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When Would I Refinance My Mortgage?

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 us about refinancing your home loan to make it more manageable.

 

If refinancing is something you are considering or if you would like more information, contact us today!

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September 2015 RBA leaves cash rate on hold

At its meeting today, the Board decided to 

LEAVE THE cash RATE ON HOLD AT 2.0%

The Governor of the RBA, Glenn Steven’s statement is available in full CLICK HERE

With the Spring buying season upon us, whether you are looking at purchasing to upgrade or would like to do some renovating, stay tuned for our Spring newsletter coming out next week for tips on spring cleaning your budget to buy a home or if you’re in the market to sell, we have some great ideas on styling your home for sale.

For our clients that are investors, who may be receiving letters from your lender regarding increased interest rates, we have an article in our Spring newsletter that explains why this is happening.

Please don’t forget to like us on Facebook, and share with your family and friends to keep up to date with Lender news, hints, tips and tons of useful information.

Until next time…..

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What Type Of Loan Is Right For You?

The array of mortgages available helps a good finance broker to tailor a package to suit your needs. Here are just some of the options.

 

Fixed-rate mortgages
With a fixed-rate loan, you know exactly how much you’ll pay per fortnight or month for the fixed period of the loan (usually one to five years).

 

Variable rate mortgages
Repayments can change during the life of a variable-rate loan, so you may pay more or less as interest rates rise or fall. If you’re fairly sure that rates are set to fall, this is a good option.

 

Principal and interest mortgages
In this mortgage, you are paying the amount lent to you plus the interest.

 

Interest-only mortgages
With interest-only, you are paying just the interest on the loan – you are not paying off any of the original principal.

 

Split home loan (fixed and variable)
You can choose to have part of your loan at a fixed rate and the other part can be at a variable interest rate. If rates do fall, the interest will go down on the variable part of your loan, but you aren’t taking as big a risk should rates rise.

 

Redraw facility
If you have a variable-rate loan and you make extra repayments, then you can withdraw that additional money when you need to (you can’t do this on fixed-rate loans).

 

Land loan
A land loan lets you buy a block of land without the pressure to build on it as soon as possible. Land loans are usually variable interest for up to 30 years.

 

Construction loan
For buying land, building or renovating your home, a 12-month construction loan can be the best way to go. Usually, up to 90 per cent of the property value can be borrowed.

 

Non-PAYG loans
For self-employed people, a home loan can still be arranged using differing supporting documentation that shows your ability to service a loan and might include BAS and bank statements. You self-certify your income, which will need verification. You may be able to borrow up to 80 per cent of the property’s value.

 

Equity release
This loan type allows you to convert a portion of your residential property ‘asset’ into cash or an income stream while still allowing you to continue to live in your home.

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What Is A Low Doc Home Loan?

A mortgage created for the self-employed.

If you’re self-employed, you may have found it difficult to get a traditional mortgage. Don’t despair. The low doc home loan has been designed specifically for the self-employed.

The dilemma of the self-employed

If you’re self-employed, the goal of your accountant is to minimise your taxable income. Unfortunately, while this means you pay less tax, it creates problems when you try to borrow. While you might know that you can service a loan, your books don’t back you up, or your paperwork may not be up-to-date. As a consequence, the self-employed often find it frustrating to obtain a Home Loan.

Consider the low doc home loan (or lo doc home loan)

While the self-employed often can’t satisfy traditional lending criteria, they can be perfectly capable of servicing a loan. As a consequence, the low doc or lo doc loan was born. Low doc loans don’t require the same level of “documentation” as normal loans. If you have difficulty documenting your financial position with regular pay slips, tax returns or business financials etc, a low doc mortgage could be a good solution.

If you would like to know more or you think this might be an option for you, talk to us today!

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When Was Your Last Home Loan Health Check?

Circumstances can change, leaving your home loan less suitable than it was originally. A home loan health check can reveal if you’re paying too much.

What’s involved?

We can do a full home loan health check for you either in person or over the phone. We will check if your loan is still competitive and still suited to your individual needs.

