Refinancing Archives | Page 2 of 2

4 Easy Ways To Get a Better Interest Rate For Your Home Loan

Posted on 17/10/201702/05/2023 by Clinton Waters

Have you ever had that feeling of frustration that comes from buying an item at a store, then seeing it substantially cheaper at another shop?

It can also happen with your home loan. And if you’re refinancing your mortgage, it’s smart to shop around for a better interest rate.

The reality is that, even though your interest rate might have been fantastic when you first applied for your mortgage, other lenders are competitive and can have better deals on offer.

And if your current interest rate is not ideal, the end result can be many thousands of dollars wasted over the life of your home loan.

The good news, though, is that you can take practical steps to fix the situation.

In the current Australian home loan market, there are always discounted interest rates available and by comparing the different options available to you, there could be valuable savings to enjoy.

To help you refinance your home loan, try these tips to save money on your mortgage by shopping for a better interest rate deal.

1 – Improve Your Credit Rating

Even if you already have a home loan and you are keen to refinance your mortgage for a better deal, improving your overall credit rating can still have an impact.

With a healthy credit rating, you have more choice available – and the more options you can access, the better chance you have of securing a competitive interest rate.

Always pay utility bills on time (or, better yet, pay them well before the due date and save money with the earlybird discount).

When it comes to credit cards, get rid of any unnecessary extras and keep the available balance as low as possible on the one you do keep. By reducing available credit and avoiding late payments and defaults, you give your credit rating the best possible boost that lenders appreciate.

2 – Research The Rates

In these days of the online world, when comparison rate websites put information at our fingertips, shopping around for great interest rates is easier than ever. The days of approaching your bank for a home loan because of some sense of customer loyalty are gone and the truth is that the interest rates deals that can benefit you the most may be found in some unexpected places.

For access to the best interest rate comparison, talking to an experienced mortgage broker is always recommended. Researching available rates is more than just comparing numbers on a screen – it’s about understanding which lenders service which client demographic best and what unique criteria each lender has as a potential barrier to your entry into doing business with them.

By putting some effort into researching a great rate that is actually available to you, you can save tens of thousands of dollars – and years – from your home loan.

3 – Be prepared to switch banks

Switching banks for a better deal on your mortgage payments is not the enormous hassle it once was. Make sure you do your research – checking application fees and other associated costs will reveal the true picture of the complete cost of your mortgage. If crunching the numbers reveal that switching banks really will save you money in the long-term, it is worth making the switch to save money on your interest rate for the life of your loan.

4 – Ask For A Better Interest Rate

Sometimes, it’s possible to access the benefits of these competitive interest rates without even having to change home loans. Depending on your lender and the history of your loan with them, simply letting them know that you are keen to shop around for a better interest rate can be enough to get them to offer you a lower interest rate in an effort to hold on to your business.

Try asking your current lender this question: “I’m shopping around for a better interest rate and I want to know if you can give me a better deal on my mortgage?”

Or, better yet, get an experienced mortgage broker to do it for you. By having a thorough understanding of different interest rates available at a wide variety of lenders, professional mortgage brokers are in a strong position to negotiate a more positive deal.

For more information about refinancing your property, talk to our team today.

Why is your interest rate increasing?

Posted on 12/07/201722/04/2024 by Clinton Waters

If the Reserve Bank of Australia (RBA) cash rate is so low, then why is your interest rate going up?

We are asked this question a lot.

The official cash rate, as set by the Reserve Bank of Australia (RBA), has remained at 1.5%pa since August 2016 when it was then cut by 0.25%. The below graph shows the last thirty years of the official cash rate – you would have to go back to the 1950’s to see rates this low.

There are a few simple reasons why some rates are increasing. As you probably know in the past few years, we have experienced a boom in property prices (mainly only in Melbourne and Sydney though). This has resulted in significant growth in investment and interest only lending.

Interest only loans are of course an attractive form of mortgage lending as it reduces your monthly cash flow commitments but it does significantly increase the total cost of a loan over its effective life. You can actually simulate this using one of our online calculators to see for yourself here.

