What is a good interest rate? How do you know if you have one?

Your mortgage is likely to be your single biggest monthly expense and yet you might (like many people) struggle to know what interest rate you are paying, let alone whether or not you are getting a ‘good deal’.

The difference in interest rates can be significant. The best rate in the market at the moment (after the recent rate cut) is around 3.8% and the highest rate (for low doc loans) are over 6.0%. A whopping variation of 2.4% ($12,000 in interest per year on a $500,000 loan – cash you would much rather have in your back pocket!!).

What impacts on the interest rate of your home loan?

There are several factors that will impact on the interest rate you have from your lender;

  1. The features you want
  2. The total amount you are borrowing
  3. The Loan to Value Ratio (LVR)
  4. Principle and Interest or Interest Only
  5. Owner Occupied or Investor

 

1) Features

As with many things in life, when it comes to a Home Loan you generally get what you pay for. If you want to buy a new car, you can choose to pay a little extra for DVD players, leather seats, carpet and window tint. With a Home Loan, it is no different except the sort of features that you will be looking at include Offset, Redraw and Fee Free Credit Cards.

And the reality of Home Loan pricing is that consumers tend to pay a premium for convenience. If you want to have all of your banking within the same institution, seamlessly linked as much as possible you will generally be getting a Home Loan package and this may come with a slightly higher interest rate to cover these features.

For example, a no frills home loan only available through a broker could be as low as 3.88% and a full package loan through the big lenders will be somewhat more expensive, anywhere from 4.2% upwards.

 

2) Total borrowing amount

Generally the higher the amount of money you are borrowing, the larger the discount the big banks will be willing to offer you off their standard variable rates (subject to their other criteria, more on that later). The non-bank lenders don’t tend to offer these same discounts as their advertised rates already incorporate a discounted rate. 

For example, with a recent home loan over $1.0 m, I negotiated a discount of 1.3% off the standard variable rate, reducing the standard variable rate down to 4.26%. Another client, with a total borrowing of $400,000 the discount negotiated was 1.1%, taking the standard variable rate down to 4.38%.

 

3) The Loan to Value Ratio (LVR)

The smaller the loan in relation to the value of the property the better the price generally available. The best discounts will be available for LVR’s that are 80% or below. The higher your LVR gets, the higher the risk to the lender, so the lower the discount. And in some cases, if the LVR is too high (over 95%) the banks won’t lend at all, let alone offer discount.

 

4) Principle and Interest or Interest Only

Principle and Interest loans will attract higher discounts than Interest Only Loans. The regulator (APRA) sees interest only loans as somewhat risky and fueling speculative investment. They want to see borrowers paying down loans and have put pressure on lenders in recent years to reduce the availability of interest only loans.

For example, a client recently wanted to change over their investment loan from Interest Only to Principle and Interest in order to reduce interest payments and the discount increased by 0.2%. 

 

5) Owner Occupied or Investor

In July 2015, the regulator (APRA) imposed guidelines on lenders to take the heat out of the property market by restricting the growth in investor lending to under 10% a year. This now means that borrowing for investment purposes now attracts a premium, and most lenders have separate rates for investment loans to owner occupied loans.

For example, the current standard variable rate for ANZ is 5.56% for Owner Occupied and 5.83% for Investors (a difference of 0.27%).

 

 And the impact of set and forget!

And a final word – borrowers who don’t regularly review their lending will also pay a premium as discounts offered years earlier may now be well below that available in the market today. Banks have relied on people to ‘set and forget’ and it’s the age old saying “don’t ask, don’t get”.

One of my clients had been paying 4.93% on an investment loan (with a discount of 0.9% that had been put in place 3 years ago). With additional negotiation I was able to reduce the rate to 4.58% (a total discount of 1.25%) saving over $3,000 per year in interest.

What rate do you have currently? Do you think it is a ‘good rate’?

If you aren’t sure, the best way to know if you have a ‘good rate’ is to get in touch for a free, no obligation, 30 minute home loan health check. 

You can contact Doug at (e) douglas.piening@choicehomeloans.com.au or (m)  0408 671 524.