Having an expert do this for you can also take the stress out of the process for you. It is advisable to get this check done at least once a year, or if your circumstances change.

Questions to ask

Be aware of what you want checked. Think about the following when you speak to your adviser:

  • Am I paying an unreasonably high interest rate?
  • Am I paying high fees?
  • Am I happy with the service I receive?
  • Does my loan give me the features I need?
  • Am I paying for features I don’t use?
  • Have my financial circumstances changed

Benefits

A home-loan health check will generally cost you nothing and could save you thousands. Your home loan features could be improved or you could find yourself with a lower interest rate. A better payment structure could also be introduced, making your repayments more manageable.

Checking the state of your current loan could uncover the possibility of taking out additional finance, which can consolidate any other debt you may have or help you purchase an investment property

 

We give all our clients an Annual Mortgage Health Check to ensure they are still getting the best deal suited to them. If you would like a Mortgage Health Check done now, contact us today!

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Lenders have increased their Investment loan rates

A snapshot of lenders who have made changes to their Investment loans

 

Suncorp – Increasing by 0.27% on existing and new customers from 31st August 2015

NAB – Increasing by 0.29% for new variable and fixed rate Interest Only Investment loans effective 10th August 2015. Increasing by 0.29% for existing variable Interest Only home loans effective 10th September 2015. Increasing by 0.29% for new and existing Peak Performance facilities effective 10th September 2015.

AMP – Have withdrawn from Investment lending. This is expected to last until later in 2015. This includes SMSF loans.

Choicelend – New Interest Only loans will increase by 0.29% from 10th August 2015. Existing Interest Only loan will be effective 10th September 2015.

St. George – New and existing Residential Investment loans will increase by 0.25% effective 21st August 2015.

Westpac – New Residential Investment loans will increase by 0.27% from 10th August 2015. For existing customers the increase will take effect from 25th September 2015.

 

If you have any questions about the changes to investment lending and what it could mean for your loan, please don’t hesitate to contact us.

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What’s The Secret To Buying Your First Home?

Saving for it.

Saving for a home loan or mortgage isn’t glamorous but it has to be done. So here are some savings tips for first home buyers to help get you into the property market.

How much should You be saving?

One of the first rules of saving is to set a goal. But what should that goal be? Different people have different needs, but a rough guide is that you should be saving 10% of your pre-tax income. Not saving anything like that? Read on.

What are you spending?

To help with saving, you need to know what you’re currently spending. And not just on the big items like rent, utilities and groceries. Get yourself a notebook and every time you spend money, write it down. Everything. For at least a month but preferably longer. You’ll be surprised where your money goes.

What do you really need to spend?

If you’re a typical first home buyer, you probably haven’t been exercising a lot of financial restraint to this point. Invited out to dinner? You go. See shoes you like? You buy. Take lunch to work? Are you kidding? There’s nothing wrong with that, but if you really want a home, you’re probably going to have to start making some sacrifices. Look through your spending record and decide what you’re willing to give up. You might decide, for example, that life would still go on if you didn’t spend $1500 a year on coffee.

Get rid of credit card debt

You probably used to pay your credit card off every month. But then one month you couldn’t quite manage it and things snowballed from there. That credit card debt is killing you. It is expensive money and you need to eliminate it. Consider transferring the debt to a new card that gives you an interest-free grace period, and save like mad to get your balance down to zero as soon as possible. Then consider the old trick of keeping your credit card in a cup of water in the freezer.

A savings history

If you’ve spent everything you’ve earned – and then some – don’t be surprised if the mortgage market doesn’t put out the welcome mat. lenders like to see proof that you can save. So start putting something aside every month and you’ll be surprised how quickly it adds up – and how much more popular you’ll be among the lenders.

Want more savings tips? Talk to us today!

