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Have you had a look at your home loan statement lately? Have you noticed that lenders have slowly raised your interest rate? The major lenders – CBA, ANZ, Westpac and NAB have lifted their variable mortgage rates last September by at least 15 basis points. If your rate has gone up above 4%, what will you do?

My advice is to go back to your lender or broker and try getting the rate reduced. If your current lender isn’t too thrilled to provide you with the same rate as what they give to new clients, it’s time to move to another lender. The good news is that banks are hungry for your business. The competition is cutthroat and banks are dangling cashbacks and frequent flyer points to get clients to switch to them.

Refinancing is a smart move for homeowners to get the best home loan deals. It is especially smarter for homeowners with high credit scores and great employment history to refinance a home loan with 80 per cent loan to value ratio. With a lower rate and fewer fees, you can save money allowing you to pay off your home loan sooner.

Here’s a lowdown of cashbacks that are available to new clients of banks.

ANZ is offering cashback rebates for loans being refinanced from other financial institutions. Cashbacks range from $2,500 to $3,500 depending on the loan amount. Applications must be submitted by the 31st of December and drawn by the 31st of March.

CBA is offering for a limited time a $2,000 cashback for new investment home loans of $500,000 or more. These are for applications submitted between the 15th of October up to the 21st of December. Refinance of investment loans is not included.

Westpac is offering a $1,250 refinance rebate per property. Minimum loan size for each property is $250,000. Applications must be submitted between 1st of October 2018 to 31st of January 2019 and settled by 31 March 2019.

Bank of Melbourne is offering a $2,000 refinance cashback for all applications made from the 8th of October and settles by 31st of December 2018.

Suncorp is offering a refinance incentive special offer of $1,500 for loans submitted from the 8th of October to the 31st of December. Settlement must happen no later than the 28th of February.

Just remember that each lender has their respective conditions and credit policy. For a few lenders, the rebates and cashbacks are only available for owner-occupied properties and some may require that the loan amount is within 80% of the value of the property being refinanced. A finance broker can help you navigate through these conditions and credit policies. They can also order a valuation upfront so you know beforehand if refinancing is possible at 80% loan to value ratio avoiding you from paying loan mortgage insurance.

There are lots of reasons to refinance your home loan

You just want to save money on interest and fees and refinancing will help you achieve your goal of lowering your repayments and paying off your home loan sooner.

You would like to access the equity of your home for reasons such as renovation and upgrade or future investment purposes such as buying an investment property.

You may also refinance to consolidate your credit card and personal loan debts and you can focus on having one single payment for all your loans. Refinancing to consolidate debts only makes sense if you are consolidating your multiple high-interest rate debts into one lower interest rate loan.

My least favourite reason to refinance is releasing the equity of your home to fund a motor vehicle purchase or a lifestyle purchase such as boats and caravans.

Why? Because these are purchases that depreciate over time. It does not make sense to buy a motor vehicle and finance it together with your home loan on a 30-year loan term. Can you imagine still paying the loan another 20 years on a motor vehicle that has no value at all in 10 years’ time? A good finance broker who keeps his/her client’s best interest at heart will consolidate personal loans, car loans and credit card debts into one loan on a 5-year loan term or less and at a lower rate.

How does refinancing work?

Refinancing means paying out your current loan with a new loan with the goal of reducing your minimum repayments and your loan term. Just remember that refinancing comes with a cost. The cashbacks will help cover the cost of refinancing. Ask your finance broker to crunch the numbers for you to find out if refinancing is worth your time and effort. A finance broker who looks after his/her clients’ interests will negotiate a better deal for you and reduce your fees and charges.

Debt consolidation and refinancing is not easy nowadays. You have to provide 6 months’ worth of clean bank statements with no entries showing late payment fees, defaults or dishonour fees. For those refinancing in their 50s, there has to be a very clear exit strategy because you are not expected to work until you are 80 years old. Refinancing has to make sense and should clearly benefit the applicants and not put them back financially.

Merry Christmas to all the Philippine Times readers and wishing you all prosperity and financial security in 2019.

This article provides general information only and has been prepared without taking into account your objectives, financial situation or needs. We recommend that you consider whether it is appropriate for your circumstances and your full financial situation will need to be reviewed prior to acceptance of any offer or product. It does not constitute legal, tax or financial advice and you should always seek professional advice in relation to your individual circumstances. MBM Mortgage Pty Ltd trading as Maverick Finance | ABN 28 149 301 084 | Credit Representative Number 403019 is authorised under Credit License Number 389328.

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