If you have loans for multiple residential or commercial properties, including self-managed super fund (SMSF) loans or family trust loans, it may be beneficial to spread your borrowing across multiple banks. Refinancing your loans to achieve this could provide you with benefits.
Potential benefit #1: A lower interest rate
The lending market in Australia is extremely competitive, especially for large, long-term loans like property loans. According to the latest figures from the Australian Bureau of Statistics (ABS), the average property loan in Australia is $593,000. Standard property loan terms in Australia are 25 or 30 years, so lenders earn a huge amount of interest over the life of each loan.
Unfortunately, staying with the same lender can result in a financial cost for borrowers. Most lenders offer their best interest rate deals to try and entice new long-term customers, rather than offer these to their existing customers. This is because they assume that many of those customers will not regularly explore their refinancing options.
Potential benefit #2: Cashback refinancing
Many lenders in the highly competitive Australian lending market offer cashback refinancing deals to entice new borrowers. What this means is that they will pay you to refinance your loan by switching from your current lender. Cashback refinancing offers up to $2,000 are not uncommon for both large residential and commercial property loans.
Refinancing to a loan with a cashback offer can help to improve your cash flow. It can also save you money longer term if you refinance to a loan with a lower interest rate.
You should consider whether it is the right time to get independent professional advice from our lending and finance specialist at Wilson Pateras to help you explore and evaluate your options.
Example
The below table highlights the potential financial benefits that can be gained from refinancing, depending on the lender, in a range of different interest rate scenarios, assuming each loan has $500,000 owing.
Other potential benefits
Spreading your property loans across multiple lenders can also provide you with other potential benefits, including:
- Minimising your risk exposure to one lender
- Lending criteria and costs vary between banks making some more favourable for certain types of transactions over others, for example while a main big 4 bank may give a good rate on a family trust investment loan they wouldn’t do the same for an SMSF loan
- You may be able to borrow more, as you will be less likely to reach your debt ceiling with any one lender
The bottom line
You should explore your financing options every few years or whenever market conditions or your personal circumstances change. There can be a significant financial cost to you if you do not take the time to do this. An independent adviser can do this analysis for you to help you make an informed decision. Please feel free to reach out to our lending specialist, Brett Elliot by contacting 0409 402 086 or book a meeting here.
This content has been prepared by Wilson Pateras to further our commitment to proactive services and advice for our clients, by providing current information and events. Any advice is of a general nature only and does not take into account your personal objectives or financial situation. Before making any decision, you should consider your particular circumstances and whether the information is suitable to your needs including by seeking professional advice. You should also read any relevant disclosure documents. Whilst every effort has been made to verify the accuracy of this information, Wilson Pateras, its officers, employees and agents disclaim all liability, to the extent permissible by law, for any error, inaccuracy in, or omission from, the information contained above including any loss or damage suffered by any person directly or indirectly through relying on this information. Liability limited by a scheme approved under Professional Standards Legislation.
