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Renovate or Invest? How 7-In-10 Australians Are Using Their Equity

renovate or invest

Seven in 10 homeowners have recently used their equity in their home to renovate, invest in property or shares, or boost their superannuation. Have you thought about how you could take advantage of last year’s property price spike?

Have you heard that property prices spoked 23.7% in 2021? That is quite the growth spurt! So, how do you take advantage of that growth without (or before) selling your home? Well, one way to do so is to cash out equity while property prices are high.

According to NAB research, three in 10 mortgage holders have recently done just that and have used the money to give their home a facelift by renovating. Other popular options include using unlocked equity to buy an investment property (16%), invest in shares (12%) and boost super balances (8%).

How Does ‘Cashing Out Equity’ Work?

Let’s say you bought an $800,000 house three years ago, that due to last year’s property price surge, is now worth $1 million. And let’s also say you took out a $600,00 loan for that house, which you have managed to pay down to $500,000. By refinancing that $500,000 loan into a $700,000 loan (70% of your property’s new market value), you can unlock $200,000 in equity to help fund a deposit for your renovations or to buy an investment property.

It is worth noting that banks will typically let you borrow up to 80% of a property’s market value. So, if you upped the ante and refinanced to an $800,000 loan, you would be able to unlock $300,000 in equity.

 Want to Find Out More About Unlocking the Equity in Your Home?

We would be more than happy to sit down with you and help you work out how much equity you can unlock. And if you decide to proceed, the good news is part of the process can include refinancing your home loan.

Why is that good news? Well, just because interest rates are going up, does not mean you can’t scope out a better deal on your mortgage. Competition amongst lenders remains fierce, particularly if you have a decent amount of equity and a strong track record of meeting your mortgage repayments.

If you would like to explore your options when it comes to unlocking the equity potential in your home, get in touch as we would love to help you crunch the numbers.

Frequently Asked Questions

What is ‘Cashing Out Equity’ and How Does It Work?

Cashing out equity means refinancing your existing home loan to unlock the increased value of your property. For example, if your home’s value has risen from $800,000 to $1 million, and you’ve paid down your $600,000 loan to $500,000, you can refinance to a $700,000 loan to unlock $200,000 in equity.

What Are the Popular Ways Australians Are Using Their Home Equity?

According to NAB research cited, 30% of mortgage holders have used their home equity for renovations. Other popular uses include buying an investment property (16%), investing in shares (12%), and boosting superannuation balances (8%).

How Much Can I Borrow Against My Home’s Value?

Banks will typically let you borrow up to 80% of a property’s market value. So, if your home’s value has increased to $1 million, you could potentially refinance to an $800,000 loan, unlocking $300,000 in equity.

Can I Get a Better Mortgage Deal While Refinancing?

Yes, even though interest rates are going up, competition among lenders remains fierce. If you have a decent amount of equity and a strong track record of meeting your mortgage repayments, you may be able to find a better deal on your mortgage.

How Can I Find Out How Much Equity I Can Unlock?

Financial experts can help you work out how much equity you can unlock. They can also assist you in the refinancing process, which can include finding a better mortgage deal.

What Are the Risks Involved in Cashing Out Equity?

It’s important to consider that refinancing to unlock equity increases your loan amount, which could lead to higher monthly repayments. Always consult a financial advisor before making such decisions.

Zippy Financial is an award-winning mortgage brokerage specialising in home loans, property investment, commercial lending, and vehicle & asset finance. Whether you are looking to buy your first home, refinance or build your property investment portfolio, the team at Zippy Financial can help find and secure the right loan for you and your business. 

About the Author:   

Louisa Sanghera is an award-winning mortgage broker and Director at Zippy Financial. Louisa founded Zippy Financial with the goal of helping clients grow their wealth through smart property and business financing. Louisa utilises her expert financial knowledge, vision for exceptional customer service and passion for property to help her clients achieve their lifestyle and financial goals. Louisa is an experienced speaker, financial commentator, mortgage broker industry representative and small business advocate.   

