Re-Financing

 

Re-Finance Your Existing Mortgage

Let’s say you took out your current mortgage several years ago.

What interest rate are you currently paying? 

How does this compare to the rates now offered out there in the finance market? 

Are you still on a good deal or could you do better?  Remember, its your money!


We will look at an example where there has been what looks like a small drop in interest rates from what you are still paying.

Initial term of mortgage 25 years
Number of years completed 5 years
Years to still complete 20 years
You might be on the current standard variable 5.88%.
You purchased property for $385,000
With a 20% deposit $77,000
Loan amount $308,000
Your property is now valued at $550,000
Your current monthly payments $1,962
Mortgage balance (amount still owed by you) $276,526

 

Your loan to value ratio (LVR) is 276,526/550,000  50.2%
(No lenders mortgage insurance needed as you are well below 80%)


You consult your mortgage broker to find the current deal that suits you, and find that you can now get a rate of 4.69%.


You could opt to revert to a 25 year term again but you want to reduce the time spent paying interest, therefore you go for a new, 20 year term paying monthly as before.  Let’s look at the new numbers with this.

 

Your LVR is well below the 80% where lenders mortgage insurance kicks in, and your deposit is already in the equity of the property.

 

The New Setup


Your property is now valued at                          $550,000
Mortgage balance (amount still owed by you)   $276,526
New interest rate                                               4.69%
Term of mortgage                                             20 years
New monthly repayments                                 $1,778

You are now paying off your mortgage over exactly the same time period as before:


Except you are now paying $184 per month less.

Over a year, $2,208 less.


And over the life of this mortgage, $44,160 less.

 

We had been thinking about re-financing for som...

Mel and Ross Johnstone
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