Many homeowners put refinancing into the too hard basket but a new tool from uno Home Loans is changing the landscape forever.
If you’ve ever thought about refinancing your home loan but were scared of the heavy lifting, chances are, you have been missing out. When the average mortgage holder can save up to $50,000* over the life of loan – don’t you think it’s time to stop stalling and consider your options?
Vincent Turner, founder of fintech company uno Home Loans tells Your Best Interests (YBI) given the constant shifts in the housing markets and changes in interest rates, it’s vital mortgage holders check-in on the state of their loan. While Turner says there are generally two motivations for people to refinance – saving money and pulling out equity from their property – he suggests you needn’t wait for these justifications to consider shifting your loan to a new service or provider.
“One motivation is internal – I want to save some money – and the other is external – we want to do something, such as renovate or go on a holiday or pay off debt. So, the homeowner looks to their existing mortgage to see if there is a way to pull the equity out by refinancing.”
Considering most homeowners stick to their loan provider for years, the savings by refinancing can be considerable. Turner runs YBI through a few quick calculations:
“As an example, a person with a home loan of $450K at 4.5 per cent, who hadn’t refinanced in three years, if they moved to say, a loan of 3.9 per cent could save around $220 a month and around $73,000 off the life of the loan.”
Definitely not slim pickings, yet Turner suggests people underestimate the savings benefits of regular refinancing.
“What happens after a few years is your loan situation changes. Your property goes up a bit and you have a better loan to value ratio – so you should be entitled to a better rate. But your current lender won’t tell you that,” says Turner.
While the Reserve Bank’s interest rates are currently at an all-time low, the first of the big four banks recently raised mortgage rates. It begs the question: should homeowners be looking to fix their rates now?
“If you are locking them in, you shouldn’t be trying to beat the house,” says Turner.
“It’s more about debt. If you know how much you can pay and you don’t want to think about it for three years then sure… But don’t try to beat the bank. It’s more about a desire to have certainty.
“I fixed my rates for five years because I have a baby coming and I don’t want to have to think about it,” adds Turner.
When looking to refinance, Turner says you need to consider your needs and objectives.
“If you’re simply trying to save money, you should look for equivalent features that suit your needs. When you’re refinancing, you want to be clear on what you are solving for. Rate is one of those things. My brother for example, who lives in Perth wanted to be with a bank that had a local branch. So, you need to also consider what else is important to you.”
Traditionally the refinancing process could take days of to-and-fro with a bank or broker, but advances in technology are changing that. Thanks to sophisticated algorithms and software processes, particularly from fintechs such as uno, refinancers can receive a credit proposal for a new loan in a matter of minutes.
“Our new refinancing pathway digitises the process,” Turner explains. “The customer’s perception and their reality are that they will spend hours filling out forms and completing documents. That often turns people off unless they really need to refinance. But we’ve made it possible for someone to shave down hours of paperwork into about ten minutes.”
Turner believes uno’s new platform addresses the barriers most mortgagees face.
“By automating the collection of a customer’s financial details, we alleviate a lot of the effort that prevents Australians from switching and saving.”
Turner says uno’s unique platform combines a property valuation; ID verification; instant credit check; the collection of current loan details; verification of income, expenses and liabilities; and assessment with credit policies from nine of Australia’s leading lenders. Most importantly checking your eligibility to refinance won’t affect your credit score.
By expediting the process most of the effort of refinancing is removed. Turner likens it to posting a parcel to London. It doesn’t take much effort to walk to the post office and drop off your parcel because you don’t see all the work that goes into it after you leave the post office.
Turner explains that getting people to understand just how much money is at stake is vital.
“People underestimate the couple of hundred dollars a month, how much it adds up to over the life of the loan. And the other thing is people often don’t refinance because they think they don’t have time or they can’t be bothered.
“A study we did found that 74 per cent of Australian mortgage holders are turned off switching lenders because of the time involved and 77 per cent described refinancing as a ‘hassle’. So, it’s not just you – it’s all of us that think that. But we can take that hassle way.”
uno is an online mortgage broker which finds the right home loan for you through smart technology and a team of experts. uno’s technology sorts through thousands of home loans to find the best options for your situation and our experts are available to help seven days a week and in the evenings via phone, text, email and chat.
*Average saving for uno refinance customers who switched to a lower rate between January and May 2018. Savings calculated over life of loan, assuming consistent repayments.