Subscribe to be notified for updates: RSS Feed

refinancing
Getting a mortgage locked in can be a major hurdle when buying a property, whether you’re a home buyer or an investor.

For some, it can be a very anxious time and it’s easy to understand why you might try to avoid the stress of doing it again for as long as you can. However, sticking with the same loan for too long can be a mistake. In this article we talk about some of the benefits of refinancing your mortgage and some of the strategic reasons why you should regularly consider making a switch.

#1. It pays to change with the times.

Mortgage products can become outdated very quickly and it’s important to check regularly to make sure your home loan product hasn’t become a bit of a dinosaur. It really can pay to take the time just to see what’s out there in terms of mortgage features.

Some products offer features that could save you money outside of your mortgage. For example, fee free transaction accounts or low-rate credit cards. Other mortgage products may offer rewards, incentives or even more flexibility. Or perhaps you could be benefiting from more features on your home loan like the ability to make extra repayments and redraw them if you need to, or an offset account that helps you maximise your savings and saves you money on interest.

#2. Minimise your interest bill.

Interest rates also change frequently, with lenders making adjustments in response to economic influences, RBA rate movements and policy directives from industry bodies such as the Australian Prudential Regulation Authority (APRA). And smaller lenders and new lenders in the market place often offer lower interest rates than the big banks, just to attract new business. So it really does pay to compare your interest rate against a range of other options from time to time.

A recent study showed that borrowers who held the same home loan for more than ten years could easily have paid thousands more in interest than borrowers who monitored their interest rate and switched mortgage products every two to three years. You might wonder how that can be true but consider this, if you have a $500,000 mortgage and can manage to reduce the interest by just one percent, over 30 years you could save $100,000 in interest repayments. Switching regularly could potentially help you achieve results like these for yourself.

#3. Capitalise on rises in home values.

The interest rate you may be eligible to receive depends on a number of different criteria and these can change over time. A great example of this is your loan to value ratio (LVR). Your LVR is calculated by dividing the amount of your home loan by the current value of your property. (This is effectively a measure of how much equity you have in the property.)

Generally speaking, the higher your LVR, the greater the risk to the lender and that’s why they usually apply a higher interest rate to loans with an LVR above 80%. As you make your regular home loan repayments and the value of your property grows over time, your LVR constantly improves. If your property has risen in value or you have made significant headway on paying down your loan, you could find your LVR has improved considerably and you could now be eligible for a better interest rate.

#4. Maximise improvements to your circumstances.

An improvement in your personal circumstances could also make you eligible for a better interest rate. Perhaps your credit score has improved over time. Maybe you have had a significant salary increase since you purchased your home, or you have paid off other debts and loans and your financial commitments have been reduced.

Everyone’s circumstances are different and there are lots of ways that time can cause them to change. A consultation with your mortgage and finance broker will soon reveal how any changes to your personal circumstances may influence your interest rate on a new loan.

#5. Make your investment work harder for you.

Purchasing a home can be a very emotional experience and it’s easy to forget that your home is more than just the cosy haven where you live. It’s a valuable asset and an important investment that can help you build wealth.

When you pay down your mortgage and at the same time, the value of the property increases, you build equity in the property that you may be able to access by refinancing. You can use these funds to invest in another property, make another form of investment such as stocks and shares, or to increase the value of your home through renovation. These are just some of the popular wealth building strategies that refinancing can help you to achieve.

Another way you can use refinancing to save money on interest and improve your financial situation is by consolidating your debts. The interest rate you pay on your mortgage is the lowest interest rate available – much more attractive than the interest rate offered on credit cards, car loans, personal loans and store credit.

If you’re interested in refinancing your home loan, just give us a call. We’ll help you decide if it’s the right move for you and work out the numbers to ensure the costs don’t outweigh the benefits. We’ll also help you to find a new loan that has the right features for your needs and offers you the best interest rate available for you considering your current personal financial circumstances. Call us today.

Happy New Year! We hope that you and your family enjoyed a very relaxing holiday break and managed to get into the great outdoors to enjoy this lovely summer weather.

Are you ready for another fantastic year in our property markets? 2015 was a fast and furious year that favoured property owners and sellers in almost every capital city. However, many analysts are predicting that our property markets will improve for buyers this year, with conditions starting to look much more favourable for first home buyers and owner occupiers.

