Tag: investmentloan

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Three questions to ask before you refinance

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With interest rates at record lows and competitive deals on offer, switching to a new loan or lender may be an appealing prospect, with the potential to make significant savings.

Since the Reserve Bank of Australia (RBA) began its latest round of rate cutting, lenders have been lowering mortgage interest rates across the board, with several now offering rates below the 3% mark.

But before you make the decision to refinance, there are a number of areas to consider. Here we cover off some questions you should ask before making the switch.

Will I be better off in the long run?

Refinancing to a lower interest rate can be a great way to lower monthly mortgage payments, freeing up some of your income for spending in other areas.

However, opting for lower repayments will usually mean signing up for a longer loan period — and the longer you take to repay your debt, the higher the accumulated interest payments will be.

Before refinancing, do some calculations to see how the new loan will stack up in the long run. If you find your total interest payments are higher under the new loan term, you might want to consider adjusting the amount you pay each month (if the mortgage terms allow) to help you to become mortgage-free sooner.

What are the costs of switching lenders?

Switching to a new lender can come with a number of associated costs, so it is important to ask your broker about these before making any changes. Some of the costs you need to be aware of include:

  • Bank fees. When you close your home loan account, you may be hit with a discharge fee (typically $100-$400) or break fees if you are ending a fixed-rate loan before the end of the fixed term. Your new lender will then charge fees for processing your new application, valuing your property and settlement. Depending on the cost of each fee this could bring your total set up expenses to $300-$1000. A standard valuation fee alone can be between $200-$500.If you are staying with your current lender but moving to a new product, you may also be charged a switching fee for this. Any lender fees accrued when refinancing will be added to your new loan, so to avoid paying interest on these over the life of your loan, you may want to consider paying off any costs when they are first charged.
  • Lenders Mortgage Insurance (LMI). For each new loan, a lender will look at the loan to valuation ratio to assess whether LMI is required. If you are borrowing more than 80% of the current value of the property, you will have to pay LMI again. To avoid this scenario, your mortgage broker may be able to arrange an upfront valuation of your property, so you know whether you will be liable for LMI before proceeding with a refinance.
  • Stamp duty. If you are increasing your loan amount when refinancing, you could also be liable to pay stamp duty. This will be calculated on the portion of the loan that is new. Stamp duty may also be payable if you are changing the name on your property’s title – for example adding the name of a partner or spouse. As stamp duty is determined by the state, discuss with your broker whether this charge is likely to apply to you.

What are the loan features?

Choosing a new home loan involves much more than finding the lowest interest rate. Home loans come with a range of features, which can provide flexibility and help you pay off your mortgage faster. Depending on the lender and loan type you choose, some of the features you might be able to access include an offset account, free redraw, unlimited extra repayments and direct salary crediting. There are many things to consider before signing up for a new loan, so do your homework to ensure you are getting the best deal.

Source: Your Loan Hub

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Which home loan features are right for you: Variable vs Fixed

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Before you start shopping around for a new property loan or alter your old property loan, it’s worth knowing about the options available. 3 most common differentiators are:
 
1. A Variable-rate loan offers greater flexibility than a fixed rate loan & will appeal to you if you don’t want an interest rate to be locked in for a set term. Often with variable rate loans, you can also redraw or make additional payments electronically at no cost, so you can pay off your home loan sooner and get ahead.
 
2. A Fixed-rate loan is right for you if you need greater peace of mind, as you will have the certainty of knowing what your repayments will be during the fixed rate term. You can choose different terms on a fixed rate loan – often between 1 to 5 years, depending on what suits you.
 
3. Combo-rate loans offer both the flexibility of a variable rate and the certainty of repayments offered by a fixed rate. Like with a variable rate loan, you will have the flexibility to make additional repayments electronically at no cost to the variable rate portion.
 
Unsure which of these options is right for you?
 
As your finance broker, we have access to a myriad of loans from a large range of lenders. We put a lot of work behind the scenes to save you time, effort & most importantly save you plenty of unnecessary stress.
 
Call us or email to discuss your situation. 
 
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Credit report changes: don’t be caught out

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On 1 July 2018, Australia moved to a positive credit reporting system. This means credit providers are obliged to provide credit-reporting agencies with more information on what accounts you hold and how you’re managing them.