Most accountants and financial planners will rightly recommend that you setup your investment purpose lending as interest only (the theory being do not pay down a debt that gives you a tax deduction first if you have a home loan mortgage that does not). While this structure is in most cases a wise one, it has also seen a significant increase in owner occupied home loans that have been set up as interest only. This of course means that borrowers have had more cash flow available to them to either spend on more investment debt or, more worryingly so, on living and lifestyle expenses – without having to pay off what they owe.

The government has recognised this trend and has been concerned with the level of indebtedness that Australian households have taken on; coupled with low wage growth and rising house prices. When interest rates increase (and they will) and if left unchecked this could create significant economic pain for borrowers and the government alike.

Subsequently APRA (Australian Prudential Regulation Authority), the government body tasked with ensuring sound governance of our banking system, set a speed limit that states that lenders cannot exceed 30% of all new loans being interest only – which has been running at something closer to 40% of all new loans approved.

Until recently, interest only and investment lending has traditionally been priced at the same rates as owner occupied mortgages and even the same as interest only loans – so effectively the rate you paid was the same across the board regardless of what the purpose or structure was.

This has now changed so there are effectively four types of rates on the market (excluding fixed options) They are summarised as follows and ordered cheapest to most expensive;

– Owner Occupied – Principal and Interest (3.7%pa – 4.2%pa)*

– Owner Occupied – Interest Only (3.9%pa – 4.5%pa)*

– Investment – Principal and Interest (3.8pa – 4.5%pa)*

– Investment – Interest Only (4.2%pa – 5.00%pa)*

*Approximate interest rate ranges as at early July 2017

In summary – interest only and investment lending is now more expensive.

Mortgage lending policy is being tightened

As a result of these restrictions we are seeing significant changes in lending policies and rules across all lenders. In combination these rules have a direct effect of reducing demand for interest only and investment lending purposes.

Across the board there have been countless changes which cannot be summarised in this brief blog but at a high level they can be summarised as follows;

Reducing higher lending ratio loans

Generally higher lending ratio loans for investment and interest only lending are being capped at around the 90% loan to valuation (LVR) ratio with strong pricing incentives for borrowers to be at 80% or less.

Increased stress testing of borrowers

While the mainstream media may have made broad brush statements about irresponsible lending by the nation’s banks and lenders, this is simply not quite true. Banks have always maintained rigorous assessment criteria and have always sensitised interest rates in their calculations to account for a ‘what if’ scenario for when, not if, interest rates rise. Most lenders test borrowers for affordability at around 7.0% to 8.0%pa and apply minimum benchmarks to acceptable living allowances to determine affordability.

This latter requirement has come under significant scrutiny recently with most lenders demanding borrowers to summarise their own basic living expenses which will be compared against the banks own standards (some lenders now will also index living expenses according to the amount of income an applicant earns with those on higher incomes having higher minimum living expenses applied.).

Lender rules first, rates second

In this environment, more than ever before, it is important to get quality advice around your finance options. There are significant differences between what one lender’s rules are and anothers. There may be a slight difference in the rate but a huge difference in policies that will affect your ability to be approved, your structure and of course your total borrowing capacity.

What you can do about it

Fortunately there are a few simple things you can do about it. If you are completely unsure then just get in contact with us here or fill out our FREE mortgage health check link here

A few recommendations include;

Consider fixing some of you loan

Some of the lenders are offering some pretty attractive fixed terms that are the same or cheaper than many variable investment and interest only loans. With the likelihood of further increases for this sort of lending, now would seem like a pretty good time to consider your options around locking in a near historical low rate

Switch to Principal & Interest

Given that the banks are under significant pressure to reign in interest only lending taking a principal and interest repayment is attractive to all lenders these days and they have priced their products accordingly to increase demand for principal and interest repayments. It does of course increase your monthly repayments but you are paying down the loan and ultimately paying much less interest in the long term

Set up an offset account

If you have some funds sitting in a interest bearing account it can be a suitable option to put the same funds into an offset account. The effect is it reduces the balance of your loan and interest charged on your mortgage by the amount you have in offset (eg $10k in an offset account reduces the balance of a $100k loan to an effective balance of $90k). The rationale being that an interest bearing account may earn you a poultry 2.0%pa currently, less tax, less the effect of inflation and you aren’t really going anywhere. Where an offset account saves you interest at a much higher rate with nil tax payable on the saving. Consider it that saving money is better than making money.

