The Mortgage Choice 2010 Refinancers Survey, conducted by Australian mortgage broker Mortgage Choice, found that 68 percent of home loan refinanciers saw their interest rates drop. Of this percentage, 23 percent were now saving more than $300 per month while 88 percent were saving more than $50 per month. The survey also found that the main motivation for refinancing was to switch to a ‘cheaper’ loan, with 24 percent of respondents using this reason, followed by the need to consolidate debts, prompting 11 percent to refinance.
Given the current economic climate, it is no surprise that so many Australians are refinancing their home loans, say Mortgage Choice spokesperson Kristy Sheppard.
“With a recent spate of rate rises and the possibility of more before 2011, plus a renewed focus on mortgage exit fees, it is no surprise Australians are refinancing to a cheaper mortgage deal and/or one that better suits their current needs and goals,” Ms Sheppard said.
“Contributing any extra savings into a loan each month can have a big impact in the long run. Based on a loan of $300,000 at 7 percent over 30 years, if a borrower rounded the monthly repayments of $1,996 up to $2,050, the loan would be repaid approximately one year and eight months earlier, saving over $25,000 in interest,” Ms Sheppard explained.
The survey also revealed that almost half of the refinancers did not pay exit fees. However, 22 percent paid up to $500, 16 percent between $500 and $1,000, 11 percent between $1,000 and $5,000, and 5 percent incurred over $5,000.
The survey shows that exit fees play an important role in when and how Australians decided to refinance their home loans, says Ms Sheppard.
“It is interesting to hear that after respondents researched their options, 26 percent delayed the refinance due to charges they would have incurred by doing so earlier. They weighed up the cost versus benefit of refinancing, which is what any savvy borrower would do before committing to a large financial decision,” said Ms Sheppard.