Homeowners have been battling rising interest rates for over a year and a half now, but a new report reveals the important step some savvy borrowers are taking to rein in higher rates.
It is no secret that refinancing has the potential to slice a big chunk off your monthly loan repayment. According to Canstar, 1 in 10 mortgage holders chased a better deal in 2023 and switched to a new lender to save on their repayments. But what is surprising is that 9 in 10 didn’t. So, what is holding them back?
Some Score a Discount, Others Don’t
To be fair, many homeowners have been on the front foot this year. According to Canstar, 1 in 5 homeowners with a mortgage have negotiated a better rate with their current lender. Having a chat with your bank can be a fuss-free way to save, especially if they come to the party with a rate discount.
A further 14% of homeowners say they have tried to switch to another lender but weren’t able to do so because they didn’t have enough equity or didn’t meet the new lender’s requirements.
That is why it pays to speak to us before talking to a lender. We have in-depth knowledge of different banks’ lending criteria, so we know which lenders are likely to give you the green light for a better deal.
There are too many borrowers wearing higher rates
The thing is, there are plenty of homeowners who have just copped rising rates without acting. As Canstar puts it: “Too many borrowers remain complacent even in the face of rising repayment costs.”
The scary thing is that 49% of Australia’s homeowners with a mortgage don’t intend to change lenders at all. Some believe they have a good interest rate, but as many as 1 in 5 think that refinancing is too hard.
Busting the myths
It is great if you think you are paying a competitive interest rate but the key is to know for sure.
Right now, variable home loan rates are anywhere from 5.69% (very rare) to 9% plus. With that sort of range, there is plenty of scope to save, especially as lenders often make lower rates available to new customers.
There is an easy way to know if you have a good rate – pick up the phone and call us. If you are worried that refinancing is hard work, rest assured that we will do the bulk of the leg work for you. We will sort through hundreds of home loan options to find the loan that is right for your needs. We will also make the paperwork easy and liaise with your old lender and your new bank.
If you are keen to find out if you can do better with your home loan, give us a call and we will help you put your best foot forward going into 2024.
FAQ
A: Refinancing involves replacing an existing loan with a new one, potentially with better terms or lower interest rates. It can significantly reduce monthly loan repayments, making it a smart financial move for homeowners.
A: According to Canstar, 1 in 10 mortgage holders in 2023 switched to a new lender to save on their repayments. This trend indicates a growing awareness among homeowners about the benefits of refinancing.
A: Despite the advantages, 9 in 10 homeowners haven’t refinanced. This could be due to a lack of awareness, perceived complexity of the process, or satisfaction with current rates.
A: Yes, negotiating a better rate with the current lender is a viable option. Canstar reports that 1 in 5 homeowners successfully negotiated a better rate with their existing lender.
A: Many homeowners are reluctant to change lenders due to contentment with their current rate or the belief that refinancing is too complicated.
A: Homeowners can consult with financial experts or mortgage brokers to evaluate if their current interest rate is competitive and explore refinancing options.
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.
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.
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Enhancing Your Borrowing Power: Updated Strategies for Today's Market
Enhancing Your Borrowing Power: Updated Strategies for Today’s Market
In today’s fluctuating economic climate, understanding and maximizing your borrowing power is more crucial than ever, especially when it comes to significant financial commitments like home loans. Borrowing power, the amount a lender is willing to loan you, is influenced by various factors, and staying informed about these can significantly impact your financial decisions.
Understanding Borrowing Capacity
Borrowing power, essentially the amount a lender deems you capable of repaying, plays a pivotal role in your financial journey, particularly in property investments. With the lending landscape continually evolving, it’s vital to stay abreast of how these changes affect your borrowing capacity.
Factors Influencing Borrowing Capacity
Income and Employment Stability: Lenders assess your income and employment stability to gauge your ability to meet repayment obligations. A stable and consistent income stream positively impacts your borrowing capacity.
Debt-to-Income Ratio: The ratio of your debt obligations to your income is a key metric. A lower debt-to-income ratio enhances your borrowing capacity, signaling to lenders that you have a reasonable level of debt relative to your income.
Credit History: A strong credit history is crucial. Lenders evaluate your credit score and payment history to assess your creditworthiness. A favorable credit history can increase your borrowing capacity.
Evolving Lending Criteria
Regulatory Changes: Financial regulations and lending criteria can evolve over time, impacting how lenders assess borrowing capacity. Staying informed about regulatory changes ensures that you understand the criteria shaping your loan eligibility.
