Why offset accounts are hitting new highs

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Spare cash can be tight right now (cost of living crunch, anyone?). But if you’ve still got some savings plus a home loan, there’s a way you could make your surplus funds work harder.

Ever heard of an offset account?

They’re becoming an increasingly popular add-on feature to home loans, with new data showing that homeowners are stashing money in their offset accounts at a record pace.

In fact, balances in offset accounts have increased to 11% of credit limits, the highest share since APRA started collecting data on this particular stat in March 2019.

This essentially means that, on average, people with offset accounts are only paying interest on 89% of their mortgage each month.

So how do home loan offset accounts work?

An offset account is a cash account linked to your home loan.

The bank doesn’t pay you interest on the offset account. Instead, the balance of the account is deducted from (or ‘offset’ against) the balance of your home loan when loan interest is calculated.

For example, say you have $20,000 in an offset account and a home loan worth $615,000, which is about the size of the average new mortgage Australia-wide.

Instead of monthly interest being based on the full $615,000, the lender will only charge interest on $595,000 – that’s the $615,000 loan minus the $20,000 in the offset account.

This means you pay less loan interest each month.

And there’s an added bonus: because your loan repayment amount stays the same, more of each payment goes towards paying down the loan principal, which in turn helps to reduce next month’s interest cost.

And so on and so forth.

In this way, offset accounts are a way for borrowers to swing the mortgage pendulum more in their favour, with savings on interest plus the potential to pay off their home loan sooner.

Why are offsets so popular right now?

Long story short, offsets are increasingly popular right now in no small part due to high interest rates.

And because no interest is paid on the balance of the offset account, there is no tax impact.

That’s quite different from having a separate savings account, where a high income earner can lose a sizeable chunk of their interest earnings to tax.

The icing on the cake is that the home loan interest rates that lenders charge are typically higher than the interest returns they pay on savings accounts.

This means offset accounts can let borrowers make their spare cash work harder by saving more on loan interest than they could earn with a regular savings account.

Last but not least, some lenders allow you to have multiple offset accounts (with debit cards attached!) linked to the one home loan, which can allow you to put all your money to work each month – as opposed to having it in different buckets across a number of low-interest transaction accounts.

What to consider with offset accounts

First and foremost, the money you put into your offset account is potentially money you could be investing elsewhere.

So you’ll have to weigh up whether that money is better served by helping you pay off your home loan sooner, or investing towards your future in other assets.

Secondly, it’s important to be confident you are paying a competitive home loan interest rate.

That’s because offset home loans may come with loan fees and/or higher interest rates than more traditional loans. Not always, but sometimes.

Last but not least, offset accounts don’t tend to work with fixed-rate home loans. But … there are ways you could split your home loan so that it’s part fixed and part variable (with your offset account attached to the variable side).

That’s why talking to us about your home loan needs is important.

Let’s discuss whether an offset account might be a suitable option for you.   Just call us  !

 

 

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

They’re back! Why property investors account for one-in-three new home loans

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Lending to property investors is soaring once again. We lift the lid on what’s driving investor interest – and what it could mean for the property market throughout 2024.

It looks like property investors are back … and in a big way.

The latest ABS figures show that in December 2023, banks lent over $26 billion in new home loans – and one-third of this figure, a whopping $9.5 billion, was to property investors.

That equates to 36.2% of all housing loans – the highest market share for property investors since mid-2017.

It’s also quite an uptick from December 2020, when the ABS says investors took out just 23.6% of mortgages.

So why the big shift in recent times?

What makes an investment property so attractive?

There are many reasons why people may love owning a rental/investment property.

An investment property can be a source of extra income, and right now, some investors are pocketing very attractive rental yields (that’s annual rent divided by the purchase price of the property).

PropTrack, for example, is reporting yields as high as 9% in some suburbs.

Investors may also expect to see their property grow in value over time, which could add up to some pretty impressive capital gains.

CoreLogic looked at the results of 86,000 property resales in the third quarter of 2023, and found 93.5% were sold for a profit, with the median gain coming at $298,000. Not bad at all.

And home values are tipped to jump a further 6% in 2024, according to ANZ Bank.

