November 08, 2010
It's time to take control of your home loan situation by becoming proactive and managing your mortgage rather than letting it rule you. Don't sit back and hope for the best while interest rates rise around you.
Did you know that a borrower with a 30-year $300,000 home loan who switches from a product with an interest rate of 7.8% to another that is the same apart from a 7% rate will save almost $164 per month and just under $59,000 over the loan term?
Are you looking into your options or thinking it's too much effort? It really isn't.
Australia's largest independently-owned mortgage broker, Mortgage Choice is seeing a big increase in queries from mortgage holders who know that now is an ideal time to get a free home loan health check.
Company spokesperson Kristy Sheppard said, “It's likely that Australian borrowers are in for an interest rate ride over the next year or more. Everyone who has a basic or standard variable home loan, or who is nearing the end of a fixed rate term, should have an action plan for taking on the challenge of rising repayments.”
“If your strategy includes considering switching to a different loan, you'll need to set aside time to research today's options and remember that when it comes to home loan choice it's not all about the big banks. This country has a wide range of large, medium and small lenders offering hundreds of different products.”
Mortgage Choice suggests six simple steps to finding out whether a home loan refinance is right for you:
- Ask your lender about your loan's exit fees. Keep this in mind when weighing up the upfront costs of moving to, and setting up, another loan versus the overall savings. It may be cheaper than you realise or enough to keep you from moving. Either way, it's better to know than wonder ‘what if'.
- Negotiate with your lender for a better deal. This is definitely worth trying. Your lender may want your business enough to sweeten their offering.
- Understand what you really need in a home loan. Interest rate is important but it's not everything. There are a range of loan features available and some have ongoing fees attached, depending on the product. Perhaps you can save money by dropping features you don't use.
- Research the market to see if there's a better home loan that's tailored to your needs. Do this by trawling the internet, calling lenders or having an experienced mortgage broker research for you.
- Consider the pros and cons. Add up your current loan's exit fees and the new loan's set up fees plus any other initial and ongoing costs. Compare that with the savings you will make during the time you will stick with this new loan. After all, you may refinance again in a few years' time.
- Be aware that rates may change while you're researching the market. Most of us know variable rates are just that – variable in nature. What some don't realise is that fixed rates can change just as quickly. It would be disappointing to have your eye on a home loan with a rate of, say, 7% one day and then the next day it's 7.2%. Paying for a ‘rate lock' when you apply for a loan may be an option.
If you decide to simplify the process by working with a mortgage broker to tailor a home loan to your current needs, wants, financial situation and lifestyle, you won't be alone. Around 40% of all new home loans in Australia are sourced through mortgage brokers. Just ensure you choose one who knows their stuff.
A professional broker should have access to a wide range of lenders, demonstrate why the loans they suggest for you are suitable (especially if one of them is their own product and/or they're owned by a bank or another lender), not charge you for their services, explain how they are paid and be an MFAA member.
For further information or to arrange an interview, please contact:
(02) 8907 0472 / 0407 416 124