How Often Do You Refinance Your Home Loan?

I'm about 6 months into my first owner occupied home loan with a non bank and the interest has already raised from 3.84% to 3.93%. If it wasn't for free 100% offset account, I would be very very tempted to refinance due to lower rates elsewhere with a bank. But then I'd have to pay for loan discharge, loan establishment and other loan fees again. In addition, not sure if the fees (Inc offset and any annual fees) are worth the maybe 0.3-0.4% discount.

So, for the people who have a home loan, how often do you refinance and what makes you move?

Poll Options

  • 3
    <1year
  • 2
    1-2
  • 10
    2-3
  • 11
    3-5
  • 4
    5-10
  • 0
    20+
  • 21
    Never refinanced
  • 3
    Other

Comments

  •  

    is that for IP or PPOR

    •  

      Oops, PPOR.

      Edited post

  • +1 vote

    The free offset account is permanent. Rates will change regardless of where you go.

    Even if you were to find a bank that offered 3.6%, that’s only a saving of $330 per $100,000 (compared with your 3.93%). Assuming a 500k, that’s $1,650 total (assuming no change in either rate).

    How much will it cost to move? Will the new loan have fees (yearly or once off)? Will you get your 100% offset? How much time will it take to find the new loan? Is all of this worth saving $1,650? It may well be.

    •  

      Good points.
      I'm also wondering if well known banks are less likely to raise interest rates in a short period of time than non banks. Or maybe they're just as dodgy.

      •  

        I had two friends buy at the same time. One went with one of the big 4, CBA I believe, and the other ing. Ing started slightly less but after 6 months they were equal and 6 months later ing was more.

        Not sure if this is the case with most of the online banks v the big 4. Just something a mate told me.

  •  

    Thats funny …

    We purchased a new house a few years ago and secured a 4% deal on a promotion we went 100% variable.
    Every month they pushed our % up .

    Funny thing is , a friend recommended this bank. Yet their interest rate did not budge .

    we were just moved up to everyone else rate within 6 months.

    we refinanced with another bank , fixed 70% at 3.8%

  • +1 vote

    Talk to your bank / lender. What I've noticed is that if you don't keep a tight leash on your interest rates, the lender will just take the slack as profit. This was particularly in the setting of a market with falling interest rates.

    I basically had to keep pointing out lower rates with reputable banks out there and half threatening to walk away to keep getting lower rates.

  •  

    I just refinanced mine for the first time. I took out a 2 year fixed rate initially just so I could have some consistency while going through the whole move and doing some renovations. Now that 2 years is over I decided to go for a better deal which meant lower interest rates and an offset acct.I don't think I'll consider refinancing again for another 4 or 5 years as there probably won't be much benefit unless my lender raises their rates to a crazy level compared to other lenders which is probably unlikely.

  • +1 vote

    I refinance whenever the time and effort is worth the money saved. I prefer to stick with a continuously low rate, like at UBank over the spike savings.

  • +14 votes

    I have been meaning to engage in a few of these conversations in the past, but this is the one that has done it …

    Bank Manager here …

    Asking this question is one of those "how long is a piece of string" questions.

    In the context that you're asking this question, the only right time to refinance your home loan is when your rate goes up to a point that your week-to-week cash flow is impact.

    If you do the math, a rate increase of nine basis points will have nearly zero impact on your personal finances - that being said though, as someone else has mentioned … if you take no action, your bank will continue putting your rates up.

    Banking is all about margins, lending margins and transactional margins. Put simply, the higher the margin, the higher the share price.

    Every morning, I go in to work, and I have a system generated list of people my team is expected to call who's transactional patterns have flagged them as someone "suited to" (read: susceptible to) a new "product".

    In the same context, if you take no action on an incremental rate increase - I can guarantee the pattern will persist. Compare this hypothetical situation to the person who contacts the bank's complaints department at the first unjustified rate increase, threatening to contact the financial services ombudsman because you were "guaranteed" a competitive rate the lender "promised he'd look after you".

    As a consumer, I had this exact scenario play out, and I didn't have another rate increase for the rest of the time I had my loan with this provider - while family and friends around me were having their rates go up little bit by little bit.

    I can tell you when the "best time" to refinance your home loan is: when you find an under performing branch, with a "refinance your home loan with us and receive $ X" offer running.

