Is It Worth Changing Home Loan?

ppp13 on 22/10/2020 - 15:31
Last edited 22/10/2020 - 15:31 by 1 other user

Hi Guys,

This is my first home loan and please be soft on my slowness.

I took 85% loan and built this house 2 years ago. Due to corona and all that recent shit, there is not much change in current value.
Currently running at 2.87% variable.I have just ordered valuation with St.George. If the valuation comes above my expectations and LVR is <= 80% then no issues.

Question is - if valuation comes as it is (85%), then is it worth for me to take 2.64% var loan by paying that 5% from my pocket?
I have enough cash sitting in redraw facility and I feel getting 3300 ( cashback after charges) is worth for that 5% money. This 5% is my 6 months of salary into bank account.

After this part payment, I will still have healthy savings for rainy day.
What do you guys think ? I'm I missing something here ? I know this personal finance but you can shed some light on my brain.

Thank You All. Stay Safe.

Financial Home Loan Loan

Comments

  • CyberMurning on 22/10/2020 - 15:33
    +1

    open excel and put all the numbers under two big coloums, stay vs move
    then see if you will save some $ or not by moving
    or maybe get second valuation from diff. bank
    repeat step above

    • ppp13 on 22/10/2020 - 15:49

      Yup I have done that. I feel refinancing for bonus at 2.64% looks profitable. But still wanted to ask for advice as people might have gone through this path. Thanks for your idea.

  • ilsan0 on 22/10/2020 - 15:36

    Broker here.

    You can get
    2.64% with ING 80- 90% LVR
    2.54% with ING below 80% LVR
    2.59 with AMP below 80% LVR

    • ppp13 on 22/10/2020 - 15:50

      Not much difference from St George 2.64%. Any cash back on these?

      • ilsan0 on 24/10/2020 - 10:26

        No cash back but then you dont have to put that 5% towards it.

  • nedski on 22/10/2020 - 15:40

    If you are doing this for the re-finance bonus with St George, I would see what other options are available and compare the savings you may get from having an even cheaper mortgage rate.

    EG we are currently on 2.34%. Would the savings at 2.34% over time eclipse the cashback bonus?

    • ppp13 on 22/10/2020 - 15:52

      Yes you are right.
      But as it is variable rate, it can go any direction in next 6 months. Where as cash back, I’m getting 3300 in account straightaway.

  • Meho2026 on 22/10/2020 - 16:27
    +2

    There is always additional costs when you refinance with another lender so unless the interest rate is significantly lower (which it likely wont be) or the sign up bonus is significant its not usually worth it especially when you consider all the hassle involved.

    Sometimes the lowest rate is not the best deal, there can be a lack of flexibility with the loan product and other issues eg fees and charges or customer service downgrades.

    The best approach is often to just ask your existing lender for an interest rate review, usually they will offer you a better deal.
    My advice would be to stay with your existing lender, ask for a better rate and keep ploughing your savings into the offset account. Then reassess every 2 years.

  • avoidfullprice on 22/10/2020 - 17:11

    Look at your income and expenses. Make sure they are not worse off than when you took the first loan. Recheck your borrowing power.

    If you don't put the extra 5%, do you need to fork out LMI on new loan? LMI is not transferrable, and St George only allows $1 LMI at 85% LVR for first home buyer.

    Not financial advice.

  • Jolakot on 22/10/2020 - 20:04

    Should've gotten onto the ANZ deal a few months ago, 4k cashback and 2.29% rates.

  • mortgagebroker on 22/10/2020 - 20:09
    +1

    Go see a broker.
    There are lenders that do no LMI at 85%
    The other banks may value it less.
    I'm sure are better offers out there for you.

  • Lunarboogie on 22/10/2020 - 22:17

    If you're contemplating moving interstate and converting the place into an IP, then you'd be foolish to tip a further 5% into the redraw facility (ie not an offset account). Sounds like there's a little too much uncertainty to jump ship at the moment. Stay put for time being would be my recommendation.

  • brendanq on 25/10/2020 - 15:57

    I agree with others here - worth chatting to a broker for free. I did that and my refinance was settled just last week - got about 0.6% off my interest rate, but be aware that there are fees associated with refinancing (e.g., discharge, conveyancing).

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