Australian home loan interest rates remain at historic lows, and the opportunities for paying off a mortgage early are better than ever. Used in conjunction with low rates, here are some extra steps that can speed up loan repayments and reduce your loan balance.
Just under 12 months ago I decided set myself up as a Mortgage Broker on the Northside of Brisbane. MyFinanceFinda was set up with the sole purpose helping clients fund their dreams.
As you will be aware finance brokering is an extremely competitive industry and is dominated by large players. Recently, a prospective client asked me why they should trust me over a broker from a well established brand. My response was simple. I fight to get my clients the best deal.
I am a Chartered Accountant with a Graduate Diploma in Applied Finance and Investment and an Executive MBA. I am associated with a national brokerage firm called Origin Finance which has over 90 brokers under its umbrella. I also aggregate through Choice Aggregation Services which is a NAB owned business. Fear not, I am not obliged to provide you NAB products. My goal is to provide the most suitable finance package for my clients, be it a residential loan or commercial/business loan.
In this blog you will be able to follow my journey to becoming the most sort after finance broker in Brisbane. Gaining success in this industry is about helping as may clients as possible. Getting those clients is not easy. My aim is to speak with 100 people a week and this is where I need your help. Please share my contact details with as many people as possible who may be in the market for a new home loan or looking to refinance. In return you will have my eternal friendship. Pretty good deal dont you think?
I know you all want me to succeed so please help me by giving me the opportunity to speak with 100 people a week who may benefit from what I am offering.
Please call me directly on 0411144625 to discuss any of your residential finance needs.
Stay tuned for updates on my journey to speaking with 100 people a week.
Whenever it makes financial sense to do so.
Heard about mortgage refinancing? In the past, most people who took out a mortgage doggedly continued with it until they had paid it off. These days, people refinance their mortgage much more frequently. The average duration of a home loan in Australia now is just 4-5 years. Here we look at some of the reasons people in Australia refinance their home loan.
Mortgage refinancing reasons: lower rate
The most common reason for people to refinance their mortgage is to get a better deal. But be careful you don’t become interest rate-fixated. When you refinance your home loan, you need to consider fees and charges as well as the interest rate. You often have to pay charges for exiting your current home loan, plus charges for taking out the new mortgage. You need to be sure that in refinancing your home loan that you’ll be better off in the long run after taking into account all costs.
Mortgage refinancing reasons: more flexibility
Many people only discover the full details about their mortgage when it’s too late. They try to do something and get told by their lender that either they can’t do it, or they will incur a hefty charge if they do. An example is a redraw facility – the ability to pay extra money into a mortgage and then redraw it later. This feature is not possible with a basic home loan, so many people refinance their mortgage to give themselves this sort of increased flexibility.
Mortgage refinancing reasons: renovation
If you carry out renovations, it often makes sense to refinance your mortgage and take out a construction loan so you only pay interest as building progresses. Once construction is over, it might make sense to refinance your home loan again so that you consolidate the total amount you owe into a loan that minimises your interest bill, while giving you a degree of liquidity.
Mortgage refinancing reasons: home equity
Over recent years in the property market houses have appreciated at a significant rate. e.g. a home you bought for $300,000 five years ago, might now be worth $500,000. Refinancing your mortgage with a home equity loan might let you tap into that extra $200,000 equity.
Mortgage refinancing reasons: defaulting
Some people find they have borrowed more than they can comfortably repay, and they’re in danger of defaulting. There’s no shame in that. But don’t suffer in silence. If you’re having trouble making your mortgage repayments, talk to your MFAA member about refinancing your home loan to make it more manageable.
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The home loan market is constantly changing, with new and attractive deals coming up all the time. Refinancing can help you secure a more competitive interest rate, access the equity in your home, add features (such as an offset account) or consolidate your debts, but there are some important questions to consider before you get the ball rolling.
1. Has my financial situation changed since I first applied for a home loan?
A refinance is effectively a brand new loan application. All of the personal financial data you had to gather the first time around will need to be produced again. The stability of your income stream, your assets, and your credit card debts and other debts and expenses will all be reviewed, and may impact the result of your application.
It’s important to think about your ongoing ability to pay off your loan, particularly if you’re planning on making big changes that will affect your financial situation, such as starting a family or quitting your job to start your own business.
Of course, if you’ve just received a big pay rise or are now an empty-nester, this may also make a difference to your loan application.
