A lot has happened in 2020 to make many people feel uncertain about their finances. The COVID-19 global pandemic has wreaked havoc in many more ways than just healthcare. With Australia falling into its first recession in 29 years, in addition to job uncertainty and the biggest stock market crash since 1987, people are determined to save money in as many ways as they can. Refinancing your mortgage can be a great way to save money and with interest rates at an all-time low, now is the time to look at refinancing!
Record Low Interest Rates
With the official Reserve Bank of Australia’s cash rate sitting at a record low of 0.1%, there’s never been a better time to go looking for a great interest rate for your mortgage. If you haven’t refinanced in the last six months, you might be shocked to learn that interest rates have taken a considerable dive since then. It’s currently possible to find interest rates at just below 2% whereas last year some were sitting at close to 4%. A rate drop of this magnitude could potentially save you tens of thousands of dollars each year. Locking in a low rate now can ensure you reap the benefits into the future.
Save Money by Consolidating Your Debts
If you have multiple personal loans and credit cards, combining all of your finance into a debt consolidating mortgage could be the answer to reduce your repayments. Rather than paying off multiple loans at high interest rates, you can pay one monthly repayment at a much cheaper rate. With home loan rates at an all-time low, now is the perfect time to look at refinancing and consolidate your debt.
Be sure to seek advice before you jump into this one though as it’s possible to get the structuring wrong which could see you paying more than you would’ve before consolidating — this is because you could be changing short-term debt into long-term debt. The interest rate might be lower, but increasing the term of the loan could end up costing you more interest over the long run. But don’t let that scare you off! Speak to us if you think a debt consolidation home loan might be right for you.
Times are changing and so are Your Mortgage Needs
With the change in lifestyle and economic challenges we’ve faced, your cashflow needs might be completely different now to what they were last year. Adjusting your mortgage to suit your needs works well to manage your cashflow.
Refinancing your home loan allows you to choose features that suit your current needs.
- Fixed-rate. If a predictable, easy-to-budget repayment amount is what you’re looking for, then a fixed rate might be right for you. Keep in mind that generally, you aren’t able to make substantial extra repayments or use a full offset account or redraw facility when you lock in a fixed rate. When you lock in a rate, any equity in your loan is locked in too.
- Variable-rate. If you’re after features like an offset account or redraw facility, then you might need to choose a variable rate. These features mean that you can freely withdraw any equity you have available to meet your cashflow needs. Variable rates let you take advantage of rate cuts, but you need to increase your repayment amount when rates rise. The RBA’s cash rate is unlikely to drop any further — and at 0.10% it certainly doesn’t have much room to get any lower — so it’s a good idea to keep in mind that eventually, the interest will be going back up.
Use Your Free Time to Refinance
Thanks to coronavirus, we’ve been working from home, lost working hours and had social restrictions clear our calendars for months. If you have been searching for the right moment to reassess your mortgage, now is time to look at refinancing. It is starting to become business as usual again regarding life and everyone is too busy to think about assessing their mortgage so get in quick.
If you’re wondering how refinancing can help you, we are more than happy to assist! Please call or email us, and we can make sure you have the best home loan to suit your needs.
Disclaimer: This information is general advice only. If anything is taken from this article, it is at the reader’s own discretion, and KISS Solutions Pty Ltd trading as Jannar Financial Group takes no responsibility for any potential consequences from writing this article as any decision made to proceed with a finance application is at the client’s own risk.