The recent hikes in cash rate has resulted in most, if not all lenders passing these costs to their customers.
So if you are thinking of taking these lenders up on their home loan refinance offers (surely you’ve seen quite a handful of these ads lately), you’re not alone – there are more increases on the way, and a lot of Aussie homeowners are thinking about refinance home loan to avoid defaulting on their home loans. Or worse, being forced to sell their homes.
So if you find yourself asking “can I refinance my home loan, and should I do it now?” keep reading to know the answer.
Rising interest rates causing strain on most homeowners
As per the latest Finder survey, one in five of them (over half a million Australians) admit to struggling with their repayments once the rate is increased by 3%.
Out of these demographic, 145,000 said they might have to sell their homes if worse comes to worst.
And just about 65% of them are concerned about defaulting on their home loan payments as a result of the relentless cash rate increase!
Despite the en masse panic, an overwhelming 8.5 out of 10 Australians are not doing anything to cope with these issues.
How much would an interest rate rise cost you?
A whopping 75% of Australians are unaware how a cash rate increase can impact their household budget, which is concerning. To paint you a picture, here’s a real-world scenario using the PLS Loan Repayment Calculator:
If you had a 30-year home loan with a balance of $650,000 and an interest rate of 1.99%, your monthly repayments would be $2,400. But if your interest rate went up to 4.99%, your monthly repayments would increase to $3,486.
That means you’d be paying $1,086 more every month, which adds up to just over $13,032 extra in the first 12 months alone!
If you’re worried about how the rate hike would impact your monthly repayments once your fixed term ends, best to use our mortgage repayment calculator or ask a mortgage broker to help crunch the numbers for you.
Why you should look into home loan refinance NOW
“Why refinance home loan now of all times?”
One good reason to start finding a better refinance home loan offer now is the prospect of paying too much on your monthly mortgage repayments given the successive rate hikes. With the cost of living having drastically gone up and cash rate increases not letting up, you could be backed into a corner financially.
By reviewing your home loan, you can check the competitiveness of your current rate against the future rates and lock in on a rate now that isn’t as bad as it can potentially be months from now.
In addition, refinancing can also improve your financial situation by being able to save hundreds to thousands in monthly repayments alone.
At Professional Lending Solutions, we encourage you to review your home loan annually with a mortgage broker and consider refinancing so you can save as much as 1% in a year. It may not sound like much, but this single percent can translate to thousands of dollars of annual savings!
How does refinance work?
When you refinance, you take out a new loan to pay off your old one. This new loan usually has a lower interest rate, which can save you money in the long run.
Refinancing also gives you the opportunity to switch from a variable interest rate to a fixed interest rate, or vice versa. A variable interest rate will go up and down with the market, while a fixed interest rate will stay the same for the entire life of the loan.
“How much equity do I need to refinance?” If you have equity in your home and are thinking of using it to refinance, make sure you have at least 15%-20% equity built up to avoid paying the lenders mortgage insurance (LMI).
Ask a mortgage broker to find out how much equity you can tap into in your home.
When can you refinance a home loan?
The home loan market is changing significantly, and new, more competitive products are being offered constantly — now is a good time to take advantage of this flux. Another incentive to refinance is the nature of the costs to refinance home loan which are typically low.
Main indicators that let you know when to refinance are:
- When you want to take advantage of ‘new customer’ lending rates
- When your introductory rate or honeymoon rate ends
- When your fixed term period ends
- When your economic circumstances change
- When you want to access equity in your home
- When you want more flexibility in your home loan
How long does it take to refinance a home loan?
This will depend on a few different variables, mostly to do with how long it takes your existing lender to discharge your home loan to your new lender. Some lenders are actually approving loans within 2 hours! On average, the total process will take 2-4 weeks (although, in some cases, it can take up to 6 weeks).
Refinance with a Gold Coast broker from Professional Lending Solutions
If you’re looking to refinance your home loan, NOW is the time to act. It’s important to work with a professional who understands the current lending landscape. At Professional Lending Solutions, our brokers are experts in refinancing who have access to the best refinance home loan rates in the market today.
We will guide you on how to refinance a home loan and the steps involved, and we will help you secure the best home loan refinance deal for your needs.
Let us help you take advantage of current market conditions. Get in touch today to discuss your options.