Give yourself an instant pay rise by refinancing
2% seems to be the lucky number for the Reserve Bank of Australia, since they’ve left the official cash rate steady since May this year. But there is talk of rate rises in the future, in fact some big banks are already increasing their rates. So you could take things into your own hands now and make payday come early by switching to a better home loan deal.
Refinancing to a home loan with a lower interest rate attached will not only lower the interest you pay, thus freeing up extra cash, but will also reduce your home loan repayments making budgeting in the lead up to Christmas (and the Christmases every year after) a much easier feat.
Read on to see how much you could potentially pocket by making the home loan switch:
Are you an owner occupier?
If you answered “yes” the good news is lenders are vying for your business, as they attempt to reduce their investor loan portfolios, whilst increasing their owner occupier books. As a result there are a handful of providers offering rates below the 4% mark.
To give you an idea of how much switching to one of these low rate deals could save you, here’s a quick comparison:
Say your current home loan has the average big four rate for owner occupiers of 4.67%, on a $500,000 home loan with 20 years left your monthly repayments would be $3,209 and the interest you’d pay over the remainder of the loan would be $270,235.
But if you are savvy and switch to a low rate home loan offered exclusively to owner occupiers like UBank’s UHomeLoan - Spring Offer with a 3.99% variable interest rate, your repayments would drop down to $3,027 each month and the interest you’d pay over the remainder of the loan would be $226,544.
Monthly pay rise = $173
Pay rise over 20 years = $43,691
Are you an investor?
While the best deals are currently reserved for owner occupier borrowers, if you’re an investor that has felt the bite of your current home loan rate increasing, huge savings could be made by switching. Just check out the below scenario:
To keep things consistent let’s use the same example as above of a $500,000 home loan paid back over 20 years. If your current home loan rate is 4.88%, which by the way is the average big four rate for investors, your monthly repayments would be $3,267 and the interest you’d pay over the remainder of the loan would be $284,014.
But if you made the switch to online lender Click Loan’s The Online Home Loan, available to both owner occupiers and investors with a 4.09% variable interest rate, your repayments would drop down to $3,054 each month and the interest you’d pay over the remainder of the loan would be $232,880.
Monthly pay rise = $213
Pay rise over 20 years = $51,134
Pay day come early
As you can see, the potential money up for grabs by making the home loan switch is big, sitting at $43,691 for owner occupiers and $51,134 for investors.
It just goes to show, even though providers are targeting owner occupiers with the most competitive deals, because the average big four rate at the moment is significantly higher for investors than owner occupiers the potential savings for an investor refinancing from a major is greater too.
And when you consider switching home loans only takes a few short hours, we’d say that is time well spent and a quick way of giving yourself an instant pay rise.
Of course, that’s just two scenarios of the potential savings that could be made. Punch in your details into our home loan comparison calculator to see how much you could save by making the switch.
*Rates correct 14 October 2015