Interest Rate Fluctuations: Changes in interest rates directly influence borrowing capacity. Even a slight fluctuation can affect the affordability of a loan. Understanding the current interest rate environment is key to anticipating potential impacts on borrowing capacity.
Market Conditions: Economic and market conditions play a role in lending practices. During economic downturns, lenders may tighten their criteria, affecting borrowing capacity. Conversely, in periods of economic growth, lending criteria may become more lenient.
Maximizing Borrowing Capacity
Loan Structure Optimization: Working with financial professionals to optimize your loan structure can enhance borrowing capacity. This may involve considering different loan products, interest rate options, and repayment terms.
Managing Existing Debts: Effectively managing and reducing existing debts positively influences borrowing capacity. Strategies such as debt consolidation or paying down high-interest debts can free up capacity for new loans.
Income Enhancement Strategies: Exploring opportunities to increase your income, such as through career advancement, additional income streams, or investment returns, can positively impact your borrowing capacity.
Key Factors Affecting Borrowing Power
Interest Rates:
Your borrowing power is sensitive to interest rate fluctuations. Lower rates can increase your borrowing capacity, as they reduce the amount you’ll need to repay.
Credit Score:
A high credit score can significantly enhance your borrowing power. It signals to lenders that you’re a low-risk borrower, which can lead to better loan terms.
Income Stability:
Lenders favor borrowers with stable and predictable incomes. Demonstrating job security and consistent income can positively influence your borrowing capacity.
Existing Debts:
Your current debts, including credit card balances and other loans, can reduce your borrowing power. Lenders consider your debt-to-income ratio to assess your repayment capability.
Practical Steps to Boost Borrowing Capacity
Debt Consolidation:
Consolidating multiple high-interest debts into a single, manageable loan can improve your financial standing and borrowing power.
Reducing Credit Limits:
Lowering your credit card limits can positively impact your borrowing capacity, as it reduces your potential debt burden.
Improving Credit Score:
Regularly paying bills on time and reducing outstanding debts can help improve your credit score, thus enhancing your borrowing power.
Income Documentation:
Properly documenting your income and assets can provide lenders with the assurance they need to offer you a higher borrowing capacity.
The Role of Mortgage Brokers:
Mortgage brokers can be invaluable in navigating the complexities of borrowing. They can offer tailored advice, help you find the best loan options and rates, and assist in understanding your borrowing power for a home loan.
Your borrowing power is a key factor in your financial health, especially when considering a home loan. By understanding the factors that influence it and taking proactive steps to enhance it, you can position yourself for better financial opportunities. For personalized advice and to understand your borrowing power, consider consulting with experts in financial planning or mortgage brokers.
Frequently Asked Questions
What is borrowing power and why is it important?
Borrowing power refers to the amount of money a lender is willing to loan you, based on factors like income, debts, and credit history. It’s crucial as it determines the scale of financial commitments you can undertake, especially for significant investments like home loans.
How can I calculate my borrowing power?
You can estimate your borrowing power using online calculators provided by lenders or financial websites. These tools typically require information about your income, expenses, debts, and other financial commitments.
Can improving my credit score enhance my borrowing power?
Yes, a higher credit score can significantly boost your borrowing power. It indicates to lenders that you’re a responsible borrower, potentially leading to more favorable loan terms and higher loan amounts.
Does my choice of employment affect my borrowing power?
Yes, stable and consistent employment is viewed favorably by lenders, as it suggests a reliable income stream for loan repayments.
Are there any quick tips to boost my borrowing power in the short term?
Short-term strategies include paying down existing debts, avoiding new credit applications, and ensuring your credit report is accurate and up-to-date.
Can financial advisors help in enhancing my borrowing power?
Yes, financial advisors can provide personalized advice and strategies to improve your financial health and borrowing power, tailored to your unique circumstances.
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.
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.
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Real Estate Jargon Busters: Decoding Property Terms for Today’s Market
For a long time, Sydney and Melbourne have been cities to watch in the Australian property market. Unprecedented growth, cut-throat auctions and large-scale developments dotted across these cities have helped many investors build investment portfolios that have far exceeded any expectations.
However, as we all know, growth in these cities has not only slowed but has gone backwards. According to recent research, our two biggest cities may see themselves surpassed when it comes to property price growth by a contender to the north.
The BIS Oxford Economics Residential Property Prospects 2019 to 2022 report has been released, and it predicts a slow recovery from the property downturn for almost all of our major population centres.
