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When should you refinance your mortgage?

March 19, 2023

When it comes to mortgage refinancing, it’s important to understand when the right time is to refinance your mortgage. Refinancing your mortgage can be a great way to save money on your monthly payments, pay off your mortgage faster, or even access some of the equity you’ve built up in your home. But it’s not always the right move. Here are some things to consider when deciding if it’s time to refinance your mortgage.


Interest Rates 


One of the most common reasons to refinance your mortgage is to take advantage of lower interest rates. If interest rates have dropped since you took out your mortgage, refinancing could save you a significant amount of money over the life of your loan. It’s important to remember, however, that refinancing comes with its own set of costs, so you’ll want to make sure that the savings you’ll get from the lower interest rate will outweigh the costs of refinancing.

Your Credit Score

 

Your credit score is an important factor when it comes to refinancing your mortgage. If your credit score has improved since you took out your mortgage, you may be able to get a better interest rate when you refinance. On the other hand, if your credit score has dropped, you may not be able to get the best rates. It’s important to check your credit score before you apply for a refinance to make sure you’re getting the best rate possible.

 

 Your Financial Goals 

 

It’s important to consider your financial goals when deciding if it’s time to refinance your mortgage. If you’re looking to pay off your mortgage faster, you may want to consider a shorter-term loan. If you’re looking to lower your monthly payments, you may want to consider a longer-term loan. It’s important to consider your financial goals before you decide to refinance your mortgage.

 

Refinance on laptop screen

 Your Equity

 

If you’ve built up equity in your home, you may be able to access some of that equity when you refinance. This can be a great way to access funds for home improvements, debt consolidation, or other large purchases. It’s important to remember, however, that if you access your equity, you’ll be increasing the amount you owe on your mortgage.

 

 Your Loan Terms

 

If you’re unhappy with the terms of your current loan, refinancing may be a good option. You may be able to get a better interest rate, lower monthly payments, or even switch to a different type of loan. It’s important to compare the terms of your current loan to the terms of the loan you’re considering to make sure you’re getting the best deal.

 

 

Refinancing your mortgage can be a great way to save money, pay off your mortgage faster, or access some of the equity you’ve built up in your home. But it’s important to consider all of the factors before you decide to refinance. Make sure you understand the costs associated with refinancing, check your credit score, consider your financial goals, and compare the terms of your current loan to the terms of the loan you’re considering. By taking the time to consider all of these factors, you can make sure you’re making the right decision for your financial future.

 

February 2024 Cash Rate

February 6, 2024
Property and cash rate predictions for 2024

Banks “stand ready to help” people with home loan problems

January 3, 2024
The Australian Banking Association (ABA) has launched a campaign encouraging borrowers struggling with loan repayments to seek help, in a valuable reminder there are options available if you're finding it hard to keep up with your mortgage. Your bank may be able to: Reduce your home loan repayments. Pause your repayments temporarily. Switch your repayments from principal and interest to interest-only temporarily. Increase the length of your loan (thereby reducing the repayments). ABA CEO Anna Bligh said banks understood many borrowers were facing challenging circumstances. “Banks stood by their customers during the COVID-19 pandemic, deferring payments for people who for the first time in their lives found themselves unable to pay. Banks stand ready to help people again now,” she said. “People who are finding their finances are stretched should not feel they have no options and they have to do it on their own. Banks have dedicated, highly experienced teams ready to help.” As your broker, I'm also here to help. You're welcome to contact me for advice; I can then speak to and negotiate with your lender on your behalf. The key thing is to move fast, because the further you get ahead of the problem, the more flexible and helpful banks tend to be.

Is 2024 the year to buy property?

January 2, 2024
The Reserve Bank of Australia has rounded out 2023 with the decision to hold the nation’s cash rate at 4.35%. 2023 hasn’t been an easy year for homeowners or ambitious first-home buyers. The cash rate increased from 3.10% to 4.35% over the course of eleven months in the RBA’s bid to bring inflation back within its target range. According to data from the RBA, the average home loan rate at the start of the year (for existing home loans) was 5.46% p.a.. If the lender passed on interest rates in line with the increased cash rate, that would make the interest rate 6.71% p.a.. Based on the average Australian mortgage of $599,000 on a 25-year term paying principal and interest, that equals an additional $459 per month simply to service the mortgage (from $3,661 to $4,123 per month). For first-home buyers, the average time to save for a deposit has increased to 14 years, according to a recent paper by the Australian Housing and Urban Research Institute Limited, with the national ratio of median house price to median income now sitting at 8.5. That is the hard reality many Australians are currently facing. So the question is, what will 2024 bring? Short of looking into an Australian-economy crystal ball, we can’t predict exactly what will happen with inflation, the cash rate and therefore interest rates. However, there are a couple of factors to consider. The RBA will meet only eight times in 2024 to determine whether to move the cash rate, down from the eleven in 2023. This means potentially less movements through the year. The next cash rate announcement will be 6 February. Economists from the Big Four predict the cash rate is at, or near, its peak. Some predict at least one more rate hike in 2024 and rate cuts likely not happening until at least December. Despite predictions of a decline in house prices in 2023, they have actually continued to increase in most areas around the country. This could be good news for refinancers as we enter 2024, as they could find their equity has grown. Why 2024 could be a good time for first-home buyers Despite some potential challenges, 2024 could actually be a good time to get into the housing market. Here’s why. Savings interest rates are up - the pro of the cash rate going up is that savings interest rates also tend to go up. This can help expedite saving for a deposit. It could be cheaper to be a homeowner - according to PropTrack data, it is now cheaper to buy an apartment rather than renting one in most capital cities (based over a ten-year period with a 20% deposit). In fact, a third of properties nationally are cheaper to buy than rent. The First Home Guarantee has expanded - in 2023 the eligibility criteria for the First Home Guarantee, Family Home Guarantee and Regional First Home Buyer Guarantee was expanded, enabling eligible buyers to get into the market sooner. This means if you have a 5% deposit (or 2% if you are a single parent or guardian), you may be able to use one of the schemes to purchase property without paying lenders mortgage insurance. ‘Help to buy’ scheme to be introduced - the federal government has announced plans to rollout a new scheme that will help up to 40,000 eligible buyers with as little as a 2% deposit get into the housing market with lower repayments. If 2024 is the year you want to purchase your first home, it is a good idea to speak with your broker to find out how much you may be able to borrow and set a plan in place to achieve your goal.
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