 

Douglas Piening is a Mortgage and Finance Broker with Choice Home Loans and is passionate about providing clients with lending advice they can trust. Whether it’s re-financing an existing property, buying a new or next home, or investing, he brings a wealth of knowledge and expertise to assisting clients with their lending needs. 

 

Want to hear what clients have said about working with Doug? Take a look at these reviews from LinkedIn and Facebook.

This information is of a general nature only and does not constitute professional advice. You should always seek professional advice in relation to your particular circumstances.

How much can you afford to borrow with your first home loan?

Understanding how much borrowing capacity you have when buying your first home is an essential step for all newcomers to home ownership.

The question of “How much can I borrow?” rears its ugly head for all new home buyers. As daunting as it can be, understanding your borrowing power is important – and essential – for those ready to get their foot in the door with their first home purchase.

Financial factors

Before you start looking for a property – either to live in or as an investment – take a look at your finances from all angles and ask yourself a few important questions:

  •          Do I have enough money to pay for a deposit?
  •          Can I afford to make monthly repayments?
  •          Is my repayment/credit history positive?
  •          Have I assessed my household budget?
  •          Am I planning to start a family soon?

Understanding where you stand financially and what financial loads may be coming your way in the near future can give you a clearer picture of how large or small your borrowing capacity should realistically be.

Figures that figure

How much you can comfortably afford to borrow comes down to two factors:

  • The size of your deposit. Most lenders require a minimum of 10 per cent of the total property cost.
  • How much you can afford in mortgage repayments.

If you’re currently renting a property, your weekly or monthly rental amount is a good indication of the starting figure for your mortgage repayments. This is the bare minimum, however. You will need to add other expenditures to this figure, such as rates, taxes, lenders mortgage insurance (if applicable), among others.

New buyers may also want to consider single or joint income amounts. As a general rule, your mortgage repayments (along with other short and long-term expenses) shouldn’t cost more than 35 per cent of your gross income.

Help wanted!

Many people choose the help of a mortgage broker when shopping around for their first home loan, and for good reason. Using a mortgage broker to seal the deal can give you greater choice, peace of mind and clarity, especially for those just starting out in the property market.

Mortgage brokers have a wealth of knowledge to steer you in the right direction in terms of what you can realistically afford versus what you think you can afford.

There are many home loan calculators that can also help buyers get a sense of their borrowing capacity. These online calculators factor in your loan type, loan length and interest rates to calculate a general repayment figure. Your broker will be able to walk you through these calculations to ensure you’re aiming for the right figures. 

Doing your due diligence from the very start will pay big dividends when it comes to home ownership. Putting your expenses under the microscope may be intimidating at first, but it will ensure your home loan works as hard for you as you did for it.

 

If you are looking at buying a first home, be sure to get in touch to talk through your options.

You can contact Doug at (e) douglas.piening@choicehomeloans.com.au or (m)  0408 671 524.

Douglas Piening is a Mortgage and Finance Broker with Choice Home Loans and is passionate about providing clients with lending advice they can trust. Whether it’s re-financing an existing property, buying a new or next home, or investing, he brings a wealth of knowledge and expertise to assisting clients with their lending needs. 

 

Want to hear what clients have said about working with Doug? Take a look at these reviews from LinkedIn and Facebook.

This information is of a general nature only and does not constitute professional advice. You should always seek professional advice in relation to your particular circumstances.

 

5 reasons why pre-approval makes things a whole lot easier

Whilst it is not a mandatory requirement for home buyers to seek a pre approval, doing so can make things considerably easier.

So why might that be?

 

1) You get a clear and accurate price range

Whilst you can use a borrowing calculator to work out your approximate buying power, different lenders have different requirements and getting pre approval gives you a far more accurate price range.

 

2) It reduces the financial risks associated with finance ‘falling through’

Home buyers who aren’t able to secure finance by the date of settlement are at risk losing their deposit. Not only is it devastating to not only be going ahead with the purchase, but vendors are within their rights to keep the deposit paid as there is a breach of contract.

 

3) Greater leverage in negotiations

You can also use your pre approval as extra leverage when negotiating with vendors as you are less likely to have to pull out of the contract last minute because you can’t get finance. You will also have a clear ceiling price to work with in negotiations and are less likely to be pushed into paying over your budget.

