Financial Health Column

Refix or refinance? If your low rate is coming to an end then you should probably look more closely at your options.

If you're about to come off a low fixed rate in the next few months and are worried at the thought of the higher repayments, then refinancing might be a good option.

At the moment banks are offering some nice incentives when it comes to refinancing, such as cashbacks or cash contributions.

Some of the main banks are offering up to 1% of the loan amount as a cash incentive to switch your lending over to them, so for example, if you have a home loan of $600,000 then you could be looking at a cashback of $6,000. They all have a minimum loan and equity amount to qualify for the cash back but they are hungry for new business.

How does a cashback help you if you are facing higher repayments? Let’s say you get a $6,000 cashback when you switch your lending to a new bank. You could utilise this money to go towards quite a few months worth of covering those extra repayments which would allow you enough time to hopefully find some savings in your budget to offset the increase going forward.

So if you are at crunch time and having to decide what rate to refix for - why not go one step further and see what extra benefits you can obtain to help lessen the blow of increased mortgage payments.

If the prospect of higher payments is a major concern, other things you can look at to ease the pressure include consolidating high interest rate debt into your mortgage to further save on interest costs, and extending your loan term to minimise repayments. You also have the chance to make sure that the loan structure is going to serve you while on the higher rate so thinking about whether to have a portion on interest only for a while could be an option to consider.

One final thing to consider when switching banks is the amount of paperwork and negotiations that