Previously, your credit file would only capture negative credit events: overdue debts, defaults, bankruptcies and court judgments. But the new system – also known as ‘comprehensive credit reporting’ – records your entire repayment history for each line of credit you have. This could include your:

  • Mortgage
  • Car/personal loan
  • Credit/store cards
  • Utility and telecommunications services.

The system details when you make payments on time or late, and when accounts are opened and closed. This means potential lenders have a much fuller picture of exactly what debt you hold and just how effectively you’re servicing it.

What does it all mean?

While this level of scrutiny may feel uncomfortable, it could enable you to obtain a loan for which you’d previously have been rejected. Demonstrating sustained good financial management prior to applying for credit will show up on your file and could offset a default notice from a few years ago. Also, if you’re a newer borrower or have little credit history, you should be able to establish a credit score more quickly.

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RBA October Cash Rate Announcement New Record Low of 0.75 per cent

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For the third time in five months, the central bank has cut the official cash rate to a new record low of 0.75 per cent. Meaning the cash rate has now been slashed by a cumulative 75bps over this period.

This move is aimed at supporting jobs growth and ensuring that the inflation rate closer to the RBA’s medium-term target of 2 to 3 per cent. Market observers were anticipating the RBA’s decision in light of recent interest rate cuts from its foreign counterparts in the US and Europe. Following the US Federal Reserve’s recent cut to its funds rate, AMP Capital’s chief economist Shane Oliver observed that it “reinforced” the need for further easing from the RBA in order to maintain downward pressure on the Australian dollar.

This cut to the cash rate comes despite evidence of a recovery in the housing market, which analysts have partly attributed to the RBA’s cuts in June and July.

Latest Hedonic Home Value Index from CoreLogic has revealed that national home values increased for the second consecutive month, rising by 0.9 per cent in September, following on from a 0.8 per cent increase in August. Tim Lawless, CoreLogic’s head of research, said that the improvement in housing market conditions was offset by signs of further weakness in the labour market.
“A trend towards higher unemployment and a slowdown in jobs growth were likely the primary factors in the RBA’s decision to cut rates to a new low, as well as concerns around persistently weak household spending, subdued wages growth and low inflation,” he said.
The focus will now be shifted to mortgage rates, with Australia’s lenders expected to pass on the RBA’s cuts to home loan customers.

It certainly seems wise to review home loans every time the RBA makes an adjustment to the cash rate to take advantage of the low rate environment.

“There’s no prospect of rates going up any time soon so this should be a shot in the arm for consumer confidence. With Christmas approaching, the domestic economy will lift if consumers have a change of heart and start spending again,” said managing director of mortgage aggregator Finsure John Kolenda, encouraging mortgage holder to take advantage of record low, interest rates opportunities.

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Impressive Capital city Auction clearance rates

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There is a continued upward trend in auction clearance rates, strengthening claims of a resurgence in demand for house. 

In the week ending 25 August, preliminary auction clearance rate of 79.6%, was reported by Property research group CoreLogic.

which follows from a final clearance rate of 73 per cent recorded in the week before, being the highest final clearance rate in over two years.

Auction clearance rates are up 25 percentage points from 54.6% compared to same week last year.

The clearance rates were highest in Sydney (84.7%), followed by Melbourne (79.7%), Adelaide (72.4%), Canberra (68.9%), Brisbane (67.7%) and Perth (62.5%).

In the same week ending 25 August, Melbourne was host to the largest number of auctions (665), followed by Sydney (500), Brisbane (94), Canberra (75), Adelaide (56) and Perth (20).

This increase in auction clearance rates has come amid mounting evidence of a recent rise in demand for housing. 

Mortgage Choice’s CEO Susan Mitchell said the group experienced a sharp increase in demand for home loans in response to the Reserve Bank of Australia’s (RBA) back-to-back cuts to the cash rate and the Australian Prudential Regulation Authority’s (APRA) new lending guidance.

Ms Mitchell also mentioned that the demand had not come from a particular segment of the market and had come from “across the board”, adding that lenders had reported similar trends.

“We have seen our loan applications rise significantly since June 30. I think everyone has seen that,” she said.

“The feedback I’ve gotten from the banks is that they are as busy as they’ve ever been.” 

Despite the impressive clearance rates, the auction volumes were reduced from 1,915 to 1,412 relative to the same period last year.