Even with interest rates on the rise and more pain expected to come, there are ways to save big bucks – and it’s easier than you think.
The big four banks are set to lift their interest rates after the Reserve Bank increased the cash rate 0.25 per cent, adding to the squeeze on family finances.
But according to the Australian Bureau of Statistics, a record $19 billion worth of home loans were refinanced in August this year as mortgage holders seek out better deals.
WATCH THE VIDEO ABOVE: Expert advice on getting a better home loan deal.
On a $500,000 loan, the savings add up to thousands of dollars.
“If someone on that 5.36 (per cent) figure dropped their rate, refinanced to something that’s just over 4 per cent, over the first two years they could save $11,299,” Sally Tindall from RateCity told Sunrise.
“Then on a larger loan, there’s more pain with the rate hikes but more savings to be had if you refinance.
“On a million-dollar loan, you’re looking at a saving of $23,949 over the first two years.”
A major barrier for many people in switching home loans is the perception that it’s difficult to do.
Sydney homeowner Sophia Franzini recently refinanced her home and is now saving $230 a month in interest.
“I found the process with Reduce very simple,” Franzini said.
“It was as easy as submitting all my paperwork, getting the approval and that was basically it – the whole process took about a month.”
Tips for getting a better deal
As the cost of living continues to rise, every dollar saved counts.
“If you’re going to refinance, compare apples with apples,” Tindall advised.
“Rates are on the rise but lenders move at different times … if you see a rate that starts with a three, it could be too good to be true.”
Tindall explained some institutions may not have factored in all the RBA rate rises into their advertised rate, and you could get stung down the track.
Also take note that there are usually initial costs to switch, but your new lender may wave their upfront fees.
“Ask – if you don’t ask, you don’t get,” Tindall said.