We're not talking peanuts here. We're talking tens of thousands of dollars. A review costs nothing but could save you buckets of money. Seems like a no-brainer.
Maybe you've started a family, maybe you've retired. Whatever life stage you're at, make sure your mortgage is structured in a way that suit your needs right now.
Getting just a small amount shaved off your interest rate can make a difference to your monthly payments, leaving you more money for the things you want - not to mention getting your home loan paid off quicker.
Your Squirrel mortgage adviser can often renegotiate your mortgage with your current bank, saving you the hassle of switching if you're happy where you are.
Not only do we have access to more banks than other brokers, but we have a community of over 5,000 peer-to-peer lenders for a custom solution if you don't quite fit the bank's box.
One of your options is to stay put. Your existing lender will be prepared to sharpen the pencil to keep you as a client – it is just a question of how much. What can be frustrating is that you will likely need to get an approval elsewhere before they will match it.
When it comes to refinancing it might be pricing or it could be due to another lender having a better policy or product, or if you own multiple properties it could be to diversify the risk of having all of your lending in one basket. Make sure you know all of your options. If you set out financial goals that you are working towards, this will make it easier to make decisions.
If you have multiple loans on fixed rates, then chances are you will incur fixed-rate break fees. These can be significant and add up to several thousand dollars. Essentially, a break fee will equal the interest you save by switching your mortgage to a new, lower rate, so there is seldom a big financial benefit to refinancing. The savings from a new lower mortgage rate will offset the break fees.
When you refinance you may need to use a conveyancing lawyer which will cost around $900. There are some free refinancing services that you can use alongside Squirrel.
The main reason people refinance is to get a better deal. The benefit can be a lower mortgage rate and a cash-back contribution. To make sure it's worth it, you need to weigh up the benefits against the costs of refinancing including break fees and legal costs. What usually makes it worth making the switch is the cash-back.
A cash-back contribution is a lump sum given to you by the bank at settlement. It can be as much as 1% of the amount borrowed, but depends on what's happening in the market. There are conditions though, and the money can be clawed back within three years if you sell the property or move to another bank within that time.
Sometimes when reviewing your mortgage we might find that the best solution is switching you to different bank. In this case the bank your mortgage is with will charge what's called a "Break Fee". This is because you are breaking a legal contract between you and the bank. The bank incurs a real cost as a result, which is then passed on to you. They’re not just trying to squeeze you for a bit more.
Generally speaking, the longer the remaining time on your fixed term or the bigger the difference between your current interest rate and the new rate (if switching from a higher rate to a lower rate), the higher the break fee.
There are circumstances where it’s worth breaking your fixed term, but it could also end up costing you more in the long run. Every situation is different so get in touch with one of the team to help you work out what’s best for you.
It might be possible to break out of a fixed loan before the term is up, but you’re likely to be charged a break fee for doing so. This is because the bank is incurring a loss by you breaking the term early. This loss is passed on to you in the form of a break fee. There are some instances where it’s worth breaking your fixed term, but it could also end up costing you more in the long run. Every situation is different so get in touch with one of the team to help you work out what’s best for you.
If you sell your house to buy a new one while still under a fixed term, you may be able to transfer the existing loan and rate to the new property. If you’re repaying your loan once you’ve sold, you may have to pay break fees. Before you sign anything, get in touch with one of our team to chat through your options.
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