Refinance case study

How we saved a client $12,000/annum in interest repayments and raised the deposit for an investment property.

To refinance simply means replacing your existing loan – be it a home or investment loan – with one that is more competitive and/or that better suits your current needs so that you wind up with a lower overall cost and a loan that has the right structure and features for you.

People refinance for several reasons including;

• To consolidate their debts into the one facility.
• To benefit from a lower interest rate.
• To ensure the current rate, product features and fees they have in place are competitive and have the appropriate features for their stage of life.
• To access equity for a deposit on an investment property, car, renovations or other purposes.
• To move from a low doc to full doc facility.

We take a look at this in action through a recent client case study.

Switching to a lower interest rate saving our client money on home loan repayments and released equity for an investment property

We work with a number of financial advice practices and their clients, and recently an advisor with the help of us here at Equilibria helped one of their long-term clients save more than cost of his advice through restructuring his existing debt!

The advisor had not previously had a successful referral partnership with a broker and was hesitant about raising debt in meetings and about referring clients to a broker.

However, during an annual review he decided to ask his client how they felt his bank was looking after him and when they last reviewed their home loan.

The client’s response was that he was worried that they had not moved with the other lenders – and he was right.

Issue

As it turned out the client – who was a busy professional with a young family had not looked at their loan since they purchased their home in 2009 and were paying a variable rate of 4.9% on an owner-occupied property – close to 1% above the current market.

Engagement

A meeting was set up between the client, myself and the advisor to discuss their situation. We then reviewed their existing facility relative to current market rates and structures.

At this point it was clear they could benefit from refinance and restructuring the loan to be more reflective of their current situation and obtain a more competitive rate – as well as assist them in leveraging into an investment property.

Outcome

• We secured a variable rate of 3.84% with a 100% offset facility attached to this.
• This represented a savings of over $1,000/ month for the client.
• Additionally, we obtained “cash out” from the increase in the value of their property to form the deposit for an investment property that was a part of their longer-term goals.

Through the advisor identifying the client need, the client has saved more than their annual advice fee in interest repayments! restructured their facility to reflect their current savings capacity and they are in a position to purchase an investment property.

You will find more smart refinancing strategies here

Anthony Landahl | Equilibria Finance

Note: This article has withheld the names of the client and some of the actual details for confidentiality.

Note: This is for general information purposes only and does not constitute advice. With all of these options there are a number of considerations outside the scope of what is covered in this article that you need to understand to ensure your personal circumstances are taken into consideration.