While the majority of Australians don’t know what their home loan rate is, savvy home owners are freeing up cash by refinancing to a better rate – saving thousands of dollars a year.
Raising a family often means shifting priorities. Juggling school or childcare runs with work commitments, while paying for a never-ending range of expenses.
But what if there was a simple way to free up some significant monthly savings? Enough for a much-needed family holiday, a bathroom makeover, or even that university education fund you keep talking about?
Your home loan could be the answer.
The cost of complacency on your home loan repayments
On average, Australians spend between 21% and 39% of their monthly income on their home loan. It’s likely to be your biggest single expense – and it’s one you have some control over.
“In this competitive interest rate environment, you need to be aware of what your current rate is, and what’s available” explains Jason Jessup, Associate Director at Macquarie’s Banking and Financial Services Group.
Yet Pocketbook’s analysis of 200,000 users found as many as 90% of Australians don’t know what their home loan rate is – and some are paying as much as 1.75 percentage points more than the best rate on offer.
Let’s put that into perspective.
If you have a $500,000 home loan at a rate of 5.75%, and you’re paying 1.75 percentage points more than the best rate available to you – you’re paying more than $530 extra a month. That could soon add up to a family holiday, the first year of school fees – or even a down payment on an investment property.
“One of my clients created offset accounts in the names of each child. They split the monthly savings between those accounts, saving for the kids’ future education while reducing the interest payable on their home loan – and eventually paying the loan off sooner,” says Lucinda Schettino, Sales Engagement Manager at Macquarie’s Banking and Financial Services Group.
How to supercharge your savings
Refinancing can be a relatively straightforward process, and, after refinancing, savvy homeowners can choose to keep paying the same, higher, monthly repayment required under their previous home loan. Paying that little bit extra a month, can shave years off your loan.
“That extra payment is always available to you, in your offset account,” explains Jessup. “So if you need it later, you can spend it – but in the meantime, it’s saving you more on your interest repayments.”
If you keep adding $530 extra a month to your offset on that $500,000 loan, you could pay it off eight years and eight months early – saving more than $116,000 in interest in the process.
“Our loan terms are 30 years, so we often see clients work out how much their loan repayments would be over a shorter period – say 20 years – and increase their monthly repayments to that amount,” comments Schettino.
Make even more of your money
Most people refinance because they want a lower interest rate (and lower monthly repayments). But there are other benefits to weigh up beyond a cheaper deal.
For those Macquarie customers who switch their everyday banking along with their home loan, it’s the digital banking tools that make the difference.
- Intuitive budgeting tools, to help you track your spending
- Apple Pay and Google Pay, so you don’t need to carry a wallet
- The reassurance of push notifications on your mobile when you make a payment – so you’re on top of security
- Redeeming credit card points for gift cards – saving you more on everything from the weekly grocery shop to birthday gifts.
What's involved in the process of refinancing?
These days, there are very few costs involved in refinancing. But the process may take time. While pre-approval typically happens within one business day, there’s also a credit assessment, property valuation, documentation and contract exchange involved.
“For example, if you refinance with Macquarie, there’s no establishment fee and we cover the property valuation fee on properties up to $3 million,” explains Schettino.
“We help our clients work out the cost savings they’ll get through refinancing – it could be around $5,000 in the first year,” says Schettino.
The process of collecting all the necessary documentation can feel time-consuming. But with Macquarie, almost all of it can be completed online.
“We can arrange for an identity check to be done at your home or workplace, and you can sign almost all of the paperwork online,” says Schettino. You might spend half an hour with a dedicated banking specialist on the phone, and the rest is done online and over email.
In theory, you might spend a few hours deciding on your options, tracking down payslips and bank statements, and signing documents. But in reality, you may save thousands of dollars in the short term, and much more in the future.
That sounds like a reasonable trade-off – and a good reason to add refinancing to your list of priorities.
- Your home loan is likely to be your biggest monthly expense – it accounts for between 21%-39% of the average Australian household income.
- As many as 90% of people don’t know their home loan rate.
- Refinancing your $500,000 home loan could save you hundreds of dollars a month.
Interested in exploring your refinancing options? Request a call and your personal Macquarie banking specialist will guide you through the process.