While the property slump seems to have turned a corner across the country since the federal election, buoyed by further interest rate cuts and APRA’s recommendation to lower the interest rate buffer lenders use to assess borrowing capacity, most experts are warning that the bounce back will be subtle and steady, nothing like the boom conditions that followed the GFC.
Unless, you are investing in Brisbane.
Brisbane Prices Set to Surge
The BIS Oxford Economics report suggests that house prices in the Queensland capital could leap by up to 20 per cent over the next three years, leaving Sydney and Melbourne in their dust. Units should also get a significant boost, with their price tag set to increase by around 14 per cent, according to the report.
By contrast, BIS Oxford Economics has forecast growth for Sydney at just 6 per cent, while Melbourne fares slightly better at 7 per cent. Even with these predicted gains, the median property value in both cities will fall well short of their previous peaks.
Over in the west, Perth is still recovering from the mining slowdown and should only see growth of about 7 per cent by 2022, while in Canberra the projected growth is 10 per cent.
These figures are echoed by other economists and property experts, who caution that while the worst is over in Melbourne, Sydney and Perth, we won’t be witnessing double-digit gains any time in the near future.
Brisbane has had a relatively steady market, compared to the peaks and troughs seen in other capitals. Investors may not have enjoyed their wealth multiplying by the day, as they did in the height of the boom elsewhere, but at the same time they have not been subjected to the crushing blows of the last year or two. If the BIS Oxford Economics predictions are correct, those who have held onto their Brisbane investments may be about to get the payday they have been dreaming of.
Can We Take This Prediction to the Bank?
It is important to note that this report (and similar research) is just a prediction, albeit one put together by economics and property experts. The experts do not always get it right though, so I always advise all my clients to do their own research and due diligence before jumping onto any bandwagon. This includes checking out median rents, vacancy rates, demographic information and local infrastructure before deciding to invest in a property, no matter where in Australia it is located.
Frequently Asked Questions
Why is Brisbane considered as a potential next property hotspot?
Brisbane is considered a potential property hotspot due to its affordable property prices compared to other major cities, strong economic growth, increasing population, and significant infrastructure developments, making it an attractive location for investors and homebuyers.
What factors contribute to Brisbane’s property market growth?
Factors such as consistent economic development, population growth, low-interest rates, and ongoing infrastructure projects are contributing to the growth of Brisbane’s property market, attracting both local and international investors.
How does Brisbane’s property market compare to other major Australian cities?
Compared to other major Australian cities like Sydney and Melbourne, Brisbane offers more affordable property options, lower cost of living, and a subtropical climate, making it an appealing choice for potential homebuyers and property investors.
Are there specific areas in Brisbane that are particularly attractive for property investment?
Yes, certain suburbs and regions in Brisbane are experiencing higher demand due to their proximity to the city center, quality schools, and public transport, making them particularly attractive for property investment.
What are the predictions for Brisbane’s property market in the coming years?
Predictions for Brisbane’s property market are generally positive, with expectations of continued growth driven by economic stability, population increase, and ongoing infrastructure and development projects in the region.
How can Zippy Financial assist in exploring property investment opportunities in Brisbane?
Zippy Financial can provide expert advice and comprehensive services to those looking to explore property investment opportunities in Brisbane, offering insights into market trends, property valuation, and financing options to help clients make informed decisions.
Whatever your investment plans are for the year ahead, be they focused on Brisbane or elsewhere, it is always a good idea to have your financial ducks in a row in case an excellent opportunity presents itself. Get in touch with us now for a financial health check, so we can help ensure you are in the best possible position to maximise your borrowing and grow your wealth.
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.
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.
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Australian Homeownership Soars: Escaping Rental Struggles
Despite the soaring costs of living and successive interest rate hikes, homebuying intentions have climbed, as shown by the latest data. So why are so many people still chasing the great Australian dream? And what can you do to make your own dream a reality?
Despite a flurry of rate rises, new data shows home ownership is again a top priority for many Australians, with the number of house hunters increasing.
So, what’s driving this appetite for property when finances are increasingly tight for many? And how can you boost your own chances of cracking the market sooner?
Rental Squeeze
Across capital cities and major regional areas, there have been historic rental price increases and low vacancies.
Understandably, many are looking to escape renting and grab their spot on the property market. But with rate hikes and inflation, saving a deposit is no easy task for many Australians.
Here are some ways to take the pressure off.