 

4) It gives you time to look around

Most pre approvals last between three to six months, so you have plenty of time after you’ve received the pre approval to look around for your new home.

 

 5) A faster final approval process

Getting pre-approved means you’re likely to have a faster final approval process too, so you won’t be waiting around to hear from the bank before you can settle your contract and move into your new home.

 

So whilst it isn’t mandatory, we would recommend getting pre approval in writing before beginning the search for your next house as an absolute must. And definitely before any negotiation that might involve signing a contract or paying a deposit.

If you need any more information on pre-approval, feel free to get in touch.

 

 

 

For specialist lending advice, you can contact Doug at (e) douglas.piening@choicehomeloans.com.au or (m)  0408 671 524.

Douglas Piening is a Mortgage and Finance Broker with Choice Home Loans and is passionate about providing clients with lending advice they can trust. Whether it’s re-financing an existing property, buying a new or next home, or investing, he brings a wealth of knowledge and expertise to assisting clients with their lending needs. 

Want to hear what clients have said about working with Doug? Take a look at these reviews from LinkedIn and Facebook.

This information is of a general nature only and does not constitute professional advice. You should always seek professional advice in relation to your particular circumstances.

7 Reasons to take the plunge and become a home owner

Mortgage can be a dirty word for anyone that doesn’t have one. It conjures up images of baked beans for dinner, never being able to go out and being enslaved to a 30 year financial commitment with a faceless big bank. But for most people it will eventually be something they consider.

 

So why would you take the plunge and take on the commitment it involves and get a place that it is all yours?

 

1) No more landlords

When you become the king of your castle, there goes the rental inspections and the need to have a landlord or agent approve the inevitable maintenance that all property requires. If your shower is leaking, you can get over to Bunnings yourself and pick up a few spanners to fix it. The downside is of course you are paying for it! (More on that later). On the upside, you have a new level of control that you just don’t get when renting.

 

2) You can hammer picture hooks into the wall

Speaking of control, once you buy your own place, you don’t need someone else’s permission to change things. Want to paint the walls? Get rid of those annoying tiles? Rip up that carpet? You can go for it. Did we mention Bunnings? Before you know it you will watching all those annoying home renovation shows looking for ideas.

 

3) Capital growth

Most people buy property in the hope that it will increase in value. Rent may be less than the cost of interest and the other costs you have as a home owner (rates, maintenance and so on), however once you factor in the capital growth, or increase in value of the property over time, that capital growth may make buying the best option financially over time.

 

4) To get a foot into the market at today’s value

Say you are interested in buying property that is selling around the $800,000 mark. If this type of property, in the suburb you are looking at is growing at 5% a year, it’s going up by a whopping $40,000 per year (which you probably already know if you’ve been looking around). It’s pretty hard to save $40,000 in a year when you are also paying rent, which is why you always hear people talking about ‘getting a foot in the market’. If you were to jump into the market this year, it might be easier than trying to keep up with the rising cost of the type of property you eventually want to buy. Of course though on the flip side, this is only true if values continue to rise the way they have.

 

5) Forced savings

OK now it is starting to sound like financial enslavement! Hear us out though. Having a mortgage is a financial commitment which forces you to save by paying off your home loan. That can be handy if you tend to, like most people, spend money when it is there. Having to pay off a mortgage each month can make sure that you are building towards having equity in an asset (your property) and you don’t get 10 years down the track and have nothing to show for all your hard work (apart from some awesome memories of that great trip to Europe of course).

 

6) You lock in your costs

When you are renting you will usually be given an annual increase in rent. Or if you decide to move you will be out in the market trying to a) find something b) possibly convince an agent you have the best application and c) be paying an amount that creeps up over time as the cost of property does (or demand outstrips supply). Once you buy your house you lock in the amount of your loan and your base cost from then on. It is dependent on interest rates – however the idea is to pay off principal and interest and have your costs go down over time (the more of your property you own) – not up (like your rent will).

 

7) It’s not usually as bad as you think

If in doubt, ask someone you know that has bought property. After some initial shock, they usually settle in to having a mortgage as a normal way of life. As daunting as it all sounds, the upside of owning your own place should (hopefully!) make up for what you might be thinking of as the downside.

