Give yourself an instant pay rise by refinancing your home loan
With the Reserve Bank of Australia making three cuts to the official cash rate in 2019, and another two in March 2020, home loans rates have been tumbling. So if you haven’t taken a look at your home loan rate in a while, now might be as good a time as ever to take things into your own hands 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.
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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, with a number of home loan interest rates on offer below the 3.00% mark.
To give you an idea of how much switching to a lower rate deal could save you, here’s a quick comparison:
Say your current rate sits at 4.30%, on a $500,000 home loan with 20 years left. According to the Mozo home loan repayments calculator, your current monthly repayments would be $3,110 and the interest you’d pay over the remainder of the loan would be $246,286.
But if you are savvy and switch to a low rate home loan offered exclusively to owner occupiers with, for example, a 2.84% variable interest rate, your repayments would drop down to $2,186 each month and the interest you’d pay over the remainder of the loan would be $124,757.
Monthly pay rise = $924
Pay rise over 20 years = $121,529
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, making both principal and interest repayments. Say your current home loan rate is 4.60%, that means your monthly repayments would currently be $3,190 and the interest you’d pay over the remainder of the loan would be $265,672.
But if you made the switch to, for example, a loan with a 3.98% variable interest rate, your repayments would drop down to $2,420 each month and the interest you’d pay over the remainder of the loan would be $180,730.
Monthly pay rise = $770
Pay rise over 20 years = $84,942
Pay day come early
As you can see, the potential money up for grabs by making the home loan switch is big, sitting at $121,529 for owner occupiers and $84,942 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.
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