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Refinancing worth the Trouble

Is the grass greener with another lender?  

Often the word refinancing leaves a bitter taste in your mouth… it seems like a lot of work with little reward to come. We are often encouraged to consider your electricity provider or shop around for insurance. initially, when we first purchase a house we are highly encouraged to shop around find the best bank, best deal, great rate, and then that’s it, your committed to this home loan for the rest of your mortgage so the next 30 years or so. But that isn’t the case, the grass may be greener with another lender... 

Here are some indicators that refinancing may be a great option 

Simple Savings  

Simple Savings in a Caffeine Filled Cup.

Whenever we focus on savings it often can seem like a daunting experience and we often focus on the big things that we are going to miss out on because we are ‘trying to save’. But, the idea of savings doesn’t need to be a big overwhelming hurdle or experience ; don’t think of it as cutting the cost it is merely shaving the cost of lifestyle.   So what’s this got to do with a cup of coffee, coffee is an unconscious expense. Although it is a minor thing it can generally add to be a bigger expenditure.  So perhaps you need to ask yourself   

RBA Rate Drops 

Yesterday the Reserve Bank of Australia, dropped the interest rate to 2%. 

 With much speculation over the previous months about what the RBA would do – many ‘experts’ advised that the last rate cut would be final, now there are lot of financial ‘guru’s’ suggesting that this rate cut would be the last of its line – with beliefs of interest rates rising.  One thing for certain is that you cannot successfully predict certain future changes.   

But, here is what we know -   Rates have currently reached a historical low.  The property market as a whole shows the capital gains has slowed, continued but at more of a steady accent.  However, since the February rate cut there was a reflected higher rate of capital gains to the capital cities.   We can only predict or perhaps assume that what they are labeling the ‘May Rate Cut’ can have a similar effect and a ripple effect – to surrounding areas. 

Another thing that is clear, is the lower interest rates have increased competition among lenders.   Fixed Rates have seen an all-time low with some lenders offering a fixed rate of under 4%!!!    Indeed this can be seen as an ideal time for many to enter the property market however, what we are seeing is more Property Investors entering or continuing to re-invest into the market as they are seeing and anticipating their growth to exceed the current cash rate.   

These Low interest rates are acting to support borrowing and spending however, if you aren't prepared for a potential rate increase or you’re unsure of your ability to service a loan, an Unlocked Home Loans Broker, can help – have a free chat, to find out what your lending capacity is, assess the risk if rates increase, get advice on loan structuring or ultimately get a hand with sourcing the best finance and most suitable lending deal.  

 

Financial Fitness

Like our personal health, our financial health should be given a ‘check up’ every so often. 

But how do you give a physical on your finances?  Is there some simple test like blood tests?  Or do I call a money DR ??  Well obviously NOT ..  there is no blood test for your money so good luck putting a needle into your finances, and these days most our wealth is recorded digitally so I’m not sure doing a physical on your coins would make much sense either.  So what is involved in checking your ‘financial fitness’ and what do they mean? Well, there are a few characters or body parts that we need to consider looking at, that is... 

Money and Mortgage

This is the big one – the size of the body the importance of the mind.  A lot of your attention needs to go here.  You need to look and see if you’re as financially fit as you can be or as you want to be.  Could your term deposits be doing better?  Are your funds working out and not getting those abs ?  Is your mortgage lifting the weights but hasn’t built any strength?    Can you get a better interest rate?? 

Mortgage Offset Accounts

When you take out a home loan or other type of loan transaction type an offset account can be opened and linked to this loan.

This account is simply a transaction account; the fundamental difference with this account is that the funds in the account, instead of having interest paid it offsets interest that would have payable on the loan.  The idea of an offset account is for you ‘to make the most’ of your funds to reduce the interest payable on your home loan, thereby reducing your loan term.   So how to explain this simply, say you have a loan of $300,000  with a loan offset account with $5000 in it, instead of paying interest on $300,000 you pay interest on only $295,000 .  

The Mortgage Vs Savings Debate

It’s the oldest finance question – should I make extra repayments on my mortgage or put into my savings account.

Like all Debates both strategies have their strengths and weaknesses, but which way is the way to go?? 

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