 

So if getting yourself a property might be something you are after, take a look at some of these other great articles*, or get in touch and we’ll help you get started down the path.

 

For specialist lending advice, you can contact Doug at (e) douglas.piening@choicehomeloans.com.au or (m)  0408 671 524.

Douglas Piening is a Mortgage and Finance Broker with Choice Home Loans and is passionate about providing clients with lending advice they can trust. Whether it’s re-financing an existing property, buying a new or next home, or investing, he brings a wealth of knowledge and expertise to assisting clients with their lending needs. 

Want to hear what clients have said about working with Doug? Take a look at these reviews from LinkedIn and Facebook.

 

*Other articles and links for First Home Buyers:

10 Tips for First Home Buyers

Moneysmart Guide for First Home Buyers

Navigating your way to your first home loan

 

This information is of a general nature only and does not constitute professional advice. You should always seek professional advice in relation to your particular circumstances.

 

Navigating your way to your first home loan

Although applying for your first home loan may be the biggest financial decision you’ll make, it doesn’t need to be an overwhelming one. With the right preparation, a realistic understanding of your financial position and some professional guidance, you can position yourself as an attractive first home loan customer and gain approval in no time.

So what should you do?

1) Clean up your credit

Before applying for your first home loan, make sure you are creditworthy in the eyes of a lender by obtaining a copy of your personal credit file (you can get a free copy of your credit report at the veda website). Your credit history will be a key factor that a lender will consider when deciding to process your loan application. If you have a history of credit defaults, be prepared to explain honestly and up-front to the lender why those defaults occurred, how you remedied the situation and how you’ve taken steps to ensure the situation will not repeat itself.

2) Check your financial position

It’s also important to conduct a self-assessment of your financial position. This is to work out the amount you can borrow and the ease with which you’ll be able to manage your repayments. Try creating a spreadsheet of your income, expenses, assets and liabilities. Make sure you are honest with yourself about your everyday living expenses and commitments. Your home loan repayments should equate to no more than a third of your income, give or take your expenses. Then consider the extra costs of buying a home (on top of the purchase price) such as legal fees, lender establishment fees, stamp duty (if no government concession applies) and so on. You may also want to look into the availability of any available government concessions or grants that may help reduce the overall cost. A mortgage broker can help you assess your financial position to ensure the amount you wish to borrow is feasible in your circumstances.

3) Be deposit-ready

Although it’s true that some lenders don’t require a deposit – or require only a minimum deposit – you may want to aim to have a solid 20 per cent deposit saved up. Also factor in the additional costs of buying a home such as conveyancing, stamp duty and removalists. Saving a deposit is a good idea for two reasons:
– A 20 per cent deposit could mean you do not have to pay for Lenders Mortgage Insurance (LMI). LMI is a premium amount that a borrower must pay to the lender when the loan-to-valuation ratio exceeds 80 per cent. Some lenders may make the loan available without having to get this insurance.
– A 20 per cent deposit immediately tells a lender that you are financially disciplined and responsible – attributes that will encourage lenders to look favourably upon your first home loan application.
If you do not have a 20 per cent deposit, don’t despair. Your mortgage broker will provide you with some options to help you find the right loan product. If you need any tips on saving a deposit, check out raising a deposit.

4) Do your research

Finding the right first home loan often entails so much more than just interest rates. You should try to research a range of products and investigate their fine print, including any set-up and break fees, loan structures, flexibility options such as redraw and offsetting, repayment options and guarantees. A good mortgage broker will have expert product knowledge that they can discuss with you to determine what loan would best suit your lifestyle and needs, both now and in the future (for example, when starting a family).

5) Gather your documents

To facilitate a fast assessment of your loan application, it’s helpful to gather recent copies of your pay slips and evidence of any other income. Also, gather copies of your bank account statements and credit card statements. If you’ve been employed for only a short time, try strengthening your application by obtaining letters of reference from your current and previous employers. If you are self-employed, a way to show your monthly income, outgoings and cashflow is by having business invoices and receipts on hand in case the lender requires such evidence of your earnings.

 

It can be easy to get overwhelmed when looking for your first home. Getting in touch as soon as you can with a good mortgage broker who can help position you as an attractive borrower to lenders, can help make things much easier.