Schemes and Grants to Save Time and Money
There are many government schemes and grants designed to help you get into the market, and all can be used simultaneously, which can really bring in savings!
By not paying LMI, you can save anywhere between $4,000 and $35,000, depending on the property price and your deposit amount, which can fast-track your first home-buying goal by four and five years.
Another home-buying cost that can have a real sting in its tail is stamp duty.
Fortunately for first-home buyers though, state governments have stamp duty concessions available, including South Australia, which announced that it was scraping the tax for first home-buyers on new homes valued up to $650,000.
Why is homeownership soaring despite the rising costs of living?
Despite the increasing costs of living and interest rate hikes, the number of people looking to buy homes has risen. The article suggests that the desire to escape the struggles of renting and the availability of government schemes and grants are driving this trend.
What challenges are renters facing that make them consider buying a home?
Renters are experiencing historic rental price increases and low vacancies in capital cities and major regional areas. These challenges are pushing many to consider buying their own homes.
How can government schemes and grants help potential homebuyers?
Government schemes and grants can significantly help potential homebuyers by saving them time and money. For example, not paying LMI (Lender’s Mortgage Insurance) can save between $4,000 and $35,000, depending on the property price and deposit amount. This can fast-track the home-buying process by four to five years.
What is the role of stamp duty in the home-buying process?
Stamp duty is another cost that potential homebuyers need to consider. However, state governments offer stamp duty concessions for first-home buyers, which can make the process more affordable.
How can Zippy Financial help me in the home-buying process?
Zippy Financial can help you understand your borrowing power, loan options, and eligibility for various schemes and grants. They can guide you through the entire process, making it easier for you to buy your dream home.
Give Us a Call
It is important to note that spots for some of these schemes are limited. And they are popular, so it’s best to get in quick.
If you’d like to kick renting to the curb, get in touch with us today. We will help you work out your borrowing power, and your loan options, and factor in what schemes you may be eligible for.
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.
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.
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Sydney Homeowners: Why They’re Choosing to Stay Put Longer
The average Australian homeowner is paying more than $37,000 in extra interest over the life of their home loan due to the loyalty tax, and it has got three-quarters of borrowers feeling ripped off and angry.
So, What is the Loyalty Tax?
It is the sneaky lender trick where borrowers with older mortgages are typically charged a higher interest rate than borrowers with new loans, and it was confirmed in a study by the Reserve Bank of Australia (RBA) in 2020. The banks don’t think you are paying attention, so they only offer their lowest rates going to new customers to win them over.
The RBA June 2021 figures show the average difference in home loan interest rates between new and existing owner-occupier borrowers was 0.46%. On an average loan size of about $400,00, that 0.46% difference on a 30-year-loan means a borrower would pay an additional $37,462 in interest over the life of the loan. That is $1,249 per year, per household.
Borrowers Are Feeling Ripped Off and Angry
It should be no surprise that 91% of borrowers want new and existing customers to receive the same rate, according to a survey of 1,000 homeowners undertaken by CoreData and commissioned by Athena. The vast majority of those surveyed say they also feel “ripped off” (82%), “angry” (74%) and “outraged” (72%) at this pricing practice.
You Don’t Need to Feel Trapped
The ACCC published a report in December 2020 where there were several recommendations that would prevent this unfair practice, but nothing much has come out of it since. More than half (56%) of those surveyed say they feel trapped in their current deal, while one-in-three people (36%) asked their lender for a drop in their interest rate but were rejected.
Competition amongst lenders is quite fierce right now – so… the power is in your hands!
Rates are at an all-time low, so it is a crucial time when Australians need the money in their pockets, not the banks. Well-informed borrowers can negotiate a larger discount on their existing lender, without the need to refinance their loan.
Frequently Asked Questions
What is the Loyalty Tax in the context of home loans?
The Loyalty Tax is a practice where borrowers with older mortgages are typically charged a higher interest rate than borrowers with new loans. This was confirmed in a study by the Reserve Bank of Australia (RBA) in 2020.
How much extra interest could a homeowner pay due to the Loyalty Tax?
According to RBA’s June 2021 figures, the average difference in home loan interest rates between new and existing borrowers was 0.46%. On an average loan size of about $400,000, this difference would mean an additional $37,462 in interest over the life of a 30-year loan.
How do borrowers feel about the Loyalty Tax?
A survey of 1,000 homeowners found that 91% want new and existing customers to receive the same rate. The majority of those surveyed also feel “ripped off” (82%), “angry” (74%), and “outraged” (72%) at this pricing practice.
