With the Reserve Bank of Australia (RBA) again rising official interest rates in May you’re probably bracing for the impending rise in your mortgage repayments. Here’s how to stay on top of your mortgage and feel financially secure.
Let’s face it, the RBA’s rate rise cycle hasn’t been easy for mortgage holders, with average monthly repayments now hundreds of dollars (and in some cases, thousands of dollars) more expensive than they were a year ago.
Pair this with the rising cost of living and many Australians are eager to bolster their finances to weather the storm, especially as there are one or two more rate rises predicted to come.
But rest assured, there are things you can do to help manage your mortgage and stay on top of your finances.
1. Review your loan
Regularly reviewing your loan can help you assess whether it’s best suited to your current situation.
You may be able to access features that may benefit you such as an offset account. And even get a better interest rate.
Canstar research shows 63% of Australians haven’t attempted to negotiate their interest rate with their lender in the last year.
And only a quarter of those who did were knocked back. But you don’t have to run the risk of rejection yourself.
Get in touch with us and we can go in to bat for you. Our lending specialists have business relationships with many lenders and can either get you a better deal or secure you a better home loan with a new lender.
2. What are competitor lenders offering?
Canstar research shows that 77% of mortgage holders may be paying more than if they switched loans.
And RBA data from November 2022 shows that on average, existing variable owner-occupier home loan rates were 5.29%, while new loans had an average rate of 4.79%.
This is known as the “loyalty tax” – where banks often only pass on better interest rates and features to new customers.
But we can help you out.
Let us do the legwork and find suitable refinancing options so you can save.
3. Avoid the mortgage trap
Before you refinance, it’s good to get a picture of your debt-to-income and loan-to-value ratios.
This can help you avoid being trapped in a mortgage without the ability to switch to a better interest rate.
Your debt-to-income ratio is your total debt divided by your gross income. Lenders use this to assess how you manage money and to calculate your borrowing power.
So if you’re seeking to refinance a $700,000 home loan (and have no other debt), and you have $160,000 in gross household income, your DTI is 4.375 – a ratio most lenders would be very comfortable with.
Make sure your other debts – such as car loans, and credit cards – are being managed, as well as your mortgage. It can help bolster your credit rating.
Your loan-to-value ratio is the comparison between your loan amount and the assessed value of your home.
This means that a drop in your property’s value can affect your ability to refinance.
And thus, if your equity drops below 20% some lenders may not accept your application to refinance. Refinancing at the right time (ie. before prices fall too low) can help you avoid being locked into your current mortgage.
If all this sounds complex or you just don’t have the time, we’re only a phone call away. We offer free property and suburb reports which can accurately predict your equity on the spot.
4. Track your spending
Like many people, you’ve probably cut back on spending already.
But there’s a popular saying that rings true: “what gets measured gets managed.” Track your spending and see where additional changes can be made.
It can be a real eye-opener.
You may think “they can pry my daily cafe-bought triple shot latte from my cold dead hand” … but when the cost is tallied up, you may change your mind.
And that streaming subscription you never use and forgot about is still coming out of your bank account like clockwork.
5. Speak to us
Want a hand with all the above?
Our lending specialists can put together a refinance package for you, and help you compare it with your current home loan. We also have access to investor discount packages.
We can help you to refinance, consolidate your debts, manage application processes, and much more.
Understanding your options can start with a simple phone, web, or in person discussion.
Check out our guide on home loan refinancing!
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This article is prepared based on general information. It does not take into account individual financial objectives or needs and is not financial product advice.