 

For specialist lending advice, you can contact Doug at (e) douglas.piening@choicehomeloans.com.au or (m)  0408 671 524.

 

Douglas Piening is a Mortgage and Finance Broker with Choice Home Loans and is passionate about providing clients with lending advice they can trust. Whether it’s re-financing an existing property, buying a new or next home, or investing, he brings a wealth of knowledge and expertise to assisting clients with their lending needs. 

Want to hear what clients have said about working with Doug? Take a look at these reviews from LinkedIn and Facebook.

 

This information is of a general nature only and does not constitute professional advice. You should always seek professional advice in relation to your particular circumstances.

Why would you use a Mortgage Broker?

Research has revealed that 53% of Australian’s now use a mortgage broker for their lending needs, up from 35% ten years ago. So why are Australian’s increasingly using the services of a broker?

 

1) A choice of lenders

With an extensive panel of lenders (including the major banks), mortgage brokers are able to compare hundreds of loans to find a loan that gives you the best fit for what you need. If you go direct to a bank, they will only show you their lending products. Better choice across the whole market = a better loan and interest rate tailored to your needs. Here is the panel of lenders that we have at Choice Home Loans.

 

2) To save time

With today’s increasingly busy lifestyles you probably don’t have hours to devote to ‘shopping around’ to find the best loan and to go back and forth to a bank. Mortgage brokers are customer service focussed and most will come to you at a time and place that suits you – whether that is at home or work, during or after hours.

 

3) It’s free and could save you money

There is no cost to you for the services of a broker. Brokers get paid commission on loans from lenders, but regardless of whether you go direct to the bank or through a broker, the interest rate and fees to you will be the same. Very often, given brokers knowledge of the lending market and the access they have to special lending deals – using a broker can get you a better interest rate than going direct. Last year our clients who refinanced saved on average $3,800 a year in interest, a huge saving from finding a better rate in the market.

 

4) They are finance experts 

Mortgage brokers are experts in financing options, with an in depth understanding of the overwhelming array of loan options available. Many loans seem to offer a great deal, but they could have penalties, fees and charges you may not be aware of, or they may not offer the flexibility you require in the future. Mortgage brokers ensure that you find the best loan for your specific requirements, now and into the future.

 

5) They are with you for the loan and beyond 

Unlike constantly changing bank staff, Mortgage Brokers are often with you for the life of your loan and beyond. Mortgage Brokers usually own their own businesses and are committed to their clients for the long term, keeping in touch to make sure your loans are still right for you and that circumstances haven’t changed. How often does the bank call to tell you that interest rates have changed and you can get a better deal? Probably not often! But don’t be surprised if this is something your broker does.

 

There are significant advantages to using a mortgage broker. Whether you have an existing loan which needs a health check to see if it’s still the right fit and the best interest rate, or you are in the market for a first or next home, or it’s time to stretch yourself and get an investment loan – it’s a great idea to get in touch with your mortgage broker.

 

Douglas Piening is a Mortgage and Finance Broker with Choice Home Loans and is passionate about providing clients with lending advice they can trust. Whether it’s re-financing an existing property, buying a new or next home, or investing, he brings a wealth of knowledge and expertise to assisting clients with their lending needs. 

For specialist lending advice, you can contact Doug at (e) douglas.piening@choicehomeloans.com.au or (m)  0408 671 524.

Want to hear what clients have said about working with Doug? Take a look at these reviews from LinkedIn and Facebook.

 

This information is of a general nature only and does not constitute professional advice. You should always seek professional advice in relation to your particular circumstances.

 

Finding a home loan when you’re self-employed

There are many perks to working for yourself, but when it comes to applying for a loan, it seems being your own boss sends up a red flag to banks and other lenders.

Andrew, owner of Tick Concepts, was one such person who found himself in a difficult position, after having left corporate life and a steady stream of high paying PAYG roles to go into business, when he went to sell the apartment he had owned in Sydney and buy a house in Adelaide. Despite the fact he was putting down a huge 50% of the equity in the new property and was doing well in his new business venture – he came up against several brick walls when looking for finance and a “sorry we can’t help”.