Can I negotiate a better rate with my current lender?
Yes, competition among lenders is currently fierce, and well-informed borrowers can negotiate a larger discount with their existing lender without the need to refinance.
What can Zippy Financial do to help me avoid the Loyalty Tax?
Zippy Financial can help you negotiate with your current lender or find another lender who will offer you a better rate. They specialize in home loans, property investment, and commercial lending.
Has any action been taken to prevent the Loyalty Tax?
The ACCC published a report in December 2020 with recommendations to prevent this unfair practice, but not much has been implemented since then.
Talk to Us
We always have your back. If you have not refinanced recently, get in touch today and we will work with you to help save you thousands of dollars in interest repayments. This may involve negotiating with your current lender or looking around for another lender who will give you a better rate.
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.
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.
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Financial Freedom: Refinancing Options for Mortgage Relief
In today’s fluctuating financial landscape, understanding your refinancing options, including personal loan option, is key to achieving mortgage relief and financial freedom. With various loan refinancing options available, homeowners can find ways to better manage their mortgage commitments, adapt to market changes, and potentially save money.
Current Mortgage Market Overview
The current mortgage market is marked by changing interest rates and evolving lending criteria. These shifts can significantly impact homeowners’ monthly payments and overall financial health. Staying abreast of these changes is crucial for making informed decisions about mortgage refinancing.
Understanding Mortgage Prison
‘Mortgage prison’ refers to a situation where homeowners are unable to refinance due to decreased borrowing power, often caused by rising interest rates and stricter lending standards. This can lead to higher-than-necessary repayments and financial strain.
Comprehensive Guide to Refinancing Options
Refinancing options for homeowners include:
Rate-and-Term Refinancing:
This option involves adjusting the interest rate, loan term, or both. It’s ideal for those looking to benefit from lower interest rates or to change the term of their loan.
Cash-Out Refinancing:
This allows homeowners to refinance for more than they owe and take the difference in cash. It’s useful for those needing funds for home improvements, debt consolidation, or other significant expenses.
Government-Backed Refinancing Programs:
These programs are designed to help those with government-backed loans to refinance under more favorable terms.
Strategies to Improve Refinancing Eligibility
Improving your refinancing eligibility can involve several strategies, such as enhancing your credit score, reducing your debt-to-income ratio, and understanding specific lender requirements. These steps can increase your chances of qualifying for better refinancing terms.
Negotiating with Current Lenders
Negotiating with your current lender can be a viable option. This might involve discussing rate reductions, repayment holidays, or other flexible terms that can provide temporary relief or long-term benefits.
The Role of Mortgage Brokers in Refinancing
Mortgage brokers can be invaluable in navigating the refinancing process. They can offer insights into the best refinancing options for your situation, assist with rate comparisons, and manage negotiations and paperwork on your behalf.
Long-Term Financial Planning and Mortgage Management
Effective mortgage management involves long-term financial planning. This includes preparing for potential interest rate changes and understanding how market dynamics can affect your mortgage in the future.
Strategic Elements of Long-Term Mortgage Management
Interest Rate Forecasting: Delve into the importance of interest rate forecasting in long-term mortgage planning. Assess historical trends and economic indicators to make informed predictions about potential interest rate changes. This foresight allows homeowners to anticipate adjustments in their mortgage payments and strategically plan for financial fluctuations.
Market Dynamics Analysis: Explore the role of market dynamics in shaping mortgage management strategies. Understand how broader economic conditions, housing market trends, and regional factors can impact the long-term viability of a mortgage. Analyzing these dynamics empowers homeowners to adapt their financial plans based on the evolving real estate landscape.
Loan Term Adjustments: Discuss the consideration of loan term adjustments in long-term planning. Evaluate the feasibility of refinancing or adjusting the loan term to align with changing financial goals. This strategic approach ensures that homeowners have flexibility in managing their mortgage over an extended period.
Mitigating Financial Risks in Mortgage Management
Emergency Fund Establishment: Emphasize the role of an emergency fund in mitigating financial risks. Long-term mortgage management should include the establishment and maintenance of an emergency fund. This financial cushion serves as a safety net, helping homeowners navigate unforeseen expenses or income disruptions without jeopardizing mortgage obligations.
Insurance Coverage Review: Highlight the importance of periodically reviewing insurance coverage. Homeowners should reassess their insurance policies to ensure they provide adequate protection against unforeseen events such as job loss, disability, or property damage. Comprehensive coverage acts as a risk mitigation strategy in long-term mortgage planning.
