Let's talk about property refinancing?
In June, the Reserve Bank of Australia (RBA) announced the official cash rate increased by 0.50% to 0.85% - the highest one-month increase to the cash rate in more than 20 years!
This is the second month in a row the cash rate has increased, and we have already seen most lenders adjust their variable rates to pass on the full increase. Several lenders also implemented stricter requirements for new borrowers, restricting people with a higher debt-to-income ratio. Undoubtedly more rate rises are on the way but there is no need to panic
What does this mean for you?
If you are looking to purchase property, the tightening of lenders’ requirements could impact your borrowing power. If you currently have a home loan with a variable rate, you may already have noticed an increase in interest repayments. How much could the rate rise impact your pocket?
Consider the scenario below:
Hypothetical Client - Meet Jessica.
Loan amount: $611,500 (avg Australian home loan)
Variable interest rate in April: 3% p.a.
Loan term: 25 years
Following the RBA’s announcement in May, Jessica’s lender increased her variable interest rate in line with the cash rate hike. This led to her paying an additional $80 per month.
Should her lender increase her variable interest rate in line with June’s cash rate increase, Jessica could be paying $244 more per month than before the two cash rate increases.
With interest rates and lending requirements changing across the board, now is a good time to evaluate your current situation. Is the interest rate competitive? Is the loan structure right for you? Are there savings to be made? Is it time to look at alternative lenders? What is the difference in borrowing power from lender to the next – it could be tens of thousands of dollars!
Naturally your professional mortgage broker can assist you to answer all those questions.
Five reasons to review your finance now.
With the current state of play, it is rare to be hit up with a positive news story. So, I just want to be clear, it’s not all doom when it comes to borrowing money, there are always ways to save.
Refinancing isn’t always the better option, but your broker will be in the best position to help you review whether it’s right for you. Here are a few reasons why you might consider refinancing:
Despite the increases, rates are still historically low and further discounts may be available depending on the lender.
Limited lenders are offering refinance cashback offers. I have access to 60+ banks and lenders so I can negotiate to get a better rate for you and see if you’re eligible for a cashback offer.
Refinancing could open doors to new loan features and benefits.
Consolidating multiple debts into one package may open up greater rate discounts and reduce fees.
An increase in existing home equity might facilitate further investment opportunities.
For perspective, 0.5% p.a. decrease in interest rate on a $500,000 loan saves you $208 per month. That’s an extra $2,496 in your pocket every year from just half a percent decrease. Now that’s a positive news story!
While we can’t control rate increases or property prices, it is possible to take control of your finances and knowing you have a good deal on your home or investment loans is a great start.
Why use a professional mortgage broker?
I can compare your loan to a panel of over 60 lenders to help determine whether you could save money through a better deal. If you are looking to start or expand an existing property portfolio, I can help you find a loan that suits your circumstances with the right lending structure and a competitive interest rate.
If you have any questions regarding property finance, and your lending ability or are
ready to purchase your next investment,
Please don't hesitate to contact your Property Strategist.
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Sydney, NSW 2000, Australia