The Cheapest Interest Rate
The loan with the cheapest interest rate is not always the right option. In some cases, a loan with the lowest rate may actually cost you more money over the loan term. A competitive home loan will offer a combination of competitive rates, low fees and loan flexibility.
Many borrowers are refinancing their home loan for a number of reasons, including:
- Consolidate debt
- Borrow money to renovate or invest
- A more competitive home loan interest rate
- Move from a fixed home loan rate to a variable home loan rate, or vice versa
Refinancing your mortgage or loan is not an easy decision. At PreApproveMyLoan.com.au your dedicated mortgage broker will help you do the sums, taking into account all the costs of mortgage refinancing, to help you determine whether or not refinancing is the right move for you.
Variable interest rates
Interest rates are a major consideration for borrowers when making a decision to refinance, so it’s important to understand how they work.
The Reserve Bank uses interest rates to manage consumer spending and thereby inflation. The decision when and if to move the Official Cash Rate is based on a range of economic indicators, including the Consumer Price Index (CPI), wages data, employment figures, the Producer Price Index (PPI) and the performance of global financial markets. The variable interest rates of lenders generally move up and down in line with Official Cash Rate fluctuations. You will need to take this into account when considering which type of home loan to take out.
And to make things slightly more complicated, in recent times lenders have changed their variable rates outside official Reserve Bank movements, and will do so when the cost to them of providing funding increases.
At PreApproveMyLoan.com.au your mortgage broker will help you navigate through the discounts and specials on fixed and variable interest rate loans to ensure your home loan is competitive and suits your lifestyle.
Fixed interest rates
Fixed rates are influenced by the wholesale money market. Fixed rates can be taken out for terms of 1 to 10 years. By fixing a rate you get repayment certainty over a designated term. You are better off if variable rates increase but can be penalised if rates drop or you need to break the fixed rate term early.
At PreAproveMyLoan.com.au your mortgage broker will help you navigate through the discounts and specials on fixed and variable interest rate loans to ensure your home loan is competitive and suits your lifestyle.
Interest rate options
Interest rates are a major consideration for borrowers when making a decision to refinance, so it’s important to understand how they work.
Most borrowers are aware there are two types of interest rates – variable and fixed. Each type is based on different financial market indicators: variable rates are driven predominantly by Reserve Bank’s Official Cash Rate policy while fixed rates are driven by the predicted trends in the wholesale money market.
Thrown into the mix is the Comparison Rate, or Annualised Average Percentage Rate (AAPR), a figure designed to show the borrower the ‘true’ cost of the loan.
Comparison rates
The comparison rate, or Annualised Average Percentage Rate (AAPR), of a loan can be a useful indicator of the overall costs you will have to pay over your loan term. It takes into account upfront fees, honeymoon rates, ongoing fees, different compounding periods and other factors to produce an average yearly interest rate that reflects the overall cost of your loan.
It’s important to note that while useful, even a comparison rate will not show all the costs associated with your loan. Your PreApproveMyLoan.com.au mortgage broker will discuss other items that may not be included or cannot be accurately reflected in the comparison rate calculation which include; occasional and one-off charges such as redraw fees, exit fees and penalties; loan features such as portability; and non-standard loan terms and loan amounts.
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