Connect with Louisa on Linkedin.   

Louisa Sanghera is a Credit Representative (437236) of Mortgage Specialists Pty Ltd (Australian Credit Licence No. 387025).    

Disclaimer:This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information. This article is not to be used in place of professional advice, whether business, health or financial.  r-less normal distribution of letters. making it look like readable English.

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Interest Rate Rise: How Long Does It Take to Kick In?

Household budgets around the country are feeling the brunt of five back-to-back rate hikes, and we are warned that more are on the way. But how long does it take for each rate rise to impact your monthly mortgage repayments?

In early September, the RBA raised the cash rate to 2.35%. It was the fifth cash rate hike in a row and the fourth straight double rate increase of 50 basis points.

In response, many lenders have increased their variable interest rates. Thankfully, lenders do not slug you with a mortgage repayment hike straight away… there is a little lag time to help you prepare. But how long?

When Exactly Will the Variable Rate Rise Kick In?

After the RBA hikes the official cash rate, your bank will (usually) announce its own interest rate hike from a specific date. But this does not mean your repayments will immediately increase when that date arrives. Exactly when your rate rise kicks in depends on the lender, their policies, the home loan agreement, and the repayment schedule. 

Lender notice periods for interest rate rises are also different from bank to bank with CBA’s lasting 20 days, Westpac lasting 30 days, NAB lasting 32 days and ANZ lasting 30 days.

Here is an example… let’s say your monthly mortgage repayments are made on the 20th day of each month. Let’s also assume the RBA increases the cash rate on the 4th of October, and you receive a notice from your lender on the 7th of October of a subsequent rate increase, with a 30-day notice period. By the time the 20th of October arrives, you will not be paying higher repayments as the full 30 days’ notice has not passed. When the 30 days’ notice finishes on the 6th of November, the daily interest rate charged will increase to the new amount. This means that when your monthly repayment on the 20th of November rolls around, you will be charged the new, higher rate (but calculated only from the 6th of November). This means there is a 44-day heads up from the lender, and it will not be a full increase yet either. By the time the 20th of December arrives, the repayment amount you are charged will fully reflect the new rate.

Are You Worried About How Rate Rises Are Increasing Your Mortgage Repayments?

If you have received your rate rise notice and your budget forecast is looking tight, rest assured that there are steps you can start taking now to help ease the pain. First and foremost, if you have not refinanced for a while, there is a decent chance you could get a better rate on your home loan.

For example, let’s say you refinance your variable rate home loan from 5% down to 4.5%. If the RBA raises the cash rate by 0.5% the month after, and your bank follows suit, your interest rate will then be 5% – not 5.5% like it could have been if you didn’t refinance.

Another option is consolidating multiple loans, such as car or personal loans, into your mortgage to reduce your monthly expenses. However, keep in mind that, because home loans are longer, consolidating mean you will pay more interest over the lifetime of the car and/or personal loan that you would have otherwise. 

You could also consider refinancing, with guidance from a mortgage broker, to extend the term of your mortgage and help reduce monthly repayments. Once again, you will end up paying more interest over the life of your loan, but it could provide assistance in your current situation.

Frequently Asked Questions

What is the impact of consecutive rate hikes on household budgets?

Household budgets are feeling the strain due to five back-to-back rate hikes. More rate hikes are expected, and it’s essential to understand how these will affect your monthly mortgage repayments.

How long does it take for a rate rise to affect my mortgage repayments?

The time it takes for a rate rise to impact your mortgage repayments depends on various factors, including the lender’s policies, the home loan agreement, and the repayment schedule. Lenders also have different notice periods for rate rises.

What can I do to prepare for rate hikes?

If you’re concerned about how rate hikes will affect your budget, there are several steps you can take. Refinancing your home loan to get a better rate is one option. You can also consider consolidating multiple loans into your mortgage to reduce monthly expenses.

