3 ways you know it's time to refinance

Here is your handy checklist for how you know it’s – high? – time to move mortgages.

Tick box 1: You are paying over the odds

A happy by-product of the pandemic has been a mortgage price war that has seen some far more competitive home loan interest rates.

But I stress, only some interest rates.

The thing is that there remain eye-wateringly expensive loan products out there, that even reward your loyalty by lifting the interest rate level.

In fact, there are now almost 300 basis points between the best-value home loans in the market and the most costly.

And chances are you are paying over-the-odds if you’ve had your mortgage for as few as three years.

There is another fairly sure indication you’re getting fleeced too: your loan repayments eat up more than one-third of your household’s gross income.

You are most at risk from future interest rate rises if you are one of the many Aussies who have borrowed six or more times your income, and/or as much as 90 percent, to secure your property purchase.

But enough of that negativity. I almost guarantee there are far cheaper products out there – that can deliver you an overnight repayment reprieve….
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Tick box 2: You are coming off a fixed rate

There was another important knock-on effect from the crisis in health, to our wealth: Fixed mortgage rates moved far below variable rates, as official interest rates plummeted around the world.

That caused a stampede of mortgage holders to fix. And those who didn’t fix for long, will shortly see a big jump in repayments.

You see, the more sinister strategy behind that ‘price cutting’ was to get you into a product that is actually uncompetitive and expensive over the longer term.

Indeed, a loan that offers a cheap fix will very rarely offer a decent variable rate.

So – sometime soon – many families face sudden repayment pain. (Fixes are today way more expensive too.)

But again, let’s get positive…
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Tick box 3: You have built 20 percent equity

The third relevant consequence of the Covid-craziness is house prices. If you are lucky enough to have already stepped onto the property ladder, it’s been more like an elevator upwards!

That means that even if you did borrow, say, 90 percent of the purchase price, you may own a far bigger chunk of what your house is worth today.

Which brings me to the beautiful ‘bottom line’: With 20 percent equity or more, you can now access the best, cheapest home loans in the country.

Do you tick all three refinancing boxes?

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Nicole Pedersen-McKinnon is the author of How to Get Mortgage-Free Like Me and an independent money educator across Australia’s newspapers and websites, and radio and television programs.

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The views and opinions expressed in this article are those of the author and do not necessarily reflect the policy or views of Unloan. This article is intended to provide general information only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product advice. Please consider seeking financial advice before making any decision based on this information.

This article is intended to provide general information only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product advice. Please consider seeking financial advice before making any decision based on this information.‍

Unloan is a division of Commonwealth Bank of Australia.

Applications are subject to credit approval, satisfactory security and you must have a minimum 20% equity in the property. Minimum loan amount $10,000, maximum loan amount $10,000,000, and total borrowings per customer across all Unloan loans is $10,000,000. (For purchase loans a minimum 10% equity is required - however a Lenders Mortgage Insurance (LMI) premium and higher interest rate apply. In some cases, depending on the property’s location or type, an LMI premium may also be required for LVR between 70.01% to 80%). For loans with Lenders Mortgage Insurance (LMI) the minimum loan amount is $10,000, maximum loan amount is $3,000,000 and total borrowings per customer across all Unloan loans is limited to $3,000,000).

Unloan offers a 0.01% per annum discount on the Unloan Live-In rate or Unloan Invest rate upon settlement. On each anniversary of your loan’s settlement date (or the day prior to the anniversary of your loan’s settlement date if your loan settled on 29th February and it is a leap year) the margin discount will increase by a further 0.01% per annum up to a maximum discount of 0.30% per annum. Unloan may withdraw this discount at any time. The discount is applied for each loan you have with Unloan.

*At Unloan, we do not charge any annual, application, banking, account, transaction, late or exit fees. In certain circumstances you may be required to pay a Lenders Mortgage Insurance (LMI) premium. Learn more about why this is applied and how it works. Government fees may also apply. Learn more about government fees here. Your current lender may charge an exit fee when refinancing.