Add in rental vacancy rates hitting record lows of 1.1% in January 2024, and many investors are attracting good tenants, which can be great for cash flow.

How could the return of investors impact the market?

On a personal level, buying an investment property could potentially be a boost for your long-term financial well-being.

ABS has acknowledged that rising household wealth in Australia is being supported by house prices that have continued to grow despite higher rates.

More broadly, PropTrack points out that the re-emergence of investor activity “heralds good news for the overall health of the market, helping to drive more new construction”.

Long story short, the benefits of more rental properties could extend beyond individual investors.

Is an investment property on your radar?

If you’re thinking about buying a rental property, or you’d like to add to your current property portfolio, talk to us today about your options for an investment loan.

We can help you work out how much equity you may be able to leverage, as well as your overall borrowing capacity.

From there, we can help you track down a suitable investment loan with a competitive rate from our broad suite of lenders, leaving you free to focus on finding your ideal investment property.

Just call us  !

 

 

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

4 tips for self-employed home loan applications

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Applying for a mortgage when you’re self-employed may have you jumping through more hoops. But it needn’t deter you from getting into the property market. Here are 4 tips to help you apply for a mortgage like a boss.

Being your own boss sure has its advantages: the flexibility of setting your own hours, building your own business to represent your values, having someone else fetch you coffee…

But when it comes to home loans, you may have more to prove than the average applicant.

You see, lenders may view you as a little more risky. That’s because, in their eyes, you may not have a steady paycheck to make those all-important repayments.

But being self-employed needn’t stop you from getting your slice of the great Australian dream.

Planning ahead and knowing what lenders generally look for could give you an edge when it comes to mortgage application success.

1. Get your finances in order

As a self-employed applicant, having rock-solid finances is important.

Even if your business is booming, most lenders will see you as more of a risk for defaulting. That’s because self-employed incomes can be less consistent.

Lenders want to know that the likelihood of you making regular repayments is high.

And to mitigate risk, loan options available to you may have a lower loan-to-value ratio (meaning you may need a higher deposit) and/or have a higher interest rate.

So, to prepare to apply, consider getting your finances in check by:

– Building up a healthy credit score.
– Lowering your living expenses by focusing on the essentials.
– Saving up a healthy deposit (aka genuine savings) and a cash buffer.
– Running your business on accounting software such as Xero, MYOB or Hnry so you can provide up-to-date and accurate profit and loss statements.

2. Gather your documents

It’s important to keep your business and personal finance documents up to date, so you’ll be ready to rock and roll.

For verification of income, many lenders require two years worth of lodged business and personal tax returns.

It’s a great idea to tell your accountant in advance that you’re planning on applying for a home loan. That’s because some of the financial wizardry they apply to lower your tax bill might work against your application and lower your borrowing capacity.

Also, keep in mind that business owners who do lots of “cash jobs” can find it harder to obtain a home loan because they have less income to show for their work.

On top of running your credit score, some lenders may want statements from loans and credit cards for proof you can make regular repayments.

They may also want to see verification of assets such as any property, savings and investments.

Some lenders may want to see the whole kit and kaboodle when applying for a loan. Some may need less.

And some offer low-doc loans if you don’t have extensive documentation. But they may come with higher interest rates or the need to pay lenders mortgage insurance (or both).

Exactly what documents are required depends on the lender and the type of loan.

3. Choose your lender wisely

Not all lenders are comfortable providing self-employed loans for the reasons mentioned above.

And every time you apply for a home loan your credit history is “pinged”. The more this occurs, the more of a red flag this may pose to lenders.

So targeting lenders that have a track record of approving self-employed loans might be a wise move.

Having a reputable mortgage professional on your side may be helpful here. Which brings us to our next point …

4. Get in touch with us today

Just as you’ll want to give your accountant plenty of notice, so too will you want to reach out to a mortgage broker sooner rather than later.

That’s because we can help you work out your borrowing capacity, and provide you with other tips that you can start working on now that may eventually help make your application more attractive to lenders.

So if you’re self-employed and think you’ll be seeking a home loan in 2024, get in touch today.

Just call us  !

