Refinancing your home could significantly reduce your monthly mortgage payments. Answer these six questions to find out if now's the right time to consider switching your home loan.
The secret’s out: one of the simplest ways to save on your monthly budget is to shave your home loan interest rate by refinancing, and moving your loan to another lender.
It could save you significantly – a 0.25% decrease on a 25-year home loan of $750,000 could save you $100 per month – and $30,000 over the life of the loan.
But, before you start hunting down the best home loan deals, make sure now is really the right time to refinance – and that you’re doing it for the right reasons. Take our quick quiz to check your best next steps.
1. Are you currently on a variable rate loan, or at the end of your fixed loan period?
Breaking a fixed rate loan can incur fees – it may be better to wait.
2. Do you have more than 20% equity in your home and is your income likely to stay the same (or rise)?
The more equity you have, the more your loan to value ratio (LVR) may have improved. LVR is the amount of your loan, as a percentage against the value of your property, and as it goes down your chance of a better rate goes up.
Not sure how to work out your equity?
Subtract the amount you owe on your home loan from your current estimated property value, and then divide it by your property value. Multiply the answer by 100 to get the percentage.
For example, if you owe $500,000 on your home loan but your property is now worth around $750,000, your equity is (750-500)/750 X 100 = 33.3%.