Mortgage News – Refinancing (It’s not just about rates)
The OCR has remained unchanged this week alongside LVR restrictions. We are seeing a big tightening of credit in general and to risk repeating myself in our last newsletter the non-bank and ‘second-tier’ lenders are emerging as a very viable option.
Some non-bank lenders can offer 90% Loans with rates as low as 4.59%! Keeping in mind with non-banks we can also borrow money to ‘create a deposit’ this is becoming very common place for those on good incomes
Even more exciting their ‘test rates’ are 6.00% compared to high 6’s and 7’s with the main banks!
When placing anyone with a non-bank we are always thinking of the bigger picture and developing a solid game plan to get them back to a main bank as fast as possible!
Refinancing your mortgage is, quite simply, replacing your existing mortgage with a new mortgage from the same, or a different lender.
Everyone’s situation is different, so we cannot simply say that you should refinance, so let’s discuss a few of the main pro’s and con’s (everyone loves a list!) towards determining the need to refinance, now that we know what it is!!!
Sometimes we do this for a very good reason, or other times it is for no other reason than “I don’t like my existing bank”! Generally, this is from an experience with an existing bank tending towards the not so good…hey, it does not necessarily mean that anyone is in the wrong, it may be due to personnel changes at the bank and the new team at Bank ‘X’ are on a different tack.
Maybe your banking history has been tarnished, due to a couple of months of ‘stormy seas’ and Bank X has not been as helpful as you would have liked.
Maybe starting afresh with a new bank is the right approach and will get you into smoother waters!
We’ve even had “an extended family member now works for this bank and we don’t want them to be able to see all of our accounts”.
Your bank isn’t there for you when you need them (cue tiny violin music)! Here are three more common scenarios we see every day when the existing bank says “NO”:
You have done the numbers – by speaking to the team at Matt Willoughby Ltd – and know that you can afford another investment property;
you have been denied a top-up for some reno’s because your income is inconsistent as a self-employed worker;
maybe you’re nearer to 60 than 30, and the banks won’t lend on all that extra wisdom you’ve accumulated and they assume you will be retiring at 65; then refinancing with a sound explanation around the ‘out of the ordinary’ situation you are in could be the answer.
Low Equity Premiums!!
Most typically let’s say you bought 1-3 years ago with a low deposit
You are not getting a fair deal! It is not always possible to get the lowest of the low rates on offer from your bank if you have low equity, but you should always be offered a competitive rate. This is where a Mortgage Adviser can ensure that your bank does offer you a good rate – and a fair one!
Different Banks vary greatly in how they charge low equity margins. Some are very competitive if you have just 5-10% deposit but comparatively speaking only offer the same rate if you have a 15.00-19.99% deposit!!
The opposite is true. Most charge 0.75% with a 10% deposit loan however some only charge 0.50%!
Also, watch out for the banks that will waive your low equity premium now but won’t continue to do so next time around.
We are winning a lot of business from 2 of the big auzzie banks doing this currently!
And the small print…what will it cost? There may be mortgage discharge (break) fees from your existing bank, you may have to pay the solicitor to switch the mortgage over, and you may need a valuation.
This is one of the key areas where the team at Matt Willoughby Ltd can help and negotiate a package with the new bank and get some of these costs covered.
We only recommend refinancing when it is financially better for you to do so (unless for some of those above unique reasons).
We will discuss the options available to you, and whether now is a good time to consider debt consolidation and/or a top-up to cover other lending on higher rates than your home loan.
Loan structure and Flexibility. This topic deserves a whole post in itself. Paying your loan off faster than the minimum payments is a great idea to save thousands off the life of your loan.
But what happens if an event occurs and you need to dial back those much higher repayments?
Most banks will ping you for this and charge a fee.
Having the correct structure in place allows you to pay the principal as fast as you can with the full surety that if you need access to money it’s there waiting for you!
We are specialists in this domain and love to talk about loan structure!
If any of the above sounds like you or someone you know, do get in touch
Matt and the team