Ring your current lender

You might be surprised at how a simple phone call may result in you getting a better rate. The recent rate increases have been a pretty broad brush 0.15%pa increase here or a 0.3%pa increase there on top of whatever you are paying. If your product is out of date and hasn’t been looked at recently you could be paying well above what is available currently. It also helps to use the magic words ‘Im looking at refinancing what can you do for me?’

Refinance to a new lender

There are dozens of lenders out there and you might just be better off refinancing to a new lender. We can of course give you some options around this. Here are two useful tools to help you start that process.

We hope that this helps shine some light on the current situation around why mortgage interest rates have been increasing recently. As mentioned please feel free to contact us here or call the office on 1300 706 540 to discuss your option tailored to your scenario.

Why should I speak to Axton?

Posted on 21/03/201726/11/2022 by Clinton Waters

Why should you be using a professional mortgage broker? This is probably a question you’ve asked yourself if you’re in the market for a home loan.

The simple answer is, it is going to make your life easier – much easier!

If you’re looking at all the necessary steps to finalise your property purchase or your refinance, it is most likely that you will need some help along the way. The mortgage broking channel issues nowadays over 50% of home loans in Australia and the growing number of people using a broker each year shows well the success of our industry.

At AXTON Finance, we are mortgage and credit experts; we can give you professional advice to match your needs with a suitable lending solution. Given that your home loan is probably the biggest expense you will ever have, it will definitely pay to get professional assistance and advice.

Here are the top 6 reasons why to use AXTON Finance as your mortgage brokers

Industry recognised qualifications,
Experienced loan specialists
Clear, concise and professional service
We listen and provide options
Sophisticated software and strong support through the whole process
The banks remunerate us; it doesn’t cost you anything extra to use our services

What are mortgage comparison sites really comparing

Posted on 16/03/201722/04/2024 by Clinton Waters

It goes without saying that it pays to shop around. With the rise of comparison websites for home loans, insurance, credit cards, real estate agents (the list goes on and on) there now seems to be unlimited information at your finger tips. Scouring the internet for comparisons and information is essential… as a first step. This however, should never take the place of tailored professional advice – particularly when it comes to the intricacies of securing one of your biggest financial decisions of your life – your mortgage!

The fine print and detail make all the difference when it comes to determining whether something that sounds like a great deal actually is. Let’s be real – we don’t all possess the ability to make that assessment and we have all heard the old adage, “If it’s sounds too good to be true…’ You get the drift.

Do your research and be armed with information, but get a real person to give you the final low down. When it comes to lending, mortgage brokers are very well placed to do so having the experience and understanding of a wide range of products, policies and options across many lenders – not just a few. They know what to look for and can truly compare ‘apples with apples’ – especially given lending rules have tightened up so much recently.

But be warned, cheap rates come at a cost of hidden hurdles and headaches in securing approval, so DIY with caution

One of the biggest misnomers are comparison websites that claim to have all your options and answers in one place, when in fact they don’t. That aside, they are usually sales channels where institutions pay for inclusion on the site and they get a commission for your business, proffered by often less experienced call centre staff (and you guessed it, the ones paying the highest commissions take centre stage). You can expect there to be plenty of cheaper, and better deals on the market – and to tell you the truth, it sometimes is not through a broker. But be warned, cheap rates come at a cost of hidden hurdles and headaches in securing approval, so DIY with caution.

Any individual institution also won’t have all the options or packages that are right for you. They also won’t be all over the details of their competitors products in the same way a broker will. What you see advertised is not always the be all and end all.

If you are keen to find out how you can save money, shorten the life of your loan or get a better interest rate, call us for a mortgage health check today on 1300 706 540 – you could save thousands Click here for your obligation free review.

Four smart questions to ask yourself when fixing your home or investment loan

Posted on 21/10/201622/04/2024 by Clinton Waters

1. Should I fix my home loan?

With interest rates at historical lows currently (at time of publishing there is a 3.99%pa (3) Three year fixed home loan rate now available from a major lender!!) many clients often ask me whether they should fix their home loan mortgage when buying or refinancing their properties. My response is always the same – fixing your mortgage is guaranteed peace of mind but not a guaranteed money saving exercise.