This is largely due to a reduction in property investment activity in response to the tightening of controls on investment lending by the Australian Prudential and Regulatory Authority (APRA) in June last year. Activity from foreign property investors also slowed in the last quarter of 2015.

Both of these factors have contributed to reduced competition for properties. This has caused a slow-down in rapid rises in home values around the country, but particularly in Melbourne and Sydney where markets were running hot all year.

Sydney home values increased by 11.47% during 2015, but they were down by 2.37% for the final quarter. Melbourne values were up by almost 11% for the year, but fell by 1.70% for the final quarter.

Other capital cities saw more modest movements in home values for the year. Brisbane/Gold Coast saw a 4.57% rise in home values and Canberra saw home values increase by 4.09% for the year. In Perth, home values decreased in 2015 by 3.73% and Darwin also saw home values fall by 3.63%. Hobart also showed a marginal decrease in home values for the year of 0.72% and Adelaide showed an overall decrease of 0.13%.

During December, there was still a great deal of activity going on in most states. Auction numbers were surprisingly high for that time of year, however clearance rates were much lower and many more properties sold prior to auction than was usual for the year.

With many people only just returning from holidays, we can expect property market activity to be continue to be quiet for the remainder of January. However, with interest rates remaining at historical lows, and further rate cuts looking likely in 2016, we can expect general property market activity to be busy again this year, with large auction numbers already on the horizon for February and March.

Whether you’re a first home buyer, looking to refinance or are planning to invest in property this year, we’re here to help you formulate your plans and access the right financing for your needs. We look forward to assisting you to achieve your goals in 2016, so please don’t hesitate to give us a call to get started today.

We hope you are enjoying the beautiful spring weather and backed the winner on the Melbourne Cup last week! It’s hard to get down to business with so many festivities going on – but spring is traditionally the busiest time of year in property markets around the country and this year is no exception!

Many analysts were predicting a rate cut in November, however the Reserve Bank of Australia (RBA) have elected to keep the official cash rate on hold at 2.0 per cent for another month.

This is the sixth month in a row that the RBA has kept rates on hold after cutting rates to historically low levels in February and May this year. This extended period of stability on interest rates is having a positive effect on our economy, with the Australian dollar mostly holding at a more acceptable level and boosting our tourism and export markets. Employment is also growing and consumer spending is improving.

Home loan interest rates have been on the move during October, despite the RBA keeping the cash rate on hold. These interest rate movements were initiated by the big four banks largely to protect their shareholder’s interests, with rate rises following from many other lenders.

The rapid rises in home values that we have been seeing in Melbourne and Sydney are finally starting to slow in response to the upward movement in rates and the changes in investor lending regulations by APRA coming into effect over the last six months. This is good news if you’ve been struggling to get your deposit together for your first home or a property investment.

Home values in Sydney only increased by 0.28 per cent during October. Melbourne home values increased by 0.64 per cent and Brisbane/Gold Coast improved by 0.16 per cent. In Adelaide home values rose by 1.47 per cent, in Canberra they rose by 1.48 per cent and in Hobart 1.44 per cent.

Only Perth and Darwin showed declines. Home values in Perth fell by 2.76 per cent in October and by a marginal 0.13 per cent in Darwin.

The number of properties on the market is currently quite high – as is to be expected for this time of year. Auction numbers were up in most states last month, however it should be noted that private sales are now becoming more popular than auctions in Western Australia and the Northern Territory. Auction clearance rates were down across the board, indicating that there may be less competition and buyers may be more discerning about property prices.

The table below shows the relevant auction numbers for each state and corresponding clearance rates, for the week ending Sunday 1 November:

STATENo. of AUCTIONSCLEARANCE
Victoria61165%
New South Wales136164%
Queensland18658%
South Australia14658%
Western Australia4956%
Northern Territory567%
ACT13069%
Tasmania1033%

If your bank increased your home loan interest rate last month, then it may be a good time to give us a call to get a home loan health check. Not all lenders have increased their rates, and some have increased them less than others, so we can shop around to get the right deal for you. We can also access some great rates for property investors and first home buyers, so if you’d like to check what home loan options are available for you then please don’t hesitate to give us a call today.

