Enormous numbers of borrowers are refinancing their home loans according to the latest data from the Australian Bureau of Statistics.
Australians refinanced $17.8 billion of mortgages in October. This is not far off the record $18.6 billion of refinancing that occurred in August. It just shows that the past six months have been the six biggest months in refinancing history.
Owner-occupiers who took out new variable loans in October were charged an average of 0.51 percentage points less than owner-occupiers with existing loans.
The Reserve Bank data shows that there are several reasons why borrowers are refinancing their home loans.
One of the reasons is that borrowers want to take advantage of the lower interest rates that lenders charge to new borrowers compared to loyal customers.
Another reason why borrowers are refinancing their home loans is to access their home equity via a cash-out. This is equally important, especially from an investment point of view. Borrowers can use the cash-out to buy shares or fund a rental property.
Refinancing to a comparable lower-rate loan could potentially save you tens of thousands of dollars over the life of your loan. However, it is important to seek guidance and do your research first to ensure you end up saving more money. It is worth noting that there are related fees when you refinance.
One of these fees is the Lender’s Mortgage Insurance. The bank will put up an LMI if your home equity is less than 20%, which can be quite expensive.
If you are looking to refinance your existing home loan to save more money with lower repayments, please contact us and I’d be happy to explain the pros and cons of refinancing, and to crunch the numbers to see how much you might be able to save by switching loans.