Diversification of Investments: Discuss the benefits of diversifying investments to spread financial risks. Long-term mortgage management goes hand in hand with a diversified investment portfolio. By spreading investments across different asset classes, homeowners can build resilience against market fluctuations and enhance overall financial stability.
Exploring refinancing options for mortgage relief is a crucial step towards financial freedom. With the right approach and guidance, you can find a refinancing solution that aligns with your financial goals and provides relief in times of need.
Frequently Asked Questions
What are refinancing options for mortgage relief?
Refinancing options for mortgage relief include rate-and-term refinancing, cash-out refinancing, and government-backed refinancing programs, each designed to address different financial needs and goals of homeowners.
How can rate-and-term refinancing help homeowners?
Rate-and-term refinancing can help homeowners by adjusting their mortgage’s interest rate and term, potentially leading to lower monthly payments or a shorter loan duration.
What is cash-out refinancing and when is it beneficial?
Cash-out refinancing allows homeowners to refinance for a higher amount than they owe and receive the difference in cash. It’s beneficial for those needing funds for significant expenses like home renovations or debt consolidation.
Who can benefit from government-backed refinancing programs?
Homeowners with government-backed loans can benefit from these programs, which often offer more favorable refinancing terms, especially for those facing financial challenges.
Are there any risks associated with refinancing a mortgage?
Yes, risks include potential fees, extending the loan term, and in the case of cash-out refinancing, increasing the loan amount. It’s important to weigh these against the potential benefits.
Should I refinance my mortgage in response to market changes?
Deciding to refinance in response to market changes depends on your financial situation, goals, and how the changes impact your current mortgage. Consulting with a financial advisor or mortgage broker can help in making this decision.
Get in Touch
If you are stuck in mortgage prison and you have explored these options to no avail, a mortgage broker may be able to create a strategy and a roadmap that could allow you to finance in 6 to 12 months’ time.
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.
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.
With recent interest rate cuts, it’s an opportune time for homeowners to review their home loan. These changes in the financial landscape can significantly impact your mortgage, potentially offering opportunities for savings and better loan terms.
Understanding Interest Rate Trends
Interest rate trends are a critical factor in the cost of your home loan. The recent rate cuts by central banks have led to a more favorable borrowing environment. Understanding these trends is key to making informed decisions about your mortgage.
The Impact of Interest Rate Changes on Home Loans
Changes in interest rates can affect your monthly repayments and the total interest paid over the life of your loan. Lower rates could mean reduced monthly payments or a shorter loan term, leading to significant savings over time.
Signs It’s Time to Review Your Home Loan
It’s essential to recognize when to review your home loan. Indicators include changes in your financial situation, shifts in market rates, or reaching a certain point in your loan term. Regular reviews ensure your loan remains aligned with your financial goals and market conditions.
Benefits of Conducting a Home Loan Review
Reviewing your home loan can lead to reduced interest payments, access to better loan features, and alignment with your current financial needs. It’s an opportunity to assess whether refinancing your home loan could offer more favorable terms.
Steps to Review and Refinance Your Home Loan
To review and potentially refinance your home loan, start by comparing current rates with your existing loan. Evaluate loan features and consider the costs associated with refinancing. This process can help you determine if refinancing offers a financial benefit.
Strategic Assessment and Analysis
Rate Comparison Analysis: Compare current interest rates with your existing loan to identify potential savings through a lower rate.
Loan Features Evaluation: Assess features of current and potential loans, ensuring alignment with your financial goals.
Cost-Benefit Analysis: Conduct a comprehensive cost-benefit analysis, considering refinancing advantages against associated costs.
Execution and Application Process
Contacting Current Lender: Communicate with your current lender about your intention to review and potentially refinance, exploring loyalty programs or preferential rates.
Application Submission: Submit a formal application for the chosen refinancing option, seeking advice from professionals for a smooth process.
Post-Refinancing Management
Loan Repayment Planning: Develop a repayment plan post-refinancing that aligns with your financial goals.
Regular Loan Reviews: Commit to regular reviews of your loan to ensure competitiveness and identify further refinancing opportunities.
Financial Health Assessment: Use the refinancing process to assess overall financial health and align your mortgage with broader financial goals.