The information provided in this newsletter is general in nature and does not constitute personal financial advice. The information has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any information you should consider the appropriateness of the information with regard to your objectives, financial situation and needs. Information sources: Auction results: www.realestate.com.au Home values: www.corelogic.com.au

Sincerely , Element Finance

In March last year, an amendment was made to the Privacy Act 1988, which allowed regulation reforms to be applied to the way credit-related personal information can be collected about you by lenders. The new system is known as ‘Comprehensive Credit Reporting’ and has brought Australia in line with the rest of the world regarding the way consumers are assessed by lenders when applying for credit and home loans.

The new rules have now been in effect for over a year, and most lenders are using Comprehensive Credit Reporting as part of their day to day operations when assessing you for a loan. This article looks at how Comprehensive Credit Reporting affects you and your capacity to borrow.

How have things changed?
Previously, lenders were only allowed to access negative information about your credit history. By ‘negative’ we mean that they were only able to access information that indicated if you had any major credit infringements, credit payment defaults, bankruptcy situations and declined applications for credit. This information did not give lenders a very good picture about your current financial situation and was only of limited use when making assessments on major credit applications like home loans.

Comprehensive Credit Reporting is designed to give lenders enough information about you to assess if you can afford to take on more debt and how much you can afford to repay. Lenders now have access to more data about you more often, which gives them a better picture of your current personal financial situation.

Information that credit providers can collect about you now includes account information including when an account was opened and closed, your credit limits on credit cards and loans, the type of credit accounts you hold (such as credit card or personal loan), as well as 24 months repayment history on any credit accounts you hold. They can also check on your overdue debts and payment defaults, the number of recent credit applications you have made recently and any publicly available information such as personal insolvency information, court writs, court judgements and directorship information.

What does this mean for you?
The new Comprehensive Credit Reporting system gives you more power to demonstrate your creditworthiness to mortgage lenders and other credit providers. It allows your recent good credit behavior to be taken into consideration and any adverse financial events to be overcome more quickly. It is also faster and easier for you to establish a credit history and compile a Credit Report.

On the downside, it is more important than ever before that you pay your bills on time. It is also important that you avoid making multiple credit applications before you decide on your credit provider as these will show up as minor defaults. If you’re not careful, you could accumulate a lot of minor defaults that could add up to make it appear as though you are under financial stress – and that may make it more difficult for you to get a home loan approved or make you ineligible for the lowest interest rates.

Make sure your Credit Report is accurate
Your Credit Report is compiled by a credit agency and is made available to lenders when you apply for a loan. Understanding your Credit Report and making sure it is correct can help to ensure your loan application goes smoothly.

Lenders will use your Credit Report to assess risk before they decide to give you a loan. We recommend that you obtain a copy of your Credit Report and make sure that is completely accurate. You can download a copy of your Credit Report once every 12 months for free from a variety of different credit reporting agencies – we recommend Veda or Dun & Bradstreet.

Once you have your Credit Report, you can address any negative information that should not be on there and take action to have it removed. Occasionally, your Credit Report can contain information that is very old, untrue or contain fraudulent entries that simply belong to someone else – so it pays to give it careful attention before you apply for any loans.

If you obtain your Credit Report and discover you have a low credit score, you can improve the situation over time with the right behavior:

  • Take action to remove any incorrect entries.
  • Always pay your bills on time or before the due date.
  • Pay down your existing debts.
  • Keep unused bank accounts open.
  • Reduce your credit limits – cancel any credit cards you don’t need.
  • Don’t make multiple applications when you are shopping for credit – talk to us about choosing the correct provider before you submit any loan applications.

Comprehensive Credit Reporting is good for Australian consumers as it helps lenders to be fair when assessing you for a loan. If you would like to discuss your Credit Report with us, we’re happy to help. Remember, we’re here to help you get the best deal available for your personal financial situation and goals for your mortgage and other financing requirements, and your Credit Report is an important part of the application process. Please give us a call today for a chat.

If you’ve only taken out your home loan in the last few years, refinancing is probably the last thing on your mind. But having a set-and-forget attitude to your home loan is not ideal! Leaving your home loan unchanged for its entire term could mean you miss out on substantial savings, or opportunities to make your money work harder for you to build wealth for your future. In this article, we look at the top 5 reasons why you might want to consider refinancing your home loan.