So why is it so difficult securing financing when you are self employed? For lenders a salaried employee has a regular, steady income and is less likely to experience the cash flow volatility of a small business owner, contractor, entrepreneur, tradesperson or freelancer.

Yet by being proactive and accessing specialist advice, self-employed applicants can also enjoy a successful and hassle-free road to securing a home loan. For Andrew this meant getting advice on an option with a Credit Union, who would take 1 year of financials rather than 3 and would accept BAS statements, making it easy for him to secure the loan for his new property.

So if you are self employed, try these 5 top tips when it comes to securing a loan.

1. Seek expert advice

Trying to navigate the home loan landscape solo may not produce the outcome you desire. There are many experts who can help self-employed people access a home loan, and a mortgage broker is a good first port of call. They will be able to provide you with an up-to-date overview of which lenders on their panel are most comfortable lending to the self-employed, and also explain what sorts of loan products are available. They can also provide valuable advice around the sort of documentation you will need to have ready before you submit your application.

2. Get your affairs in order

Many lenders will lend to self-employed borrowers who provide their full business financials. This generally includes your personal and business tax returns for the past two years. If you have these documents on hand – and they reveal a fairly consistent income – applying for a loan should be relatively straightforward.

However, the hectic schedule that comes with running your own business means many self-employed borrowers’ tax returns are not up to date. If you have time on your side, consider working with your accountant to lodge your outstanding returns. If you’re in a hurry, you may wish to explore the option of applying for a low doc loan.

3. Consider a low doc loan

Low doc loans are offered by a wide range of lenders and, as the name suggests, require less documentation than traditional loans. Many low doc loans only require 12 months of business activity statements instead of full financials, for example. A downside of some low doc loans is that they may only be available at a lower loan to property value ratio (LVR), which means you may need a larger deposit.

4. Do your homework

Checking your credit history is a good step for anyone applying for a home loan. If you’re self-employed, it’s definitely worth taking the time to make sure your credit history doesn’t include any defaults or errors – these can hold up your loan application if they are not rectified in advance.

Taking the time to work out exactly how much you’d like to borrow is also a good idea. That way, you can hit the ground running when you meet with lenders or your mortgage broker.

5. Think outside the square

It may be possible to apply for a home loan using a Certificate of Income Declaration – a document that verifies your income and is signed by your accountant. It’s wise to consult a mortgage broker before applying for a loan in this way, as they can advise which lenders will accept an income declaration. It should be noted, however, that applying for a loan using such a document may mean that the required LVR (the portion of the property value you can borrow) may be lower, so you may need a larger deposit.

So while it’s a little more complicated for self-employed borrowers, getting a home loan can be easier than you’d imagined with a good mortgage broker in your corner.

 

Self employed and looking for a home loan or refinancing? To get some specialist help and advice, you can contact Doug on (m)  0408 671 524 or (e) douglas.piening@choicehomeloans.com.au.

 

This information is of a general nature only and does not constitute professional advice. You should always seek professional advice in relation to your particular circumstances.

How Much Can I Borrow?

This is often the first question that a client will ask before they even think about buying a new property, and many are surprised at the answer they get. Different lenders have different policies with regard to the maximum borrowing they will offer but there are some basic principles that remain constant throughout.

Borrowing capacity is determined by several factors:

  1. Eligible Income

Eligible income may include income from primary work, income from investments, income from Government benefits or a combination of the above. In some cases, Lenders will require that employment has been for a certain period of time, and they may not accept some types of income. Your Broker will navigate the maze of what is ‘eligible income’ for you.

  1. Living Expenses

Living expenses are generally calculated as the higher of your declared living expenses or a minimum benchmark set by the Lenders. The Henderson Poverty Index is one measure which has been used as a benchmark minimum. As a guide for a single person, the applied living expense ranges from just over $1,000 per month up to over $1,700 per month. Couples range from around $1,800 per month up to around $2,700 and each dependent can be from around $153 up to over $500 per month. This variation goes a long way to explaining why some borrowers may be eligible with one lender but not another.