Working with Financial Advisors and Mortgage Brokers
Navigating the refinancing process can be complex. Financial advisors and mortgage brokers can provide valuable assistance. They can help you understand the intricacies of refinancing, find competitive rates, and guide you through the decision-making process.
Preparing for Future Rate Changes
While current rates are favorable, it’s wise to prepare for potential future changes. Consider building a financial buffer and stay informed about market trends. This proactive approach can help you manage any future shifts in interest rates effectively.
In light of recent rate cuts, now is a crucial time to review your home loan. This review, coupled with effective financial planning, can reveal opportunities to reduce costs, improve loan features, or refinance your home loan for better terms. Staying proactive and informed can lead to significant financial benefits.
Frequently Asked Questions
Why should I review my home loan after a rate cut?
Reviewing your home loan after a rate cut is important to ensure you’re benefiting from potentially lower interest rates, which can reduce your monthly repayments and save you money over the term of your loan.
How do rate cuts affect my home loan?
Rate cuts can lower the interest rates on variable-rate home loans, potentially reducing your monthly repayments and the total interest paid over the life of the loan.
Should I consider refinancing my home loan after a rate cut?
Yes, refinancing your home loan after a rate cut can be beneficial. It could lead to better loan terms, lower interest rates, and overall cost savings.
How can I find out if I’m eligible for a lower rate?
Contact your lender or a mortgage broker to discuss your eligibility for a lower rate. They can provide information on current rates and refinancing options.
How long does it take to refinance a home loan?
The refinancing process can take several weeks to a few months, depending on your lender and individual circumstances.
Can I switch from a fixed-rate to a variable-rate loan?
Yes, you can switch from a fixed-rate to a variable-rate loan, but be aware of any break fees or penalties that may apply for leaving your fixed-rate loan early.
Get in Touch
Seize the moment and save big! The recent rate cuts have created an ideal environment for homeowners to review their home loans. If your lender hasn’t passed on the full benefits, it’s time to explore better options. Zippy Financial is here to guide you towards the best deal available, potentially saving you thousands. Don’t hesitate, contact us now and secure your financial future!
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.
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.
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Navigating the Path to Your Ideal Australian Home Loan
With the interest rates increasing rapidly, many borrowers are now paying close attention to the rate they are paying for the mortgage.
Some people are keen to refinance to a better deal, but they are worried they will not qualify for loan approval. Others figure that the potential savings on offer won’t be significant enough to compensate for the time, hassle and fees involved with getting a new home loan.
So, how can you work out what your options are and whether you will be approved for finance? And when is it worthwhile refinancing your current mortgage?
There is nothing to lose by review your current loan, but there is potentially a lot to gain.
Where Do I Start When Refinancing?
First, call your bank and ask what your current interest rate is, then ask if this is the very best rate that they can offer you. You will be surprised at how much flexibility and discretion they have to offer you a rate discount if you threaten to refinance and take your loan elsewhere.
Once you have spoken to your bank, whether they give you a discount or not, it is time to review the other options out there.
After you have gone straight to your bank to get the best possible deal that they can offer, it is time to shop around and see what other loans you could be eligible for.
There is a big difference in interest rates between various banks, which is why refinancing can be a powerful way to save money.
If you have a $750,000 loan and you find a mortgage you can refinance to, and the rate is just 0.5% less than what you are paying, you could save around $220 per month or $2,640 per year. The more properties you own and loans you have, the more you stand to save.
Are there any hidden finance costs to watch out for?
Yes, there can be a few fees to look out for. These include:
Application fees. Lenders often run promotions to wave application fees for new borrowers.
Rate lock fees. If you want to take out a fixed rate loan, some banks charge an optional ‘rate lock’ fee to secure the advertised rate at the time of applying (as it can change by the time your loan settles).
Monthly or annual account keeping fees.
Government fees and charges to register the mortgage. These vary between states and territories, but often they amount to a few hundred dollars.
An annual ‘package’ fee of up to $400. Keep in mind this package comes with an interest rate discount, credit card fee waiver and other benefits, which can more than offset the cost of this fee.
Loan settlement fees.
Break fees, which may be applicable if you end a fixed rate loan to take out a new loan (even if the new loan is with the same bank). In the current environment, these break fees are likely to be low.
We know what you are thinking… this seems like a lot of fees, and it is! But if you work with a mortgage broker, we can help you find a bank or lender that offers value for money when it comes to both the interest rate and the fees and charges that apply.