1. To pay less on your mortgage repayments
Refinancing can often reduce the amount of your mortgage repayments – and this is probably the number one reason why people consider refinancing. Everyone would like to save money on their home loan repayments – since they usually account for around 30% of our income every month.

If you’ve had your home loan for a while and interest rates have fallen, you could access a better rate and this will reduce the amount you have to pay for each mortgage repayment. Even if interest rates have not fallen since you first took out your loan, you can sometimes access a better rate if your personal financial situation has improved in that time.

Accessing a better rate can not only reduce your home loan repayments, just a slight drop in interest rates could potentially save you thousands of dollars over the life of your loan.

Refinancing could also help you to reduce your mortgage repayments if you extend the life of your home loan. For example: Say you have been paying off your home loan for ten or fifteen years. You could potentially refinance the outstanding amount over a 30 year term, thereby substantially reducing your monthly repayment amount.

2. To extend or remodel your home
If your family is growing and you need a few more bedrooms or a bit of extra space, buying a bigger house is not always the ideal solution. Many people refinance their home loan to access funds to extend and remodel their existing home, rather than go through all the upheaval of moving.

Renovating, remodeling and extending is a great way to get the home you want. What’s more, it can potentially increase your home’s value at the same time. So even though you may be taking out some of the equity you have in your home to do the extensions, the resulting increase in value of the home could potentially increase your equity again and help you to recoup some of the costs.

3. To consolidate debts
We often talk about the difference between types of debt. A home loan is a ‘good’ type of debt because it carries a relatively low interest rate and can be used to build wealth. Other types of debt can be ‘bad’ because very high interest rates can trap you into continually paying interest instead of paying off your debt. These debts are usually things like credit cards – which can often carry an interest rate of 20% pa or more, car loans, store credit and so on.

Refinancing could allow you to access funds to pay off these expensive debts once and for all. By rolling all your debts into your home loan, you will be paying them off at a lower interest rate. You could also save yourself money every month on interest payments, simplify your situation by only having one payment to make, and beat the interest trap of credit cards and other expensive forms of credit.

4. To access the equity for other purposes
The equity you build up in your property is a valuable asset. We mentioned earlier that a mortgage is a ‘good’ form of debt because it can be used to help build wealth for your future. That’s because your equity increases as you pay down your mortgage and property values go up – and this can potentially give you access to funds you would not have had if you did not have a mortgage.

That means your mortgage really can be used to facilitate your lifestyle and build wealth for your future. By refinancing, you could access your equity and use the funds for a deposit on a property investment, to invest in stocks and shares, education costs, to support your children in purchasing their own home or for a wide variety of other reasons.

5. To fix your interest rate or switch to a different mortgage product
Switching to a fixed interest rate loan, (or a different type of loan that offers additional benefits) is another popular reason for refinancing a mortgage.  As time goes by, your needs change and it could be that another mortgage product like a fixed interest rate loan would be more beneficial for you.

The number one benefit of a fixed interest rate mortgage is that your mortgage repayments will remain the same for the length of the fixed term – usually 1, 3 or 5 years. This gives you more peace of mind because it makes it much easier to plan your budget.

Many people think that switching to a fixed interest rate mortgage will save them from future interest rate rises. And whilst this is true to a certain extent, fixed interest rate mortgages are often a bit more expensive to start with than your standard variable rate home loan, so interest rates would probably need to rise considerably before you came out in front.

There are also many other mortgage products on the market that may have more beneficial features than the home loan you have now. For example, redraw facilities or a mortgage offset account. If your current home loan simply doesn’t offer you the flexibility you need, then by all means talk to us about some alternatives.

Talk to us now about your annual home-loan-health-check
About this time every year, we like to encourage you to talk to us about a home-loan-health check.

A frequent home-loan-health-check is necessary to ensure that your current home loan is still the best home loan product available for you. We recommend that you have a chat with us at least once a year to see if the lending environment has changed or refinancing may be beneficial for you in some other way.

If you’d like to organise your home-loan-health-check, just give us a call. We’re here to help you assess your home loan’s performance and ensure that it is still the right mortgage product for your personal financial circumstances and goals now and into the future.


Copyright 2016