best get searching beyond your comfort zone to find the very best deal when refinancing.
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If you’re still squirrelling away funds to save up a tidy deposit for your loan, check out Mozo’s comparisons of savings accounts or term deposits.