Is your mortgage due for a review? Find out if you should be getting ready to refinance this year.
With interest rates staying low throughout 2016, you might be thinking about getting a better deal on your mortgage. We spoke to experienced Aussie broker and franchisee Nick Kwan from Aussie Ryde about when and why you should consider shopping around for a new home loan in this year.
The right loan for your goals
When it comes to your home loan, it’s important to have one that’s going to suit your circumstances now and in the future too. That’s why a broker like Nick will be looking to understand exactly what his clients are trying to achieve when they’re refinancing a mortgage.
“Sometimes clients come to me because their bank has put their rate up,” says Nick. “So it makes sense for them to look for a better deal. But the rate is just one part of the story. It’s my aim to get them a better deal, but also offer loan options that are right for their individual needs.”
For a couple that’s about to start a family, that could mean looking for a fixed rate product so they can be sure of what their repayments will be. Or if you’re helping kids buy their first home, you’ll be keen to work with a lender offering you the option to use equity in your home as security.
Check your equity
The question of equity is often an important one for refinancing. In Nick’s experience, discovering that your home might be worth more than you’d thought can also be a trigger for borrowers to approach a broker like himself.
“If someone on your street sells their home and it fetches a good price, it can get you thinking about what your home is worth and what you might do with that extra wealth,” says Nick.
“If you had a high loan to value ratio for your original mortgage – more than 80% – chances are you’re paying a higher interest rate. If your property is worth more now, refinancing could bring you some substantial interest savings.”
Tapping into your equity could also save you on the interest you’re paying on any outstanding loans or credit card balances. Borrowing extra on your mortgage to pay these off is known as debt consolidation and can be a great way to simplify your finances and get out of debt faster.
Running the numbers
Even if you’re not looking to unlock equity, Nick recommends that all his clients see him about reviewing their home loan rate, terms and conditions every two years. And while you might think it’s too expensive to switch mortgages this often, a good broker can weigh up all the costs and savings on your behalf so you can make an informed decision.
“You should consider looking at recouping the costs of refinancing – discharge, establishment and other fees – within the first year of your new loan,” says Nick. “And with some lenders offering refinance rebates, you can save even more. It can put more money in your pocket now, or help you pay off your loan faster.”
Broker or bank?
If you’re thinking of your current bank as the first port of call for a better home loan deal, you could be limiting your options and potential savings. With access to a wide panel of lenders, an Aussie broker may be able to provide you a number of competitive loans to choose from.
“When I know what my client is trying to achieve, I can explore a number of lenders and products, compare the rates and features and come up with choices that make sense,” says Nick. “It saves time, as well as money and they get a home loan that’s right for their particular goals and circumstances.”
Are you planning to refinance your home loan in 2017? Share your thoughts in the comments below.