If you were taking on a rather significant amount mortgage that you were not absolutely comfortable with if your circumstances were to change then it may be worthwhile to fix a component of your debt. Doing so will provide you with certainty that no matter what happens to rates.

For almost every lender, bar one or two, you cannot generally pay more than the set repayments of a fixed rate mortgage – if you did you are usually limited to only about $10,000 per annum or less sometimes. Offset accounts are usually not allowed or calculated on a small percentage partial amount but you can choose at no extra cost to have principal and interest or interest only loans.

fixing your mortgage is guaranteed peace of mind but not a guaranteed money saving exercise.

2. How long should I fix for?

Well this is usually a simple matter of personal preference but from years of experience most clients generally fix for between two and three years – not only is this usually where the best fixed rates exist but it also provides a medium term structure of certainty for most clients.

3. Will I pay more if I fix?

Again this is usually a function of what term you decide to fix for – generally speaking the longer the fixed term the more expensive the rate becomes . This is because banks and lenders price their fixed rate mortgages on the basis of future expectations. At the time of writing this piece (April 2015) home loan rates have been at historical lows.

4. How much should I choose to fix?

Almost all lenders will enable you to fix a portion of your home loan based on almost any percentage you wish. A good yard stick is 50/50, 60/40, 70/30 fixed and variable respectively. Another good question to ask your self how much do you think you could pay off the variable loan during the initial fixed term – are there any windfalls or lump sums that you may be expecting?

If its all too hard to make a decision now or you think that rates are likely to drop further then you can also usually settle your loan as being variable and choose to fix at a latter stage. Depending on the lender there may be a small maintenance fee to do this depending on the product and package you are on.

Of course should you have any questions please feel free to myself Clint Waters at AXTON Finance Hawthorn East on 1300 706 540 or [email protected]

Reduce your mortgage insurance premium

Posted on 20/03/201622/04/2024 by Clinton Waters

There is no denying it – mortgage insurance or lenders mortgage insurance (LMI) kind of sucks.

This short article is about ways in which you can avoid mortgage insurance or at very least significantly reduce costs but first a few basic facts:

– It protects the bank not you

– It is a once off premium

– You have to pay it if your loan amount is greater than 80% of the property’s value

– The premium can often be added to the loan meaning you do not need to increase your cash deposit

– Getting a refund if your refinance these days is all but unheard of

– It can be expensive but you knew that right!

In the long term its often not as expensive as you may first think – especially if you have a strategy of paying off the loan sooner than the approved loan term (which everyone should try and aim for!). Paying one or two percent extra to buy a property sooner with a smaller deposit can often be recouped by paying today’s prices rather than delaying your purchase by a year or more and paying tomorrows prices which could be much more than the cost of the initial premium.

So how do you avoid or at least minimise paying lenders mortgage insurance?

Option One – Reduce your loan to valuation ratio

For almost all circumstances mortgage insurance kicks in once you borrow in excess of 80% of the value of your property. By increasing your deposit or reducing your purchase price you may be able to minimise the cost of the premium. A sure fire way to save money is to keep your lending under 90% of the value of the property – the moment you go above this threshold the cost of the mortgage insurance sky rockets (it can almost double in many instances). Call us to get a quote or tailored explanation of how it might apply based on your scenario.

Option Two – Use A Family Pledge

Your can eliminate the mortgage insurance cost entirely with the help from a family member who already owns property. This increasingly popular facility that we use is known as limited equity guarantee or a family pledge structure. Check out a detailed explanation of how this simple structure works here on our blog.

Option Three – Do you work in one of these industries?

Some of the banks offer packages that enable certain borrowers to lend up to 90% without paying any mortgage insurance. This is generally available for professionals in speciality industries such as lawyers, doctors, physios, dentists, sports stars and entertainers.

I hope this helps explain how mortgage insurance works in a little more detail. Please contact us here for an obligation free chat or ring 1300 706 540 to discuss your individual mortgage needs.

10 tips to paying off your mortgage sooner

Posted on 03/08/201522/04/2024 by Clinton Waters

I often joke with clients that I provide them with something they don’t really want – a mortgage. Lets face it – a mortgage in its own right isn’t too exciting but it enables your dreams to be realised. Those dreams might include a new home purchase, a renovation, buying a business, a new car – and the list goes on.