    Speaking from experience, a branch manager will forego long-term margin gain for short-term balance book growth. I would rather contact my regional executive and get your your mortgage on my books, than worry about the growth your mortgage will generate over several years.

    How can you tell an nonperforming branch from a performing branch? Its easy, you ask to speak to the lender, and you say "what kind of discretion do you have with your rates?" If they say none, or imply they "might" be able to help …. then they're meeting their target and are not concerned about their balance book growth. Look for the branch manager and lender who say things like, "we'll beat that rate," "we'll do what it takes".

    Generally speaking, a branch will be able to comfortable activate a discretional discount of 1.50% to 1.65% below the market rate (non-discounted) advertised on their website. The higher the amount you want to lend, the higher the discount … regional executives, and state managers can approve higher discounts.

    Don;t even ask for a discount on any lending below $250,000 - you will flat out not get it. They way you get around this though, is refinance the full value of your home in a package that allows you to make additional repayments. These offset packages are quite good for this, but often their annual fee is quite high. The saving is there, but only if you do the math and use it to its full potential.

    Once the funds are drawn down, pay any excess directly on to the loan, and suspend any direct debit payments, then control the payments yourself. This way you'll always have lending volume eligible for the maximum rate discount available to your situation.

    The banking year - in relation to financial targets - ends on September 31st. If there is no offer on, the next best time to try and get all this done is when banks are making one last desperate attempt to meet targets and get bonuses before the end of their banking year.

    With the royal commission going on, lending is becoming harder. Bank do not have an appetite for anything risky at the moment, so your ability to lend will inevitably become harder. If you aim to lend less that 80% of the value of your home, you should be fine.

    I guess what I am trying to say is, your bank will take advantage of you if you let them. Keeping them honest will take up some of your time, but it is worth it. Be confident, know what to ask for, and understand that you have the power - not them. I really hope this helps!

    • -4 votes

      I find it interesting that you claim to be a bank manager but you use the term "lend" when you mean "borrow".

    •  

      Thanks I've found your comment very useful!

  •  

    During my entire loan term I never refinanced. It was a good rate at the beginning although it was not the best initial rate available on the market and it was always a good rate. There was never any need to switch and refinance. The hassle and additional cost to save up to $10 of cash flow a week was never really worth it.

  •  

    I voted the "Other" option.

    My husband is currently a temporary resident, and there are very few banks that will lend to people without permanent residency.

    As soon as he gets it, which should be early next year, we will be moving banks.

    Our rate is at 4.07%, but luckily we have a good amount of money in the offset account.

  •  

    I've voted never refinanced - but we've never had a home loan of more than $200K so it really hasn't been worth the effort of chasing marginal rate differences for us.

    If we had a larger loan then we probably would have - given the larger savings involved with rate differences.

  •  

    Got sucked into ANZ 'corporate discount' rate but through a broker, 3.8% variable. Signed up and 2 months later, rate went up to 4.4%, doubt the 'corporate discount' part was taken into account.

    •  

      ANZ staff/corporate rates are garbage. I used to work for them and the staff rate was no better than could be negotiated yourself anyway. I saved a fair bit banking elsewhere even when I worked for them.

      •  

        I think their policy has changed. Their staff rates and fees are now better than you can get elsewhere (or at least of the big 4)

    •  

      How did it go up so much? Was it reduction of discount or increase of published rates?

      •  

        no idea, just got a letter in the mail, it was about june/july 2017? There was a slight interest increase at that stage I think. I have no room to negotiate as I can't exit that mortgage before some minimum term or I will have to pay bank and broker fees. It didn't bother me too much at the time as I had 75% in my offset but I withdrew to 25% to help my parents buy a house and its hitting me now @[email protected]

        •  

          And you got the corporate rate from working there? Why go through a broker then?

        •  

          Have you contacted the broker about this? Sounds like he landed you in a terrible situation.

          •  

            @AncientWisdom: I got corporate rate through the company I was working at, not an ANZ employee rate. I didn't fault the mortgage broker he was very good, don't think he would have been advised of my mortgage changes. Im actually in the process of moving house now so waiting for the 2 year mark and discuss options then.

  •  

    Haven't needed to refinance yet. I call the bank every 2 years with a better offer elsewhere and ask them what do I need to do to switch banks. So far, they've matched or bettered the offer.
    If they stop matching, I'll refinance then.