How does the RBA’s cash rate affect my mortgage rate?

When the Reserve Bank of Australia (RBA) raises the cash rate, lenders usually follow suit by increasing their variable interest rates. However, there is usually a lag time before these changes affect your mortgage repayments.

Are there any strategies to mitigate the impact of rate hikes?

Yes, you can consider refinancing to extend the term of your mortgage, which could reduce your monthly repayments. However, this will result in paying more interest over the life of the loan.

Get in Touch

Everybody’s situation is different, and we understand some of the ideas above might not suit your financial or personal situation, but there are others that could. If you are worried about how you will meet your repayments in the months ahead, give us a call and we will sit down with you to help work out a plan moving forward.

Zippy Financial is an award-winning mortgage brokerage specialising in home loans, property investment, commercial lending, and vehicle & asset finance. Whether you are looking to buy your first home, refinance or build your property investment portfolio, the team at Zippy Financial can help find and secure the right loan for you and your business. 

About the Author:   

Louisa Sanghera is an award-winning mortgage broker and Director at Zippy Financial. Louisa founded Zippy Financial with the goal of helping clients grow their wealth through smart property and business financing. Louisa utilises her expert financial knowledge, vision for exceptional customer service and passion for property to help her clients achieve their lifestyle and financial goals. Louisa is an experienced speaker, financial commentator, mortgage broker industry representative and small business advocate.   

Connect with Louisa on Linkedin.   

Louisa Sanghera is a Credit Representative (437236) of Mortgage Specialists Pty Ltd (Australian Credit Licence No. 387025).   

Disclaimer:This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information. This article is not to be used in place of professional advice, whether business, health or financial.  r-less normal distribution of letters. making it look like readable English.

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Hiring Finance Broker to Get a Home Loan?

finance broker

In The role of finance brokers in securing home loans has always been pivotal. However, as the mortgage industry continues to evolve, their importance is becoming more pronounced. This article explores the current landscape of mortgage brokering and the increasing reliance on finance brokers for navigating complex loan processes.

The Current State of Mortgage Brokering 

The mortgage brokering industry has witnessed significant changes recently. With a diverse range of loan products and an increasingly competitive market, the role of finance brokers has expanded. They are not just intermediaries but crucial advisors in the home loan process. Recent statistics show a surge in the number of individuals and families opting for finance brokers to secure their mortgages, indicating a shift in consumer preferences and trust.

Why Finance Brokers are More Relevant Than Ever 

Today’s finance brokers are more relevant than ever due to the complexity and variety of modern home loan products. They play a key role in demystifying terms and conditions for clients, providing tailored advice that aligns with individual financial situations. This personalized service is particularly valuable in an era where one-size-fits-all solutions are no longer feasible.

The Benefits of Using a Finance Broker 

Utilizing the expertise of a finance broker offers numerous benefits. They provide access to a wide range of loan products, leverage their relationships with lenders to negotiate better terms, and assist in navigating the often complex application and approval processes. Moreover, with the advent of new technologies, brokers can offer more efficient and streamlined services, making the home loan process quicker and more user-friendly.

Choosing the Right Finance Broker 

Selecting the right finance broker is crucial. Potential clients should look for brokers with strong credentials, a wealth of experience, and positive client reviews. It’s important to ask about their approach to finding the best loan products, their understanding of the market, and how they tailor their services to meet individual needs.

Evaluating Broker Credentials and Experience

  • Professional Certifications: Begin by assessing the broker’s professional certifications and qualifications. Look for designations such as Certified Mortgage Broker (CMB) or membership in recognized financial institutions. These credentials demonstrate a commitment to professional excellence and ongoing education. 
  • Industry Experience: Consider the broker’s industry experience, including the number of years they have been in the financial services sector. An experienced finance broker is likely to have a deeper understanding of market dynamics and possess valuable insights into securing favorable loan terms. 
  • Specialized Expertise: Inquire about the broker’s specialized expertise. Some brokers focus on specific types of loans or cater to particular client profiles. Assessing their specialization helps ensure that their skills align with your unique financial needs, whether you are a first-time homebuyer, property investor, or seeking refinancing.

