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Wednesday, 06 December 2017 03:15

How to get the most out of refinancing

Everyone wants to pay less on their mortgage, and refinancing is one strategy to help lower your interest rates – but is it worth it? We take a look at how you can get the most out of refinancing.

Why refinance?

Generally, people refinance to negotiate a better deal on their home loan and pay it off sooner. Depending on your situation, you should be able to save money by taking advantage of lower interest rates, or new products that weren’t available when you first negotiated your home loan. To help put it in perspective, let’s say you previously took out a $300,000 loan at 7.5% over 30 years with monthly repayments of $2,098. If you refinanced to a new loan at 4%, you could save $239,543 ($665 per month) over the life of the loan by making the minimum repayments of $1,432 per month.

Once you’ve refinanced, if you continued making the same minimum repayments as your previous loan ($2,098 per month), you’ll potentially save $346,912 and pay off your mortgage 165 months early.

Make it work for you

Take advantage of your refinanced loan by:

· Consolidating debts: Home loan interest rates are often lower than those for other forms of credit, so you can save money by consolidating debts such as credit cards or personal loans into your mortgage. Beware, however: paying off a short-term loan over a longer period will likely incur extra interest and fees over the longer term. Put the money saved from consolidating your debts into your mortgage, as if you were still repaying the other debts, to reduce the overall debt faster.

· ‘Splitting’ your loan: Nominate a portion to be charged at a fixed rate of interest for a set period of time, with the balance charged at a variable interest rate. When the fixed rate period ends, the loan reverts to the variable interest rate. You benefit from the security of the fixed rate and flexibility of a variable rate loan, and are impacted less if interest rates rise.

· Having an offset account: The balance of your offset account is subtracted from the remaining principal amount before interest is applied, meaning you spend less on interest over the course of your loan.

· Making extra repayments: Any payments made on top of your regular repayment will save money by reducing the amount of interest you’ll pay.

When should you consider refinancing?

Life brings change and your mortgage needs to keep up: maybe you now have a partner, a young family, a new job that pays more, or have become empty nesters with extra cash on your hands. If the terms of your current loan don’t allow you to pay more (or less) on your principal amount, it could be worth considering refinancing into a more flexible arrangement.

How to get the most out of refinancing

Refinancing or loan switching can save money, but you might incur costs such as exit and establishment fees, government charges and administrative or legal expenses. These costs need to be weighed against the benefits to determine if you’ll save in the long run. Today’s home loan market is very competitive, and there might be a loan out there offering the features and flexibility you want. Before you make any decisions, however, be clear on your reasons for refinancing. It’s also a good idea to speak to an experienced mortgage broker or financial expert to ensure you’re making the right move for your financial situation.

Happy reading - and feel free to share with anyone who may find this info useful.

Jamie

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If you’d like to have Jamie provide advice on your finance structure, investment strategy, first home purchase, upgrade or refinance simply complete and return this FORM and he will be in touch - this is a FREE, no obligation service. 

 



The information herein is not intended as investment, financial, legal, taxation, building, development or any other advice and must not be relied upon as such. You should obtain independent professional advice and make further independent enquiries before making financial, legal, taxation, building, development or investment decisions.

Published in Blog Post
Thursday, 14 July 2016 03:59

Upfront valuations

What is an upfront valuation?

It’s a valuation carried out by a certified valuer on behalf of the lender. It’s usually paid for by the lender (so free to the borrower) and is done before submitting a loan application. Quite a lot of lenders allow mortgage brokers to order upfront valuations for their clients.

So what are the benefits to the borrower?

It’s important to know the value of your home before submitting an application

The benefit to the client is that you will know the value of your property before committing to an application. This is especially important for loans being refinanced – and also applications involving an equity release. You wouldn’t want to refinance a loan to another lender to later find out that it wasn’t approved because there was an issue with the valuation (a typical reason being the value coming in lower than the borrowers estimate).

An upfront valuation helps with equity releases because the borrower is able to ascertain how much equity can be released before submitting an application. If you’re investing in property – this is important because you’ll be able to make a judgement call as to whether the valuation was sufficient enough to justify releasing equity for your next purchase. If you’re renovating – you’ll know how much funds you’ll have to play with. If you’re looking to consolidate debt – you’ll know whether there’s enough equity in your home to do so.

Your application is processed quicker

Having the valuation ordered upfront streamlines the application process and gets your loan approved quicker. Instead of waiting for the banks credit assessor to pick up your application and order the valuation – they will have a copy of it already. This could potentially save you days/weeks.

This is particularly important when purchasing a property due to the time pressures involved. Most property purchases involve a “subject to finance” clause that determines how much time you have to arrange formal finance approval – so the quicker the finance is approved the better!

Avoid unnecessary hits to your credit file

An upfront valuation can also assist in avoiding an unnecessary enquiry on the client’s credit file. This is usually the case with refinance applications. If we know the value of the property before submitting the application – then we can be reasonably certain of getting the loan approved. If the valuation result is lower than expected – then you are not obligated to proceed with the application which avoids an unnecessary credit file hit.

What happens if the valuation result comes in lower than the purchase price of the property – or lower than the clients estimate?

We have a couple of options here. Firstly, we can try to contest the valuation. To do this – we need to provide sufficient evidence to back up our contest. This usually involves providing at least three comparable sales within the last 6 months to the valuer.

In some cases – we may order a second valuation via a different lender which may yield a different result.  

Would you like to have your property valued?

If you’re considering refinancing or releasing equity for investment purposes, debt consolidation, a car purchase – or any other reason, and would like an up-front valuation ordered on your property, just get in touch and we should be able to assist. 

Jamie Moore

About the author: Jamie Moore is an active residential property investor and owner of Pass Go Home Loans. If you’d like to have Jamie provide advice on your finance structure and investment strategy, simply complete and return this FORM and he will be in touch - this is a FREE, no obligation service. This information is of a general nature – please always consult taxation professionals about the specific nature of your situation.

Pass Go Home Loans Pty Ltd
Australia Wide Mortgage Broker
This email address is being protected from spambots. You need JavaScript enabled to view it. | www.passgo.com.au | 1300 656 299

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