We may also be able to find you a suitable loan with a cashback offer of up to $5,000. A home loan cashback promotion is exactly what it sounds like – it means that once the loan settles, you will get a lump sum payment in your nominated bank account. It can be a great way to offset some of the interest rate rises we have seen.
With mortgages climbing and putting plenty of pressure on household budgets, we are likely to see more mortgage stress in the year ahead. Refinancing can be a relatively low-effort way of reducing your costs and saving potentially thousands of dollars per year, especially if you engage a mortgage broker to do all the work on your behalf.
If you are keen to learn more about your refinancing options, contact us.
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.
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.
What Happens When You Roll Off Fixed-Rate Mortgage?
They say all good things come to an end, and that includes your ultra-low fixed-rate home loan period. So, what can you do to ensure a smooth transition?
With the past couple of years offering historically low interest rates, many Australians have been able to lock in an ultra-low fixed-rate home loan.
In July 2021, a whopping 46% of home loan taken out that month were fixed, which the ABS says was the peak period of fixing. That means the peak time for borrowers rolling off their fixed-rate period will be between July and December 2023, according to RBA research.
And that time is fast approaching…
A looming fixed rate cut off date can be daunting, particularly in the face of recent interest rate hikes. But you do have a few different options available, namely the three R’s – reverting, refixing, and refinancing.
The 3 R’s available options for your fixed-rate mortgage
Reverting
If your fixed period ends and you haven’t made other arrangements, typically your loan will revert to the standard variable interest rate.
And this is set to give many homeowners around the country a bit of a rude shock if they don’t start planning.
The RBA deputy governor Michelle Bullock has warned that half of fixed-rate mortgage may face an increase in repayments of at least 40% when they roll straight onto a variable rate around mid 2023.
So, before your fixed period ends, get in touch with us and we can help you explore your options. This takes us to refixing and refinancing.
Refixing
Depending on the terms and conditions of the mortgage, you may be able to refix your loan with the existing lender. It is worth nothing though, that due to the official cash rate going up dramatically over the past few months, it is unlikely that you will be put on a fixed rate like the current one. But there is always potential for negotiation.
The usual maximum time frame for fixing a loan is five years, but you can lock in shorter periods too. Look into the current financial climate before deciding whether to fix and the term length.
Other lenders may be willing to offer a better rate – fixed or variable – than the current lender… refinancing.
Refinancing
If the current lender does not want to provide a better option, refinancing your loan elsewhere could potentially mean a better deal.
Rising interest rates have brought up record levels of refinancing. According to ABS data, more owner-occupiers refinanced in June than ever before.
This means the home loan market is highly competitive right now and lenders are keen for borrowers who have a good amount of equity and are on top of repayments. If that sounds like you, then it is certainly worth exploring the options, which we would be more than happy to help you do.
How Do You Start Preparing Now?
If you are coming off a fixed-rate loan soon, there are other steps you can also take to smoothen the transition. Start planning now. That includes building up a buffer of savings to cover higher repayments each month and if things are looking tight, cutting back on any unnecessary expenses.
Frequently Asked Questions
What happens when my fixed-rate home loan period ends?
If you haven’t made other arrangements by the end of your fixed-rate period, your loan will typically revert to the standard variable interest rate. This could result in higher monthly repayments, especially with recent interest rate hikes.
What are the “3 R’s” options for my fixed-rate mortgage?
The three R’s refer to the options available when your fixed-rate period ends:
Reverting: Your loan automatically switches to the standard variable interest rate.
Refixing: You can choose to fix your loan again with the current lender, though the rate might differ from your previous one.
Refinancing: You can switch to a different lender to potentially get a better deal on your loan.
How can I prepare for the end of my fixed-rate period?
Start by building up a savings buffer to cover potential higher repayments. If necessary, consider cutting back on non-essential expenses. It’s also advisable to contact a financial expert or mortgage broker well in advance to explore your options.
Why is the home loan market competitive right now?
Rising interest rates have led to record levels of refinancing. As a result, lenders are keen to attract borrowers who have a good amount of equity and are consistent with their repayments.
How can a mortgage broker assist me in this transition?
A mortgage broker can help you explore various options, whether it’s reverting, refixing, or refinancing. They can provide insights into the current financial climate and negotiate with lenders on your behalf to get the best possible deal.
Get in touch with us well in advance of your fixed rate ending so that we have plenty of time to model different options for you, whether that is reverting, refixing, or refinancing.
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.
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.
Renovate or Invest? How 7-In-10 Australians Are Using Their Equity
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.
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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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.