  1. Other Commitments

Existing credit commitments will reduce the amount that someone is able to borrow. For example, if you have a car loan, personal loan or another property loan, the repayments on these will reduce the amount of additional finance available. If you have Credit Cards, the total limit (regardless of whether you pay them off in full) will impact the amount that you can borrow. As a guide the monthly commitment for a credit card is equal to around 3% of the total limit – for example if you have Credit Cards with a limit of $20,000 this equates to a commitment of $600 per month (3% x $20,000)

Once income, living expenses and other commitments are ascertained the borrower will hopefully have an amount of surplus money available each month – this amount is then used to calculate the maximum repayment possible and by extension the maximum loan amount.

The lender will apply a rate of interest that is higher than the current rates available – this provides a safety net or buffer in the event of rising interest rates. For example, whilst most Standard Variable Rates are around 5% at present, the Assessment Rates (or implied rates for this purpose) are between 7% and 8% in most cases.

Lender calculators can be useful, but should only used as an approximate guide. Your specific circumstances and the lenders policies will determine exactly how much you can borrow.

If it all sounds a bit complex, don’t worry your Mortgage Broker will help!

 

Need any information on Home Loan Options?

telephone  Contact Doug on (m) 0408 671 524 or (e) douglas.piening@choicehomeloans.com.au

 

This information is of a general nature only and does not constitute professional advice. You should always seek professional advice in relation to your particular circumstances.

 

 

 

Why you should definitely be thinking about refinancing

Some estimates put the cost to customers of their ‘loyalty’ to their existing home loans with the big four banks at ‘more than $6 billion in savings each year’*.

 

Given that there are home loan lenders offering rates as low as 3.99% at present ‘Australians are wasting $17 million every day by sticking with the big banks and paying higher interest rates’*.

So instead of an ‘out of sight out of mind’ approach on your home loan (bit like your super! Or that health check you need!) here’s why you might want to consider refinancing.

 

  1. There are big savings to be made

    Type home loan interest rate into google. The deals you see are how much you could be paying – which probably represents a huge saving for you. And if you don’t know exactly what rate you are paying now, that probably puts you in the majority of people in Australia! It’s often our single biggest monthly expense and yet it can be a vague figure that we can’t keep track of that changes randomly each time we get a letter from our lender.

  1. The big four banks are relying on you to be lazy

    The billion dollar profits of the banks don’t come no-where! The banks like to offer deals to entice new customers but rarely repay your loyalty when you ‘set and forget’ your home loan. Just like your car or home insurance, a simple review can result in a better deal.

  2. The banning of exit fees in 2012 has made switching more affordable

    In 2012 the government set about getting rid of the barriers that the banks had in place to make it difficult for you to shop around for a better deal on your home loan. There are still some costs of refinancing (like mortgage discharge fees and mortgage registration with your new lender) but they are nothing in comparison to the break costs the banks used to charge.

  1. There are some fantastic home loan deals out there

    Competition in the market continues to be strong, in spite of some of the regulatory changes that came into place in 2015 that impacted on interest rates. Lenders such as ING Direct, ME Bank, BankSA and Suncorp  not only have some terrific deals, but they also have high customer satisfaction levels**. And despite having the highest advertised variable interest rates, the big four banks will also compete aggressively for new borrowers or those that are refinancing, with discounts based on individual circumstances.

  1. It’s not as hard as you think

    It is really up to your Mortgage Broker to do the heavy lifting on assessing whether a refinance results in a better, or more suitable home loan for you. It is up to them to look at your current situation and then assess the hundreds of available loans in the market to see what options might represent a better option for you.

 

So whether your home loan is 1, 2 or 10 years old, it’s probably worth putting in a call or shooting off a quick email to see if you can get hold of some of that $6 billion in savings. I’m sure there are plenty of things you can think of to spend your money on than paying the banks interest you don’t need to on your home loan!

 

Interested in Refinancing?   You can contact Doug on (m) 0408 671 524 or (e) douglas.piening@choicehomeloans.com.au

Want to hear what clients have said about refinancing? Take a look at these reviews from LinkedIn and Facebook


Source:

*‘Loyalty to the big four banks costs home loan customers billions’ October 29, 2015 news.com.au

**‘Home loan customers urged to switch, as banks stand to reap an extra $9.9 billion’ November 24, 2015 Sydney Morning Herald.

 

This information is of a general nature only and does not constitute professional advice. You should always seek professional advice in relation to your particular circumstances.