 

 

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

How your deposit size can shape the rate you pay

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It’s commonly known that the bigger your deposit, the smaller your home loan, and thus, the lower your monthly repayments. But today we’ll look into another way your deposit size could reduce your repayments: by potentially reducing your interest rate.

A question we’re commonly asked (believe it or not!) is “how can I get a lower interest rate?”

There’s no straightforward answer to this one as it usually depends on a myriad of factors, including whether lenders see you as high risk or low risk, the competition in the market at the time and, as we’ll discuss today, how big your deposit is – or more technically, your ‘loan to value’ (LVR) ratio.

What’s LVR?

To cut through the jargon, LVR refers to how much of your home’s value you’re borrowing.

If you plan to buy a home priced at, say, $600,000 using a deposit of $120,000, you’ll need to borrow $480,000, or 80% of the property’s value. For lenders, this means you have an LVR of 80%.

Why does this matter?

Well, a bigger deposit lowers your LVR. This in turn helps reduce the risk you represent to a lender.

A loan with an LVR of 80%, for example, may be seen as less risky than one with an LVR of 90%.

As a general rule, lenders tend to reward borrowers for that reduction in risk with a lower home loan interest rate.

But note: these figures don’t include stamp duty and other up-front costs, which you may also need to budget for.

Average interest rates by LVR

Mozo checked out the average variable rates for different LVRs.

As you can see below, for home loans with an LVR of 95%, meaning a 5% deposit, the average variable rate is about 7.38%.

Borrowers who can pull together a slightly bigger deposit may see their rate fall. As a guide, on an LVR of 90% (deposit of 10%), the average variable rate falls to 7.13%.

That’s a potential rate saving of 0.25%. This may not sound like much. But along with lowering your monthly repayments, a lower rate could mean paying less in interest charges over the life of your loan.

– LVR 95%: average variable rate of 7.19% p.a.
– LVR 90%: average variable rate of 6.39% p.a.
– LVR 80%: average variable rate of 6.19% p.a.
– LVR 70%: average variable rate of 6.15% p.a.
– LVR 60%: average variable rate of 6.09% p.a.

How your LVR can see you save in other ways

Your LVR doesn’t just shape the rate you’re likely to pay.

If you have a small deposit, usually less than 20%, you could be asked to pay lenders mortgage insurance (LMI).

This is a type of cover that protects the lender if you can’t keep up your loan repayments.

LMI can be a substantial up-front cost.

There are options for first home buyers with a small deposit to avoid this expense. The First Home Guarantee Scheme, for instance, allows eligible buyers to purchase a first home with just a 5% deposit and no LMI.

What if I’m refinancing my home loan?

If you’re refinancing your mortgage, your LVR will be shaped by home equity.

The same basic rule applies. The more equity you have in your place, the smaller the loan you may need.

This may help lenders see you as a lower risk (all other things being equal), so chances are you may be offered a lower rate.

How we can help

With so many loans and lenders to choose from, home loan interest rates can vary widely.

Yes, your deposit or home equity can play a role in the rate you pay. But a variety of other factors come into play also.

That’s why it’s important to speak to us if you’re buying a first home, your next home, or refinancing.

We can help you find a home loan that’s suited to your needs at a competitive rate in line with your LVR and any other contributing factors.

Just call us  ……

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

The big stretch: should you extend your loan term?

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If the November rate hike will seriously stretch your finances, one potential solution may be to extend your loan term. It can ease the hip pocket pain by lowering monthly repayments. But taking more time to pay off your mortgage can come with hidden downsides. Here’s what to weigh up.

Will the RBA’s latest 0.25% cash rate rise squeeze you financially? (not to mention the other 12 rate hikes!)

The majority of lenders lost no time increasing their variable home loan rates following the Reserve Bank of Australia’s 0.25% Melbourne Cup Day rate rise.

According to Mozo, the 13th rate hike since May 2022 has pushed up the average variable rate to 6.62%.

What does that mean in dollars and cents?

On a $500,000 variable rate home loan payable over 25 years, the latest 0.25% rate hike can see monthly repayments jump by $78.