2. Will the refinance really save me money?
Negotiating a lower interest rate or consolidating debts may seem like a financial no-brainer, but the fees associated with switching loans can be hefty, so you need to look at all the costs to work out whether you will really be saving money.
Fixed rate loans can be particularly expensive to exit, and leaving your home loan early will usually see you pay some combination of exit fees, application fees, stamp duty or even legal fees. If you’re borrowing more than 80% of the value of your property, lenders mortgage insurance (LMI) may also be required.
Unfortunately, these fees and costs are not usually transferable from one loan to another, so you may need to pay them again even if you paid them when you took out your original loan.
3. Am I planning on keeping the property for much longer?
If you plan to sell your property within the next few years, refinancing might be a rather big investment of time and energy for little benefit. Similarly, if you only have a small amount left to pay off your loan, you may want to consider whether it’s really worth going through the process of refinancing for the marginal cost savings you may receive.
Refinancing can help you save some money, but it’s worth considering your plans and options before you decide to go ahead with it. If you need some support working out what’s best for you, contact your mortgage broker.
A home loan is generally a long-term proposition, but in some situations it can make sense to refinance your mortgage. Read this guide to the refinancing process, and speak to your broker, before deciding whether it’s right for you.
Refinancing involves taking out a new mortgage and using those funds to pay off your existing mortgage. Doing so can save money and result in significant financial gains over time.
Why you might refinance
You might want a lower interest rate
The lending products market is highly competitive and interest rates can vary significantly between banks. One of the most common reasons people choose to refinance their mortgage is to secure a lower interest rate from another lender. This could assist you to pay off your home loan sooner, potentially saving you thousands of dollars
That makes sense, but before taking any action it’s a good idea to speak with your broker. They can not only look for a better interest rate for you but also help find you the type of lending facility that suits your lifestyle. This may even mean renegotiating a better deal with your existing lender. Either way your broker will help with the right advice.
Keep in mind that not all mortgage products are the same. A mortgage with a lower interest rate may not have all the benefits of your existing loan.
The interest rates, fees and the features need to be carefully considered and your broker can help you to navigate the options.
You want to change your loan type
You may want to switch from a variable loan to a fixed loan with your existing lender, to lock in a low interest rate. Depending on the type of mortgage you have, this may require refinancing into a different product. You might also have to refinance if you want to change to a split loan, which has part variable and part fixed rates.
You want to renovate or purchase an investment property
Another reason refinancing might be an option is because you want to renovate your home or buy an investment property. If you have equity in your home, you may be able to access some of the equity by refinancing your mortgage. (Note that you could also do this by redrawing or increasing the limit on your existing mortgage.) Your broker can help advise on the best option for you. Before going ahead with an increase or refinance, your home may need to be revalued and your broker will advise how much you can borrow.
Your circumstances have changed
Refinancing could also be suitable if your circumstances have changed – for example, a significant change in your income. By taking out a new mortgage (or increasing your limit on the existing mortgage) through your current broker, you may be able to consolidate other debts, including personal loans and credit cards, into one facility, lowering your monthly payments and saving you interest.
While refinancing can save money, it may not be right for everyone. Consider your financial situation and ask yourself whether refinancing is right for you.
The refinancing process
Getting the refinancing ball rolling is simple once you’ve determined your needs and done your research through your broker.
The application. Your broker will evaluate your circumstances and assist you in submitting your application. You’ll be asked to provide identification documentation and proof of income such as pay slips, and to list your assets and liabilities. If you’re staying with your existing lender, you may not need to provide as much information.
Getting a valuation. Lenders will often require a valuation on your existing home to determine how much you can borrow. This bank valuation happens during the loan approval process and generally requires an inspection of the property by a licensed valuer.
Receiving approval. Once the lender is completely satisfied, full loan approval is granted. You’ll receive an approval letter with a copy of the loan contract to review, sign and return to the lender.
Your funds will be cleared once all the signed documentation is reviewed. Your lender (or your new lender if you’re changing lenders) will arrange settlement of your existing loan and establishment of your new loan.
There are many reasons why you may want to refinance your mortgage. Before taking any action it’s important to talk with your broker. They can help you to select the best loan product for your needs, based on your individual circumstances.
Finding the perfect property isn’t always easy. Despite the number of homes for sale, the unpredictable nature of the market can make househunting exhausting.
If you’ve tried property websites, newspapers and real estate agents’ windows without success, here are five more unconventional strategies to try.