Yes, now is the perfect time for investors to refinance their mortgages for several reasons.
For starters, the major banks didn’t pass on the October interest rate cut, while the regional banks, credit unions and mutual banks did pass on the 0.25 reduction in full.
Consequently, the gap between the interest rates offered by the majors and the other financial institutions for investment loans could be as much as 50 basis points or 0.3%. In dollar terms, this difference could be as much as a couple of hundred dollars a month on an average $500,000 mortgage.
Likewise, investors would do well to ignore the impulse to fix their mortgage, especially with fixed rates as low as 3.19% for three years. On the flip side, there are variable interest rates mortgages below 3%. These rates could drop lower if the Reserve Bank cuts rates again as expected in the first quarter of 2020.
Providing an investor with certainty is the appeal of a fixed-rate loan. However, often, fixing a portion of the mortgage only and leaving the rest variable is a better strategy. This is a “split loan” facility and enables you to manage the risk of interest rate fluctuations effectively. At the same time, you can take advantage of rate cuts with the variable portion of the loan.
Also, when refinancing be aware of the potential fee traps. Loan application fees, for example, aren’t built into the advertised interest rate. Some lenders will embed the minutiae about application fees or the legal charges in the loan document’s fine print. These costs also have the potential to blow out the lenders’ advertised rate. A specialist from Our Broker is acquainted with the hidden fees charged by the lenders and can ensure you finish up with a loan that is suitable for your circumstances.
That said, at Our Broker, we will approach your lender first with details about the refinancing deals we’ve uncovered. If your lender doesn’t play ball, we’ll then initiate the refinancing process for you.
If you’re considering refinancing your investment loan for Christmas, contact Our Broker on 02 8232 0327.