Client Reviews and Reputation

  • Client Testimonials: Read client testimonials and reviews to gauge the broker’s reputation. Look for patterns in feedback related to communication, responsiveness, and the overall satisfaction of past clients. A broker with positive reviews often demonstrates a track record of delivering quality service. 
  • Referrals and Recommendations: Seek referrals from friends, family, or colleagues who have worked with finance brokers. Personal recommendations provide valuable insights into the broker’s ability to meet client expectations and deliver successful outcomes. 
  • Industry Recognition: Check if the broker has received any industry recognition or awards. Awards or acknowledgments from reputable sources can be indicative of their standing in the financial services community and their commitment to excellence.

Zippy Financial’s Approach 

At Zippy Financial, our approach to mortgage brokering is client-centric and up-to-date with the latest market trends. We offer a range of services, from asset finance brokering to comprehensive mortgage advice, ensuring our clients receive the best possible guidance. Our team of experienced finance and mortgage brokers is committed to finding solutions that align with our clients’ unique financial goals.

The role of finance brokers in the home loan market is more crucial than ever. With their expertise, they can simplify the complex world of mortgages, providing invaluable assistance to those looking to secure a home loan. At Zippy Financial, we are dedicated to guiding our clients through this process with professionalism and personalized service. 

Frequently Asked Questions

What is a finance broker?

A finance broker is a professional who acts as an intermediary between borrowers and lenders, helping to secure loans for clients.

How can a finance broker assist in getting a home loan?

A finance broker can help you find the best loan options, negotiate with lenders, and guide you through the application and approval process.

What are the benefits of using a finance broker for a home loan?

Finance brokers offer expertise in loan products, access to a wide range of lenders, personalized service, and can save you time and effort in the loan process.

Can a finance broker help with bad credit?

Yes, finance brokers can often find loan options for people with less-than-perfect credit by accessing specialized lenders.

Can a finance broker help with refinancing an existing home loan?

Yes, they can assist in finding better refinancing options to reduce your interest rate or adjust loan terms.

What should I expect during the home loan process with a finance broker?

Expect a consultation to discuss your needs, followed by the broker presenting loan options, assisting with application paperwork, and guiding you until loan closure.

Phone: 1300 855 022

Email: clientservices@zippyfinancial.com.au 

Zippy Financial is an award-winning mortgage brokerage specialising in home loans, property investment, commercial lending, and vehicle & asset finance. Whether you are looking to buy your first home, refinance or build your property investment portfolio, the team at Zippy Financial can help find and secure the right loan for you and your business. 

About the Author:   

Louisa Sanghera is an award-winning mortgage broker and Director at Zippy Financial. Louisa founded Zippy Financial with the goal of helping clients grow their wealth through smart property and business financing. Louisa utilises her expert financial knowledge, vision for exceptional customer service and passion for property to help her clients achieve their lifestyle and financial goals. Louisa is an experienced speaker, financial commentator, mortgage broker industry representative and small business advocate.   

Connect with Louisa on Linkedin.   

Louisa Sanghera is a Credit Representative (437236) of Mortgage Specialists Pty Ltd (Australian Credit Licence No. 387025).   

Disclaimer:This article contains information that is general in nature. It does not consider the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information. This article is not to be used in place of professional advice, whether in business, health or financial.

RELATED ARTICLES 

SERVICE LOCATIONS

Comparison Rate calculated on a secured loan amount of $150,000 for a term of 25 years. WARNING: This Comparison Rate is true only for the example given and may not include all fees and charges. Different terms, fees and other loan amounts might result in a different Comparison Rate. Fees and Charges Apply. Terms and Conditions are available on request.