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Home loan health: Tips for refinancing
As housing costs climb in Australia, our homes – which should be a source of comfort and relief – are increasingly becoming a source of financial stress.
Interest rates have risen rapidly while housing prices have soared in many areas. With so much uncertainty, many people are feeling the stress of how to manage their mortgage.
Understanding your options for finding some mortgage relief can seem overwhelming. But just as patients aren’t expected to self diagnose or manage their treatment unassisted, professional help is available.
Check your home loan vitals
Some simple diagnostics around your home loan health can help prepare you for a conversation with a Lending professional.
Start by blocking out some time to familiarise yourself with your current loan so that you can answer the following questions:– What is your current interest rate?
– How does this compare with other rates advertised in the market?
– If you have a fixed rate, when does it expire and what is the type of variable rate that will apply on expiry? (Note that some fixed rate loans may revert to the higher Standard Variable Rate compared to the more frequently advertised Basic Variable Rate).
– What is your home currently worth based on recent comparable sales in your neighbourhood?
– How much do you still owe on your current loan?
– Are you using all the features of your loan? For instance does your loan have an offset account and are you using that? Are you making additional repayments on your loan?
Being able to answer these simple questions will help you when you take the next step to engage with a Lender.
How to save on your mortgage: tips for shopping around
Identify your needs
Your lender will ask you questions about what you need from a loan so it’s good to be prepared.
Things to consider:
– Do you need the option to make additional repayments?
– Do you want to be able to redraw these additional repayments?
– Do you need certainty of repayments (i.e. a fixed rate loan) or are you willing to accept future rate changes?
With a home loan lasting up to thirty years, it’s worthwhile considering your short, medium and long-term goals. Refinancing can come at a cost of time, effort or money so it’s worthwhile considering whether you need to have some flexibility in the loan you choose.
Plan ahead
Refinancing can take time and it may take up to eight weeks or more after application for your loan to change over. Keep this in mind when you’re planning your budget for the months ahead.
If coming off a fixed rate loan, don’t wait until the last minute to shop around or you may find yourself paying a higher interest rate for longer than you need to.
Consider costs
There are fees and charges associated with refinancing. Be sure to consider these and weigh them against any potential savings to make sure you will come out ahead.
Cashback offers can help cover some of these costs. But it’s worth noting that some Lenders attach cashback offers to loans with higher interest rates or fees that may cost you more in the long run. So look for a cashback offer that also offers a competitive rate.
Size up your serviceability
As interest rates increase, the amount you can borrow may decrease which can have an impact on your ability to refinance.
There are ways to improve your serviceability, such as lowering credit limits or closing unused credit cards as well as reducing your on-going expenses.
A lender can help you understand your serviceability and steps you may be able to take to improve it.
Nurses may be able to unlock additional serviceability through conditions such as salary sacrifice and shift allowances. Therefore it can be helpful to speak to a specialist bank like Health Professionals Bank who may be able to help in ways that other banks with a more standardised approach may not.
Know your values
How much you need to borrow compared to the value of your home can also impact the loans and interest rates you are eligible for. If you have paid off a lot of your loan or your home has risen significantly in value, you may now be eligible for a lower interest rate.
Speak to a lender
Understanding whether it’s worth refinancing can seem overwhelming and difficult. But the simple act of picking up the phone or making an appointment to speak to a Lender can be the first step in reducing worry.
As a bank established to care about those who spend their lives caring for others, Health Professionals Bank specialises in the finding banking solutions tailored to the needs of nurses, midwives and other health professionals.
Find out more.