  •  

    I think OP answered thier own question

  •  

    As Scott Pape says ‘it’s easier to bitch than switch’. Bitch to your current lender and ask them to lower the rate, tell them you’ll go elsewhere. See what happens. Profit?

  • +1 vote

    Depends if your objective is to build wealth or just get by.

    I generally only refinance when buying property, and take the opportunity to rebalance part of the portfolio and/or draw on equity

    I dont take honeymoon rates, just the best rate for my purpose at the time. Therefore there is no higher revert rate, just standard market movements. Refinancing for the sake of 'marginal' rate differences is not worth the time or effort imo. Yes if there is a better rate, I can always call the lender and negotiate to a certain degree.

    This is how I see many people approach refinancing.

    1. You take a marginally lower rate, and reset the term for 30 yrs (usually) - paying slightly less for a longer term. Unless you make additional repayments the net result usually costs more.
    2. You add discharge and establishment fees to the equation, which is normally added to the balance of the new loan, then pay interest on that which I consider is dead money as it doesn't go towards paying down the loan.
    3. The money you save doesn't go back into the loan, instead people usually increase their discretionary spending.
    4. People don't put a value on their own time.

    Each person to their own, but every time you refinance, try
    1. keeping the same monthly repayment of the original loan or be committed to paying down the loan based on the original remaining term.
    2. Paying for discharge and establishment fees out of pocket rather than adding it to your loan and paying 30 years of interest on it.
    3. Try putting any 'cashback' or trail commission refunds back incentives you get back into your loan instead of wasteful spending.

    Then perhaps your quest to refinance may just turn out to be worthwhile.

    •  

      Thanks for the insight. If I remember correctly, you're a mortgage broker?

      Since my loan is only about 6 months and about $300k, would I have much power in negotiating with the lender? Does non-bank vs bank make a difference in negotiations? Do brokers have more power in negotiating? Or maybe I can get better rates than broker if I turn on my full whiney annoying bitch mode?

      •  

        Your questions have many variables so I can only give you a general response …

        Negotiating is an individual acquired skill, so I can't comment on whether one individual will negotiate better than another.

        Understand why the rate increased. Not every rate rise or loan is negotiable. As I assume you are not represented by a broker for your loan, still there is no harm in calling the lender and trying to negotiate it yourself.

        The 'right' broker generally has more negotiating power based on knowledge of the market, established contacts and volume.

        Each Lenders willingness to negotiate depends on the above factors as well as timing, as explained by the 'bank manager' in the above comments. And ofcourse the basis of your argument as to why your rate should be reduced.

        •  

          Thanks for responding. General is all I need so I can piece things together.

          I am currently represented by a broker, but I don't completely trust him/her efforts when I asked about the rates, hence my post is somewhat vague to protect my anonymousity.

  •  

    Hi there great OzBargainers,

    I am kinda similar situation like @ughhh. Got around 250k mortgage and currently with a lender but desperately looking to move to save my ongoing costs:

    • Currently paying 3.89% variable interest with 8p/m account keeping fee with a 350 mortgage discharge fee
    • Lender is one of big 4.
    • My research shows the best is Ubank Home Loan variable rate at 3.69% variable with no ongoing or exit fees
    • Get 1000 into the USaver account if settled by 31 September and lodged the application by 6 August
    • I have worked out if I switch from my current lender, there will be cost of around 600(350 discharge + 250 settlement)
    • Best thing I find is no fees and charges except when you fix the loan and that would be 395
    • UHome Loan has BSB/Account and can take Bpay so to have the transaction account one has to open Usaver Ultra
    • UHome Loan doesn't have any offset account but has got unlimited redraw facility

    What I need to make my decision final:

    • Is Ubank is the first or last to jack up the price?
    • Do they agree to negotiate on the price later?
    • How is their customer service behaviour after you become their client?
    • Do they use NPP so instant transfer can be achieved or pay off non-ubank account/credit card?
    • Do I really need Offset account?
    • Won't the free redraw do the same?
    • How is Ubank in terms of releasing equity as I am thinking of buying an investment property later down the track?

    Appreciate if anything else I need to know.

    Thanks heaps as always to all the ozbargainers, a great place to be.