Refinancing and the damn rate creep

11 June 2019 · General news

So, you’ve got a home loan. You make your repayments on time and the bank leaves you alone. I mean, that’s what you want right? No fuss and no banks harassing you.

After all, the easiest way to forget about the fact you have a mortgage is to just keep plugging away on the repayments and one day you’ll pay it off. Extra payments means you will pay it off quicker and save interest in the long run. Everyone knows that…

But did you know the reason the lender leaves you alone might be because they don’t want you to remind you about a little thing called rate creep?

Below I will explain rate creep and why it might pay to refinance your home loan, ASAP.

So, now that I’ve mentioned the rate creep, let’s take a look at what it actually is (and no it isn’t some weirdo banker-looking dude staring at you on the bus).

Rate creep is simply when your lender slowly puts your rate up over time, due to a myriad of reasons such as “increased costs of funding to the bank”, or “wholesale market movements” etc

You’ve been with the bank for a few years and now you get a letter in the mail saying your payments have gone up. It’s annoying, but you’re not alone. Everyone else is getting the same letter…

But here’s where it gets more annoying for a lot of customers, as while this is happening that very same bank is more than likely offering a cheaper interest rate to NEW customers.

They attract the new customers with a low rate, put yours up and because of this you find that you are paying a higher rate, for the same size loan, with the same bank than someone who has no loyalty to that bank yet. Why should you bear the cost of this acquisition right?

Well, we at Fidget agree and that’s why we have become experts in the refinance process.

Every year we undertake annual reviews for any client who wishes for us to do so.

During this review we look at your current interest rate, loan balance and approx. valuation of your property. We also see whether your loan is still suitable for you and more often than not we are able to assist someone refinance to a better overall deal, saving a heap of cash in annual interest and/or YEARS off their mortgage.

Did I say YEARS off a mortgage? Yep.

People refinance for many reasons, such as releasing equity to buy something else, a renovation, debt consolidation but most people think of refinancing as a rate reduction strategy.

But at Fidget we like to also take a look at how much TIME you can save on your home loan.

As an example, if you borrow $400,000 over 30 years and are paying 4% interest then your payments are $1909 per month.

For example let’s say we can refinance your home loan to a cheaper rate of 3.5% pa.

If you continue to repay the exact same $1909 per month then your 30 year home loan just became a 27 year loan. You, my friend, just saved 3 years off your home loan WITH THE EXACT SAME REPAYMENTS!

That, in my opinion is the power in refinancing… Shaving years off a mortgage.

So, keep the banks on their toes and get in touch with us today to see how much money and TIME you can shave off your mortgage.

You won’t be disappointed with our chat and I’m banking on it (pun definitely intended).