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A beginner’s guide to refinancing

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When it comes to owning property, it’s important to keep an eye on what you’re paying on your home loan. In some cases, you could find a better deal by refinancing.

Refinancing is about replacing an existing or outdated loan with one which offers better terms.

5 things to know about refinancing

1. Know what you’re paying

Fact: 57% of Aussies don’t know their home loan rate¹.

Stewart Saunders, Bankwest’s General Manager Broker Sales, sat down with us and offered his insights, revealing many Australians have no idea how much interest they’re paying each month.

If you’d like to know more about your home loan and clear up any confusion around your interest rate, a simple talk with your mortgage broker or lender could be worthwhile.

Nearly one in three Aussies don’t know their home loan rate.

Lounge room interior, Bankwest

You’ve got nothing to lose by giving your bank a call to find out your refinancing options. Picture: Getty

2. Make sure you check your rate

Fact: Interest rates have dropped 2.75% since Feb 2012². If your home loan is more than three years old you could be paying too much.

Saunders advises calling your bank to confirm the interest rate you’re paying. You can then check how your rate stacks up against what’s currently available on the market by using an online comparison site or discussing with your local mortgage broker or lender.

Home loans are not like normal purchases where the purchase price covers the life of the product. Rather, the rate of a home loan at the time of buying your property may change and become less competitive. Particularly during periods of strong competition, banks have attractive rates and offers to entice customers to switch across. This is why it’s a good idea to review your home loan every few years.

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“If you’re on a variable rate mortgage during a time of interest rate drops, you can ask your bank for a better rate,” Saunders says.

You’ve got nothing to lose by giving your bank a call to find out your options.

If your home loan is more than three years old you could be paying too much.

3. Consider changing lenders

Fact: 20.9% of consumers are dissatisfied with their current lender³.

Of the 67% of households that own their home, many could be on a better deal4. “With the variety of home loan options available today, many people may find a loan better suited to their needs and lifestyle, although it may mean switching mortgage broker or lenders,” Saunders says.

If you’re on a fixed rate home loan, be sure to check with your bank before switching to a new loan. While lenders aren’t allowed to charge an exit fee on home loans taken out after 30 June 20115, you may still be liable for break fees and early repayment costs for fixed rate loans.

House exterior Mosman, Bankwest

Of the 67% of households that own their home, many could be on a better deal. Picture: Kate Griffin

4. Keep things simple

Fact: Many lenders will be happy to come to you to talk through options.

Even if you’re short on time, searching for the perfect home loan deal doesn’t have to be painful or time-consuming.

Many lenders are happy to come to you at your home or office at a time that suits you – even on weekends. They’ll help you with all the necessary paperwork, too.

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5. Know the fees

Fact: Paying fees on your home loan is fine, as long as you’re getting the best deal overall.

Not all home loan products are created equal, says Saunders. Determining which home loan and features are right for you depends on your goals, your lifestyle, and your needs.

It’s always a good idea to speak to your lender to explore whether you’re getting the best deal.

“For instance, if you have an owner-occupied property with a plan to renovate, you may find that your ideal home loan is very different than to a couple who are planning to start a family and need the security of knowing exactly what their repayments are going to be.

“Whatever your situation, it’s always a good idea to speak to your mortgage broker lender to explore whether you’re getting the best deal.”

¹Source: RFi Group, September 2016, Do you know the interest rate that you’re currently paying on your most recent loan? Base: Mortgage holders (n): 2,011.

²Source: RBA Cash Rate, .

³Source: Roy Morgan, Single Source survey of 50,000+ people pa, September 26 2016. .

4Source: Australian Bureau of Statistics, , July 2013. Base: Australian households that own their own home, with or without a mortgage, based on the 2011 Census.

5Source: ASIC’s MoneySmart, , August 2015.

Source: http://www.realestate.com.au/advice/beginners-guide-to-refinancing/