A record number of Aussies are switching home loans right now, and lenders are offering major cash offers to lure new customers.
Homeowners with loan sizes of $500,000 could secure a cashback deal of around $4,000. Borrowers with bigger loan sizes of $1 million may be eligible for up to $5,000 cash back, while those with $2 million could get up to $10,000.
According to Canstar, a $4,000 cashback deal could slash your monthly repayments by $412 per month. That’s based on a borrower repaying a $500,000 loan over 30 years.
Also read: How homeowners could save $404 a month
Canstar editor-at-large and money expert Effie Zahos said chasing cashback deals could inject some much-needed cash into your budget.
“But let’s not underestimate the benefits of switching to a really low rate regardless of whether there is a cashback deal on offer or not,” Zahos said.
“Refinancing from a variable rate of 6.48 per cent down to the lowest on Canstar’s database at 4.95 per cent could shave as much as $485 off monthly repayments on a $500,000 loan over 30 years,” she said.
It’s important to understand the implications of refinancing, Zahos said, and make sure the associated costs don’t outweigh the savings.
“It’s also worth noting that making multiple loan applications in a short period may raise red flags for future lenders. They could also result in your credit score taking a hit but it is likely to be restored,” she said.
Some lenders may not allow loan terms in months, so if you have recently taken out a 30-year loan and refinance after six months, you may need to extend your loan term back to 30 years.
“Finally, and perhaps most importantly, make sure you don’t settle for a less-than-competitive interest rate – especially if you are no longer refinancing simply to chase cashback offers,” Zahos said.