When should you refinance your home loan?

It’s pretty motivating, hearing your workmate tell you how great his newly reduced home loan repayments are.  Old mate is feeling empowered by his decision to refinance – something you’ve never done.  What’s it about and how do you access it?

I see this every day, and it is way simpler than people first think.  You can go to your existing lender and ask them for a reduced rate, as you are thinking about reassessing your home loan.  That usually works in your favour; but if it doesn’t, call a broker.

What can a broker do? An example is a lovely guy Greg, who does hard graft on drill sites in the middle of nowhere.  A bloke on site told him that the bank refused him an interest rate reduction, even though his loan was way dearer than what he saw on the news.  Feeling a bit ill-equipped, Greg went back to camp wondering why, and whether his bank would send him packing too.  Not the best feeling…  they worked too hard.

FIFO boys & girls might earn well but it’s far from sunshine & rainbows out there.

Greg (yes that’s his name) was indeed motivated to learn more.  I explained that no bank is obliged to keep looking after him year after year but, as a broker, I am.  I will watch his home loan regularly and let him know if and when he can do better. I pick out the best options and let Greg choose his move: stay or leave.  I do the rest.

Greg felt a bit stranded and also surprised to hear that he was probably paying a loyalty tax, a term that describes the lack of enthusiasm that lenders can have for longstanding, loyal customers.  It’s not an actual tax, but Greg got the drift.  Banks fall over backwards for new customers and seem to sometimes forget you as your loan ticks along.  It’s up to you to keep them on their toes, and we help banking customers do just that. 

When is it right to refinance?  When the value of your property increases, or your loan decreases, when interest rates drop, or when your credit score improves.  Maybe your circumstances require a fixed, interest-only period, or you need some cash out to buy another property without digging into your hip pocket?

The recommendations we give you are in your best interest, so we outline exit fees and any conditions on your current loan which might mean you should stay exactly where you are.  We’re here to read the fine print.

Greg’s recommendations will be in his email box tomorrow when I’ve tidied up the proposal document, and he is going to save at least $180/week and have a shorter loan term than before, which will save him tons of money.  He works away, so every hour he misses his teenage boys has to be worth it.  He just refuses to work away and not take advantage of every opportunity to tuck money away for retirement in 15 years’ time.  He said, “life’s too short”. I’m with Greg. It’s very hard to earn, so spend it wisely. Time to refinance.