Fortunately, there are a few simple steps that you can implement to reduce your mortgage:

1. Pay Fortnightly

Yep, it’s that simple. Paying fortnightly saves about five years on your mortgage and it’s only because of the magic of compounding interest (but working in reverse). Paying fortnightly means you make the equivalent of 13 monthly repayments per annum – and that can make a BIG difference.

Make small but regular extra repayments – similar to fortnightly repayments. Combine the two and you really start turbo-charging your loan.

2. Bank Pre-Approval Limits

The amount a bank will lend a customer is staggeringly large, relative to people’s income. Just because you are pre approved and can afford today’s repayments, it’s important to think about what might happen if things change – higher rates, single income family, change in careers, unemployment etc. Even though a lender will sensitise repayments at 7-8% for ‘what if rates go up’, they use such measures as the Henderson Poverty Index to determine minimum living expenses for default family sizes – the key word here is ‘poverty’ – so if you like doing other things, like going out occasionally, keep well within bank servicing requirements. We can provide you with clear guidance on this important assessment to ensure taking on that mortgage doesn’t mean sacrificing other important areas of your lifestyle.

3. Got a raise recently?

Spend half and put the extra into your home loan – before you know it, if you don’t do this, the money you will make on the raise will be swallowed up in new lifestyle expenses in the blink of an eye!

4. Put your tax refund to good use

By putting a lump sum, like a tax refund, into your mortgage might sound boring but it can save you thousands! For example, on a new 30-year home loan of $500k, a $4,000 lump sum paid one year into the loan (with no other debt reduction strategy applied) could save you $10,580 and 5 months off the loan term.

5. Give your current bank the flick – Refinance

Refinancing your home loan, if there is a significant margin in interest rate to do so, could be a good idea. We usually give your current lender first right of refusal before we actually load a full application – if the difference is small in rate, then a full refinance may not be all that economical to do (find a competing bank branch who will tell you this small truth!!). If refinancing, it’s important to keep the repayments at the same amount to secure the same remaining term on the loan – it you refinance and take a new 30-year term on minimum repayments (which is what most people do without proper advice) then you will just reset your amortisation curve and any interest saving will be blown out of the water. (Ask us for a quote to demonstrate this – the findings will frighten you!)

6. Consolidate Debts

A bit like a refinance, except you may consider rolling your current loan, store cards and credit card into your home loan – but, again, tread with caution. I’ve seen many ads that advocate this and telling customers how they ‘saved’ hundreds in repayments but the reality is that if you consolidate and take a new 30-year term on minimum repayment the short-term personal debt (car loan, personal loan, etc) will be replaced with a long-term debt product (the mortgage) and the true cost will be eye-watering over the life of the loan- long after the current assets like the car, boat or TV bought on interest-free terms are gone.

7. Use an offset account

An old technique now but effective if you are not bad at budgeting. The premise with this is that you use the interest-free terms on the credit card and spend your monthly budgeted expenses using the card, while your salary and savings continue to sit in the offset account. At the end of the month, the credit card is automatically swept (paid) and you will have benefited from reducing your interest bill slightly for the month. This does have a compounding effect and can be very effective but it does require some budgeting skills and you also need to be careful that you don’t spend more than you earn by using the credit card. If the card is not paid in full by the due date, most credit card companies will slog you the full month’s interest on the amount you spent – so be careful!

8. Budgeting

Ok don’t yawn but a budget really can make a huge difference in where you spend your money. A great app that can help make budgeting easy and the above offset tip work more effectively is as Australian app called Pocket Book. It automatically takes a feed of your expenditure and summarises it all into a simple automated budget planning tool – it’s super nifty!

9. Downgrade

Some family homes are just simply too big now that kids have grown up or moved out. We can help determine an approximated end debt position with a relocation worksheet that could simulate what sort of mortgage you might have (if any), if you choose to do this after all considered costs.

10. Carve it up

Do you really need such a big back yard? Speak to a builder or a town planner to see if you could carve off the back yard and build a townhouse or a granny flat in the back. Subject to council planning and building requirements, this can make a huge dent in your home loan if you decide to build and sell a unit in the back yard or hold and keep as investment for the medium to long-term.