For homeowners who didn’t have much fat left to cut from their budget, those extra dollars can be hard to find.

One potential strategy that may help to lower repayments is to stretch out your loan term.

How extending your term can reduce repayments

If you have a 25-year loan, your lender may give you the option to extend for up to five more years, possibly pushing out the term to 30 years.

If you get the green light, this kind of reset can significantly lower your monthly repayments.

On the $500,000 mortgage we looked at earlier, moving from a 25-year loan to a 30-year loan could cut monthly repayments by around $214 – even after allowing for the November rate hike.

The hidden cost of a longer term

There’s a lot to love about the prospect of slashing a couple of hundred bucks off your loan repayments each month, especially as we head into the festive season.

But pushing out your loan term can come with a hidden cost.

Taking longer to pay down your loan means you’re also paying interest for longer. And while your repayments can decrease, the long-term interest cost can skyrocket.

Stretching a $500,000 loan from 25 to 30 years could mean paying a whopping $128,000 more in total interest.

It’s worth keeping in mind though that those extra interest repayments aren’t a given.

You may be able to close the gap and cut down the interest cost by either making extra repayments in the future, loading up an offset account, or paying off the loan early (if, for example, you receive a lump sum inheritance).

So the upshot is that stretching your loan term can be a short-term fix now, but you’ll have to weigh up the costs against the benefits, not to mention whether you think you’ll be in a better financial position later down the track to pay down the loan quicker (and thus reduce the interest payments).

Other ways we can help

Along with exploring extending the length of your loan, we could also help you look into other solutions to ease the pain of higher rates.

Options that may be available with your lender include:

– temporarily lowering your loan repayments;
– deferring repayments for a while; or
– shifting you to interest-only payments for a set period.

The common thread is that the earlier you reach out for assistance, the sooner we may be able to help you get some financial relief.

Just call us …..

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

How much can you really save by refinancing?

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Not sure what refinancing is all about? You’re not alone. Our quick explainer lets you master the basics and helps you work out how much you could save.

Home loan refinancing is a hot topic right now.

Ever since interest rates hit an upward trajectory in May 2022, skyrocketing numbers of homeowners – as many as 28,000 each month – have turned their attention to refinancing.

However, plenty of Australians could be missing out on the savings of refinancing simply because they’re unsure of what’s involved.

Research by Finder shows one-in-five people are in the dark about refinancing, while 63% admit to being only “slightly confident” in their knowledge of refinancing.

So, let’s take a quick look at what refinancing is, and how it can reduce stress by potentially putting cash back in your pocket.

What does refinancing mean?

Refinancing simply means replacing your old mortgage with a new loan and lender.

The process is similar to the one you followed to apply for your current loan.

You decide the loan you’d like to switch to, make a formal application, and provide evidence of income, expenses, and your personal ID.

If the loan is approved, you can sit back and relax as the new lender arranges to pay out your old loan. When that’s taken care of, you just start making repayments to the new bank.

Refinancing can be a surprisingly simple process. Better still, it can all happen very quickly, usually taking about four weeks from start to finish.

Refinancing can be a stress buster

Refinancing can be an opportunity to access home equity, enjoy better loan features, or consolidate several personal debts.

But the number one reason for refinancing is to save money by paying a lower loan interest rate. Those savings can help take the financial pressure off homeowners.

According to Finder, 60% of refinancers admitted to being stressed about their home loan before deciding to switch.

If that sounds like you, making the move to a new loan could be a valuable stress buster.

How much could you save by refinancing?

Potentially, a lot!

That’s because lenders are still saving their best deals for new customers.

The average rate on established loans is currently 6.20%. But if you’re a new customer, you’re more likely to pay an average rate of 5.99%.

That’s an instant saving of 0.21% interest. Think of it as reversing almost one official rate hike.

So what does that rate difference mean for your hip pocket?

Right now, the average loan being refinanced is worth $526,093. On that balance, a 0.21% rate saving could slash more than $70 off each monthly repayment, which equates to $840 in the first year alone, assuming a 30-year loan term.

Is refinancing right for you?

If you’re starting to feel the interest rate squeeze, give us a call today to discuss your refinancing options.

