Okay, we’re all very smart, independent women who are somehow successfully juggling lots of balls in the air at the same time… but none of us have any idea when it comes to refinancing our homes or getting a home loan.
More often than not, the whole thing just falls in the ‘too hard basket’, because it’s all very confusing. But with another Federal budget drop and the cost of living continuing to climb we thought we’d actually ask the questions that we’re all thinking. So, as Mrs Doubtfire once said while a man choked on a prawn, “help is on the way, dear!”
Scott Matthews, our friend and the owner of Bernie Lewis Home Loans has spilled the beans and answered everything we need to know about getting a home loan or refinancing in the current market.
You’re welcome. And if you want to chat to a trusted mortgage broker like Scott or any of his team at Bernie Lewis Home Loans, give them a buzz or arrange a face-to-face meeting.
Let’s do a checklist! To refinance my home loan, what do I need?
+ Proof of who you are (such as a passport and drivers license
+ Proof of your ability to repay the loan (for example: payslips, payment summaries or tax returns)
+ Proof of the security being offered (such as council rates that will be verified with a valuation)
When’s the best time to refinance my home?
Generally people look to refinance when they have an “event”. These events could be plans for a renovation, to purchase an investment or large asset (like a car), or just because their own budget may be under pressure and they’re looking for relief or to consolidate.
One of the most common times to refinance is on the maturity of a loan product such as a fixed rate – it’s a good time to test the market and test your existing mortgage “revert rate”.
How do I know if I’m eligible to refinance?
Speak to a trusted adviser. A Mortgage Broker will undertake a thorough assessment of your needs and present you with a “SOCA” – Statement of Credit Assistance. It will cover your objectives and suitability to refinance factoring in your goals and the costs associated with a move to a new lender. If you have a mortgage now and you’re paying it on time, the chances are you will be eligible for a better mortgage.
What would be a reason for me not to refinance?
You wouldn’t refinance right now if you have a fixed rate loan – anything secured in the past 2 years will be low and unable to be beaten at current rates.
A common reason to not refinance is “it’s too hard”. To refinance you need to provide proof to the lender to meet responsible lending guidelines – the good news is with tech these days this process is much easier – bank statement technology, automated valuations and ID processes make refinancing much easier than when you did it last time.
Does refinancing cost me money?
Yes, but it will generally save you money over the medium to long term and it’s interesting to consider how long until the cost of refinancing is worthwhile? That is, if you save $200 per month and it costs $1000 to refinance, you will be better off after only 5 months. Throw in some debt consolidation and it could even be much sooner.
When you refinance, your old bank will charge you an exit fee and the government will charge you stamping fees twice (once to leave, once to take a new mortgage). Your new lender may have a settlement fee. Generally consider $1000 as a cost to refinance as a rule of thumb.
How often should I look to refinance my home loan?
Mortgage practices are built to become complacent with time – it’s often referred to as the loyalty tax. You might have been an existing customer for years but the rate being offered to new customers is much better – it’s also referred to as the “back book” and the “new book”! Review your mortgages every three to five years with a person you trust and respect.
I’ve been a mortgage broker for 20 years and I can’t understand why in this day and age a borrower would not use a licensed and trusted mortgage broker opposed to a bank. When was the last time you went into Bank A and they said to you, “our rates aren’t that great right now, but Bank B down the road has dropped their rates to increase market share”…? A broker knows what each bank is offering, and provides you with options so you can choose what’s best for you.
In this market today, should I be looking at fixed, variable or both?
We are in a rapidly changing market with great inflationary pressures. Rates are rising and there’s still more to come. At the moment, fixed rates are about 2 percent higher than variable rates and I cant see the benefit in locking into a high fixed rate now rather than waiting out the rise in a variable rate over time.
The good news is, markets predict rates to fall over the next 24 months… I wouldn’t want rates to fall and be trapped in a fixed rate home loan at or above 6 percent.
It is interesting to note that if you are in a fixed rate loan and variable rates rise, there is no penalty to leave.
If you are in a fixed rate loan and variable rates decrease, the bank will charge you an economic break that costs equivalent to the difference over the remainder of the fixed rate term. It can be tens of thousands of dollars.
My opinion right now, look for the best variable rate, make extra repayments if you can, financially batten down and wait out the storm – good times will come again and the good news is when they do, your wages should be significantly higher due to the impact from these inflationary times.
:: This article was not sponsored but questions were answered by one of Adelady’s major partners ::