Tricks to refinancing and saving instantly on your mortgage
Savvy borrowers who hunt down a cheaper interest rate deal can put hundreds extra back into their own pockets, a new analysis shows.
Many lenders are offering owner-occupier deals starting with a "2" but those paying rates with a "3" in front could be dudding themselves significant savings.
New figures from financial services firm Canstar show customers paying a rate of 3.5 per cent on a $300,000 30-year mortgage will outlay $1347 a month.
But their repayments could drop by $122 per month if they sign up to a rate of just 2.75 per cent, which is offered by many lenders.
While hundreds of thousands of borrowers have requested home loan repayment holidays from their bank, many others can cut their costs by picking up the phone and talking to their bank or engaging a professional.
Canstar spokeswoman Effie Zahos said refinancing or renegotiating your deal could save you a packet instantly.
"Some people don't have a choice and will need to pause their repayments, but if your position allows you to refinance it may be the best way to inject some cash back into your pocket every month," she said.
"Most people have a package rate with a major bank at an average of 3.6 per cent but by moving to the lowest variable rate of 2.39 per cent it's an instant saving of $196 each month."
The Mortgage and Finance Association of Australia's chief executive officer, Mike Felton, said while there were plenty of enticing deals out there it "had become harder to refinance".
"There's some exceptionally attractive variable and fixed rates but they are certainly not available to everybody because people are affected differently under COVID," he said.
"However, if you have largely not been impacted it's a tremendous opportunity to take advantage of some of these rates."
Mr Felton said borrowers do not always have to switch banks to get the best deal: ring your existing bank and talk options.
Finsure managing director John Kolenda, who manages companies including 1300HomeLoan, said he had seen a surge in people refinancing in April and expected this to continue as people hunted for cheaper deals.
"Some owner-occupiers are paying rates in the 3 per cent range but they can get much less than this," he said.
"There's a large difference in what existing customers are paying and what's being offered by lenders currently.
"Talk to your mortgage broker to get them to prepare all your options and paperwork and follow through right through to approval."
The Reserve Bank of Australia kept the cash rate on hold last week at 0.25 per cent and low interest rates are expected to remain for the foreseeable future.
Interest rate, monthly repayment, interest paid over loan term
2.75%, $1225, $140,900.
3%, $1265, $155,300.
3.25%, $1306, $170,000.
3.5%, $1347, $185,000.
3.75%, $1389, $200,200.
4%, $1432, $215,600.
Source: Canstar.com.au (based on $300,000 mortgage over 30 years).
Originally published as Tricks to refinancing and saving instantly on your mortgage