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RBA LEAVES RATES ON HOLD FOR ANOTHER MONTH

August 2015

At its meeting today, the Board decided to 

LEAVE THE cash RATE ON HOLD AT 2.0%

The Governor of the RBA, Glenn Steven’s statement is available in full CLICK HERE

With all of the recent changes that have been imposed to the lenders by APRA, we have some lenders offering great specials for owner occupied use.   If it has been a while since we last reviewed your home loan, now would be a great time to contact us for the opportunity to see if you can get a better deal on your home loan.

 

Please don’t forget to like us on Facebook, and share with your family and friends to keep up to date with Lender news, hints, tips and tons of useful information.

Until next time…..

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Explainer: How RBA Rate Changes Affect Your Interest Rate

With the RBA setting the official cash rate at all-time lows, it’s a good time to work out how this impacts the interest rate on your home loan and whether you are getting a good deal or not.

When the interest rate on your home loan fluctuates, it can feel as though you don’t have control of your debt. Despite being frustrating, interest rate changes are a part of every loan’s lifespan and warrant your consideration.

The interest rates that banks charge on their home loans are influenced by the Reserve Bank of Australia’s (RBA) cash rate.

The cash rate is reviewed by the RBA on a monthly basis in order to safeguard Australia’s economic stability. The cash rate is the rate charged on loans made between the RBA and your lender. This, in turn, has a very strong impact on the interest rates your lender charges you.

“The RBA supports the banks with liquidity facility,” explains Advantedge General Manager Brett Halliwell. “The RBA is a bank to the banks. The cash rate is effectively the rate at which the RBA will lend to the banks, and what the banks effectively use as a reference rate for other things.”

When the cash rate is changed by the RBA, lenders decide whether or not to mirror the new rate in the interest they charge their mortgagees.

This is entirely up to the lender in question and depends on the market and how the lender is performing at the time of the cash rate change.

“If you look at the mortgage market, specifically by itself, it is very competitive,” Halliwell says. “It is about the lender trying to get the right outcome on the deposit side of the balance sheet within the context of a very, very competitive marketplace, but recognising that a reference rate has changed and, therefore, looking at where they stand.”

Some lenders choose to shift their interest rate changes higher than the RBA’s cash rate change and, in these instances, other lenders may be offering lower interest rates than the one you currently have.

Keeping track of how your lender manages cash rate changes and where that leaves you as the person paying the interest can be time consuming, and is made more difficult by fees, charges and the flexibility offered by different loan products, which all need to be weighed alongside the interest rate.

A simple way to regain control of your interest rate is to lock it in for a period, if you believe rates are not likely to fall further. Fixed rates offer less flexibility, but more certainty.

We are familiar with the different lenders and their responses to cash rate changes, and can track interest rate fluctuations across a panel of lenders to ensure you’re getting a great deal.

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Interest rate changes announced July 2015

Over the past couple of months we have seen some considerable changes to the investment lending from the banks.

This has been instigated by APRA (Australian Prudential Regulation Authority) trying to control the increasing expansion in investment lending (and rapidly increasing property prices mainly in NSW & VIC), coupled with a 50+ year record low interest rates.

 

Lenders have either changed their policies or increased rates and LVR’s to meet APRAS 10% limit on investment lending growth.

 

The following lenders have announced changes to their loans:

ANZ

Variable interest rates on Investment loans increasing by 0.27% for new and existing customers effective 10th August 2015 (S/V from 5.38% to 5.65%)

From 28th July 2015 Fixed rates for new customers will be different for Owner Occupied and Investment loans (Owner Occupied being cheaper)

CBA

Variable interest rates on Investment loans increasing by 0.27% for new and existing customers effective 10th August 2015 (S/V from 5.45% to 5.72%)

Fixed interest rates for Investment loans will be moving effective 31st July 2015

Macqurie

Fixed and variable interest rates on Investment loans increasing by 0.27% for new customers effective 31st July 2015

Variable interest rates on Investment loans increasing by 0.27% for existing customers effective 10th August 2015

NAB

Interest rates on Interest Only (Investment and Owner Occupied) home loans and Line of Credit facilities will be increasing by 0.29% for new customers effective 10th August 2015 and for existing customers effective 10th September 2015

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