We spend a lot of our time encouraging both existing, and potential clients to review their mortgages. This week we've seen yet another example of why taking this advice could be so worthwhile for your back-pocket.
To illustrate this point, here's an example of a mortgage we've settled last week - where the client was better off by thousands!
A client was referred on to me a few weeks ago where they had a mortgage with their existing bank totaling $815k. They had a revolving credit of $50k, and the remaining debt of $765k was up for re-fix with their existing bank who offered them a rate of 6.99%, and of course as they were re-fixing, there was no cash contribution offered by their existing bank.
This client was able to meet the criteria of the bank (affordability, and had sufficient equity - i.e. they were under 80% LVR) and therefore move from their current lender and explore options in the market.
We were able to move this client to a new bank, who offered them 6.84% on their fixed portion, and also a 1% cash contribution ($8,150) to move. In addition, because this client had their property in their personal name, they did not need to involve a solicitor for the refinance from Bank A to Bank B.
Let's do a comparison here:
| Existing Bank | New Bank | Comparison | |
| Existing Mortgage | $765,000 | $765,000 | Same |
| Rate Offered | 6.99% | 6.84% | 0.15% better |
| Actual Cost (1yr) | $53,473.50 | $52,326.00 | $1,147.50 cheaper |
| Cash Contribution* | $0 | $8,150 | $8,150 more cash |
| Solicitors Costs | $0 | $0 | No solicitor involvement** |
*Includes the revolving credit facility when given 1% cash contribution
** This is only possible for certain client situations where the client's lending is in personal names.
As you can tell based on the above table, in this case the client was around $9.3k better off based on this move. Even if a solicitor was involved, there would still be a significant benefit to moving to a new bank.
As you'll note there are a few things to consider when looking at refinancing, but it's always worth reviewing - in cases like this one, it literally pays to have a review, which is particularly important considering the rising cost of everything around us.
If your fixed rate is due to expire shortly, or even if you'd just like to have a free review of your financial situation, get in touch with us now.
Ryan Smuts
31 July 2023