Recent interest rate cuts by the Reserve Bank have opened a window of opportunity
for homeowners who are eagerly reassessing their mortgage arrangements. With a
reduced cost of borrowing, refinancing could bring immediate financial relief due to
lower repayments and substantial long-term savings for homeowners. According to
Jaime Pratt, Head of PM at VPM, these rate changes are also set to energise the
housing market, stimulating both buyer confidence and demand.
Here is why refinancing could be worth considering.
Lower interest rates
As lenders respond to market shifts, refinancing presents a great opportunity to lock
in better terms. “Securing a reduced rate not only lightens your monthly financial
commitment but also significantly reduces the total interest payable across the length
of your loan term,” Jaime says.
Debt consolidation
Rolling multiple debts, such as credit cards or personal loans, into a home loan can
simplify repayments. “Home loan rates are generally lower than other forms of credit
or other loans,” Jaime advises. “By consolidating your debts, you could essentially
reduce your overall interest costs, especially if your repayments increase.”
Jaime warns that there are also some things to remember if you’re considering refinancing. These include:
Processing times
Despite promises of swift approvals from lenders, you can still face unexpected
hurdles. Jaime suggests considering using the services of a mortgage broker.
“They’ll not only help manage the process but also guide you through any potential
delays and can usually speed up your refinancing.”
Introductory offers
It’s tempting to jump at a great introductory offer when refinancing without thinking it
through properly. Jaime says to remember that these rates will increase after the
honeymoon period, so it’s important to understand the full loan terms to ensure you
can manage the new repayments.
Lenders fees
It’s all well and good if you find you’re able to make a lump sum payment or pay off
your loan early, but just be aware that some lenders charge exit fees or early
repayment costs. Jaime recommends doing your due diligence before refinancing if
you think you might make an early payout. This will ensure the financial benefits
outweigh any associated costs.
Unnecessary loan features
Options like offset accounts or redraw facilities can be helpful, but may come with
additional fees. It’s worth reviewing which features align with your needs to avoid
unnecessary costs.
The current property market
Lower borrowing costs often entice more buyers into the market, and in turn, this can
drive up property prices. First-home buyers and investors may face increased
competition, making it important to act strategically when purchasing.
If you’re considering refinancing and want to understand how the market is shifting,
contact our experienced team at VPM. With careful consideration and professional
advice, we’ll help ensure your new loan aligns with your individual goals and
circumstances.
