COVID-19 has caused a flurry of refinancing activity. Between March and April, brokers saw a 16% increase in interest of refinancing owner occupier loans and 14% for investors. In the same time period, about 75% of home valuations were solely for the purposes of refinancing.
Refinancing can be a financially savvy decision for the property owner. The benefits of reduced payments are ideal for borrowers who face economic uncertainty during this crisis. And banks have responded to the surge in demand by offering attractive refinancing packages, such as cashback offers. In this article, we’ll look at what these offers are, how you should approach them, and which banks are offering them.
A refinance cashback offer is one that promises a payout if you choose to refinance with that lender. The value of the offer will depend on the lender running the promotion, but the range is typically between $1,000 to $4,000.
These products are designed not only to tempt homeowners to switch from their current mortgage provider to a new one but to also cover the costs associated with a refinance, and banks know just how motivated people are to set themselves up for the future. The pandemic has made it even more important for everyone to save as much money as possible.
Borrowers are encouraged to take advantage of these offers, but need to remember to look at more than just the cashback deal. From interest rates, to fees, to features of the home loan – you need to take a holistic view before committing to a mortgage product. You need to also look at how much you’ll pay over the lifetime of the loan before you officially make the change. A trusted partner like Shore Financial can help you sort through the offers that are worth your while.
Refinancing will undoubtedly be a time and financial commitment for homeowners, but the advantages are too good to pass up right now. If your income has fallen due to the coronavirus pandemic, having an extra few thousand dollars a year could be the difference between having a cushion and having to revise your budget from day to day.
You also have access to historically low interest rates in an effort to keep the economy going. Both the banks and the government have a vested interest in homeowners being able to get by right now, so you might as well seize the opportunity while it’s here.
How long a cashback offer is available will depend on the bank offering the deal, but you might not have to decide immediately. Suncorp and ANZ have already extended their deadlines to give homeowners a little extra time to get their affairs in order.
Better yet, refinancing can help you reduce your mortgage payments and pay off your home loan faster. You can lock in a rate that you’re comfortable with and even potentially revamp your budget to include a new property or renovation. Refinancing is a way to improve your overall finances and may even help you improve your credit score if you have extra money to pay off old debts.
Primarily, it’s been the smaller lenders trying to increase their customer base through cashback offers. However, the big four have been responding to the market with offers of their own.
Some other worthy mentions are Suncorp who are offering $2,000 for loans between $250K – $750K under 90% LVR and $3,000 for loans above $750K but also under 90% LVR. If you’re on the frontlines of the pandemic (e.g., a doctor, etc.), you could be entitled to an extra $1,000. Additionally, St George and Bank of Melbourne are offering $2000 cashbacks, with a minimum loan value of $250,000.
Lenders are getting creative in the current situation, so you need to take into account all relevant incentives (such as reduced LMI). But remember that these cashback offers change regularly, so it’s best to take advantage of a mortgage broker’s expertise to ensure you’re getting the best and most current deal.
We recommend refinancing for property owners where there is financial benefit, Our expert brokers will be able to calculate for you the overall cost vs benefit for your specific scenario. Give Shore Financial a call today for advice you can trust.