A simple home loan health check led two police officers to refinance for a saving of $7,600 a year in interest.
When police officers Ben Dixon and Sara Peters were looking for a home loan, they thought the choice was obvious. They secured finance through the same community-owned bank most of their colleagues used, bought a house and were happily paying it off.
A few years on, and knowing that their interest rate was a little higher than others they had seen advertised, Ben and Sara visited their local MFAA Approved Finance Broker for a home loan health check.
“Being members of a mutual bank they thought they were being looked after and thought they were on quite a good deal,” their Finance Broker recalls.
This wasn’t the case though. Although they had always received good service from the lender they had been with for nine years, they were on an unnecessarily high rate that was costing them both money and years on their loan.
“We were able to reduce their rate significantly, and we ended up saving them $7600 a year in interest. And the loan was only $450,000 – it wasn’t a big loan,” says their Finance Broker.
The couple had two options: they could either reduce their repayments and have an extra $7600 each year to play with or to save, or they could keep their repayments at the current level and pay down their loan more quickly.
“They had a family as well, so the money could certainly be used elsewhere, but the aim for them was to pay their loan off as soon as possible, so they continued to make the same repayments, and have been able to reduce their loan faster,” their adviser explains.
Being able to reduce the debt significantly sooner than they originally planned means that the couple is now working towards purchasing an investment property.
“The plan is to reduce their debt first, and then be able to put funds aside for an investment purchase. They are absolutely on track to achieve that,” says Ben and Sara’s adviser.
“They are a fairly typical family, and they thought they were on a reasonable deal. It wasn’t until they came to me for a home loan health check that we were able to show them that there were significant savings to be had by looking at an alternate lender.”
Source: The Mortgage and Finance Association of Australia (MFAA)