Is it worth it to refinance?

SHOULD SARAH REFINANCE?

Is it worth it to refinance?

 ✅Sarah is a mother of 2 children. She is a carer for both a commercial team (PAYG) and she has a private contract (ABN). 

✅Sarah also has a side business of renting 2 wedding cars which has made a decent profit for the last two years with yearly summary statements to prove it. When Sarah took out her home loan, she fixed half and left the other half as a variable interest rate. There is 2 years left for the fixed portion of the loan.
✅Problem: RBA has slashed rates in the interim and her fixed rate has stayed put. She is paying 4.3% when a standard variable rate is 2.69% Understandably Sarah wants to break her fixed term and refinance. This will cost her $6,000 in break fees with Westpac.

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Should Sarah refinance?

✅ $300K loan is broken up as follows: ($160K fixed, $140K variable).
✅So what are the benefits of refinancing to 2.69% variable instead of 4.3% fixed?
✅Remember: we apply this only to the fixed portion of the loan - $160,000. This comes to $5,152 of savings.

✅And it will cost Sarah $6,000 to break her mortgage with Westpac. So there is no benefit at this stage to a refinance. She would actually be losing money by getting a cheaper rate.

Forward guidance for Sarah

✅It is best for Sarah to continue making extra repayments on the variable component of her loan. In two years, when the fixed term is over, Sarah will come back for advice on how to move into a lower variable interest rate. This will give her time to build equity in her home and start investing in property, which is really her goal.

How do I know whether to refinance or stay put?

Get in touch

I'm here if you need me.  

There is no fee. 

Matthew Stack 
www.mortgagebrokerrevesby.com.au
matthew@mortgagebrokerrevesby.com.au
0423 237 242

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