Written by Stefan Kostarelis
As home values increase, the loans we take out to purchase them increase too.
Recent research by Finder.com.au shows just how much the size of Australian home loans has changed over the years.
By using data from the Australian Bureau of statistics, it was revealed that the average home loan nationwide has grown from $17,400 in 1975 to $382,400 in 2015.
Using the infographic Finder.com.au created with the data, you can look at loan sizes state-by-state. For example, in SA the average loan was $18,300 in 1975 and $280,900 in 2015.
You may have been happy with the deal you got when you first took out your home loan, but it’s still worth reviewing it each year.
Since our financial situations are often in flux, it’s advantageous to make sure that your home loan’s interest rates, fees and features are still suitable for you.
Adelaide’s Financial Advice Centre has come up with six reasons to refinance.
#1 You want to pay less.
You have probably heard that interest rates are at an all-time low in Australia and this is true.
According to Trading Economics, interest rates in Australia averaged 4.81 percent from 1990 to 2016. They peaked at an incredible 17.5 (!) percent in January 1990 and have been flat lining at an average of 1.5 percent since August of last year.
If you can find a lower interest rate than what your current loan offers, then you stand to save money. And remember that due to the size of home loans, even a 0.5% reduction can result in a huge saving.
On a home loan of $280,900 for example, this equates to a saving of just over $1,400 a year.
#2 You want a shorter term
With interest rates down, you may also be able to reduce the term of your loan. For example, you could adjust your loan from 30 to 25 years without a major change in repayments. This will allow you to pay off your home faster.
#3 You want to access better features
Home loan packages aren’t just straight up loans; they also come with a bunch of added features. You may want to shop around to find a package that has features desirable to you, such as unlimited additional repayments or redraw facilities.
#4 You want a better deal, more flexibility or security
If you are looking to achieve any of these things, then converting to a fixed, variable or split-interest loan may be the answer.
#5 You want access to your home equity
Equity is useful for financing expensive items such as an investment property, renovations or education. However, you should be careful when refinancing to gain access to equity, since failing to make repayments could result in you losing your home.
#6 You want to consolidate existing debts
If you have multiple debts, then you may consider rolling them all into your home loan. This makes sense because the interest rates associated with home loans are probably lower than those associated with other forms of borrowing. However, as in the case of refinancing for equity, you will have to be vigilant with your repayments.
Before you refinance…
Make sure you know what you want and make sure the benefits outweigh the costs.
If you are going to switch lender, have a chat with your current lender first and see if they are willing to renegotiate.
Refinancing will involve an application process so keep in mind that any changes in your financial situation may impact your borrowing potential.
For more information on how the Financial Advice Center can help you realize your property dreams, call 08 8332 4411 or email firstname.lastname@example.org
Mark Butters is an Authorised Representative and Credit Representative and SSFS Pty Ltd (ACN 100 654 733) trading as ‘Financial Advice Centre’ is an Authorised Representative of Charter Financial Planning Limited Australian Financial Services Licensee and Australian Credit Representative 234 665
The above article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information.
If you decide to purchase or vary a financial product, your financial adviser, Charter Financial Planning Limited and other companies within the AMP Group may receive fees and other benefits. The fees will be a dollar amount and/or a percentage of either the premium you pay or the value of your investment. Please contact us if you want more information.’