So there you go – 10 simple yet effective ideas to help you get ahead on your mortgage.

Please contact us here if you would like any advice on your mortgage reduction strategies today or ring now on 1300 706 540.

Are you an Australian Expat?

Posted on 06/05/201522/04/2024 by Clinton Waters

Over the years I have helped countless Australian expat clients working in all corners of the world to appropriately finance their property portfolio back here in Australia.

Building your property portfolio with tailored mortgage advice

With the advent of new technologies, expat acquisition of property in Australia has become significantly easier. By getting in touch with me and using various simple yet powerful tools on the internet you can gain easy access to our experience and expertise. We offer packaged mortgage broking and portfolio structuring advice encompassing:

– Purchase of owner occupied home and investment properties

– Owner occupied purchases or refinances

– Lines of credit establishment for investment purposes

– Property portfolio planning

– Mortgage health check reviews

Where initial face-to-face meetings are not possible, I can conduct client meetings via SKYPE video (see my availability & book obligation free skype meeting here) and I will provide you with much more than just an opinion of a rate and product offered by a bank. I provide a live shared screen viewing of proposed structures and worksheets especially tailored to your individual circumstances.

Quick Facts for Australian Expat mortgages

– Expats can generally borrow up to 90% of the value of the property purchased

– Some professions are eligible for the waiver of mortgage insurance if lending >80%

– No loading on interest rates – normal resident discounts apply
Interviews can be completed on SKYPE

– Foreign Currency Loans (FCL) available in certain circumstances
Private banking solutions available

Get access to our network of trusted professionals:

Over the years I have established trusted relationships with some of Melbourne’s best professionals who you too can confidently leverage upon without having to trawl the internet remotely trying to find the right people to help you with your property needs.

We have direct access to leading professionals in the following fields:

Buyers advocates – where clients are not able to inspect or bid for a property in Australia, a buyers advocate can source and review properties and negotiate on your behalf. Our advocates have years of experience and can help ensure clients make the right decision with the confidence as if they were undertaking the transaction themselves.

Solicitors/conveyancers – aside from arranging the settlement and legal transfer of real estate into a client’s name, it is vital that property contracts and disclosure documents (known as section 32’s in Victoria) are closely examined to identify any hidden pitfalls. Our preferred conveyancers are experts at assuring a smooth settlement process and identifying issues early before they become bigger problems.

Accountants – a good accountant should be proactive and be across such matters as the taxation entitlements expats may be eligible for while non-resident.

Financial planners – generally expats are considering the purchase of a property as part of a longer term wealth creation strategy. The purchase of a property may form part of a much bigger wealth creation picture that needs careful consideration. Our preferred planners can provide you on a tailored fee for service basis with quality advice on risk insurances, superannuation, retirement planning and financial goal setting and reviews.

Property managers – you wouldn’t give the keys to an expensive car to just anyone so equally why would you hand over the management of a valuable property to someone you didn’t trust? We have access to some of Melbourne’s best property managers with whom we have had extensive personal experience.

Licensed pre purchase inspections – buying an established property can unearth all sorts of issues, many of which are only found after settlement. Help avoid this situation by requesting an insured pre purchase inspection by one of our selected professionals. Each inspection generates a detailed report covering such matters as structural issues, any unregulated improvements/renovations, asbestos risk and pest infestations.

Our growing expat business is due in no small part to the comprehensive set of services we provide that are tailored to individual needs and involve access to a range of technical and professional skills that are designed to take the hassle out of property investments.

Contact me now to make an obligation free review of your proposed mortgage finance needs on 1300 706 540 or email me direct at [email protected]

Alternatively see my availability & book obligation free skype meeting here.

I’ve been a long term client with Clint and have recommended him to many other clients who have been most impressed. The formation of AXTON has seen service taken to another level – with Bertrand and Richard proving to be top-notch resources – mostly in the clarity and well laid-out instructions in each timely and informative communication they provide. I am living in Canada so the logistics are not simple – however the constant attention and care made the transaction relatively easy. Thanks Guys! Stuart Sandiford – Expat Australian Newfoundland Canada – July 2016