We’ll help you work out if refinancing is the right step for you and how much you could save by switching to a new loan and lender.

Just call us …..

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

3 ways pre-approval can give buyers an edge

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There’s a lot to be said for having your home loan pre-approved. But does pre-approval mean you’re putting the cart before the horse? Definitely not. Here are three ways pre-approval can help you get ahead of the competition.

Here’s a handy tip: you don’t have to wait until you’ve found a home you’d like to buy before making mortgage enquiries with a lender.

It’s possible to have a home loan pre-approved before you’ve even started to wear out shoe leather at open home inspections.

It can mean you’re ready to go with your loan, with only a few formalities to sort out, as soon as you’ve found the right place.

Even better, pre-approval doesn’t mean you’re committed to taking out a loan. It’s not a problem if you have a change of plans.

Here are three ways home loan pre-approval can put you in front in today’s market.

1. Pre-approval gives you a budget to stick to

When it comes to a major step like buying a home, there’s no room for guesswork.

With a pre-approved home loan, you know exactly how much you can borrow, and that’s the foundation for your home-buying budget.

It means you can focus on homes within your price range, and make an offer with confidence.

Pre-approval is especially important if you plan to bid at auction. It sets a clear line in the sand for your highest bid.

2. You can act fast

In today’s market, homes are selling in turbo-charged timeframes.

Figures from CoreLogic show the median selling time across our capital cities is just 27 days. That’s less than a month!

So you need to act fast to avoid missing out. Sellers might not wait around while you head to the bank to see if you qualify for a home loan.

Having pre-approval in place means you can get the ball rolling as soon as you find the right home, without getting pipped by a more organised buyer.

3. Pre-approval can show you’re a serious buyer

Nothing says ‘genuine buyer’ like home loan pre-approval.

Don’t be shy about letting real estate agents know your loan is pre-approved. It adds clout to your negotiations and gives vendors confidence that you have the finance to follow up any offer you make.

Just consider keeping some information up your sleeve, such as how much you’ve been pre-approved for.

After all, the real estate agent’s goal is to get the best price for the vendor, not the buyer!

How reliable is pre-approval?

Home loan pre-approval is not a guarantee that you’ll get a home loan.

You won’t get the green light for sure until you’ve found a place to buy, and the bank has checked that the property meets their lending criteria.

Your lender will also want to see that your personal finances haven’t changed since your loan was pre-approved.

It’s also worth keeping in mind that while there aren’t many downsides to obtaining a single pre-approval, getting too many over a short period of time with multiple lenders can potentially negatively impact your credit score and ability to take out a loan – as lenders might suspect you’re financially unstable.

Which pre-approval is better?

Home buyers are often surprised to learn that pre-approval isn’t available with every lender.

Even among banks that do offer this service, not all pre-approvals work the same. One sort is especially worth aiming for.

You may come across two types of pre-approvals:

1. System-generated pre-approvals

This sort of pre-approval is generated by a lender’s computer based on the information you enter about yourself.
You can get a result quickly this way. The catch is that the analysis isn’t thorough, making the outcome unreliable.

In particular, if any of the details you enter are incorrect, the bank’s IT system may wrongly say you don’t qualify for a home loan.

2. Fully assessed pre-approvals

As the name suggests, this type of pre-approval involves your bank’s credit team taking a close look at your finances, credit score and other personal and financial details to be sure you can comfortably manage a home loan.

A full assessment takes more time, but it’s worth the wait. It can help you feel more confident that you’ll be offered a home loan when you find your ideal property.

Want to find out more about pre-approval?

If you’re looking to buy a home and want to get an edge over the competition (to put in an early offer, for example), then pre-approval might be a much-needed ace up your sleeve.

We can help you work out which lender and which loan product is a good fit for your pre-approval situation.

So call us today to take the guesswork out of home loan pre-approval, and give yourself a head start over other buyers in the market.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

How does your home loan compare?

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No change to the cash rate again this month, but lenders’ mortgage rates have been jumping around more than a bunch of toddlers at a Wiggles concert. We reveal the current average rates to see how your loan compares.

Home owners are celebrating the official cash rate staying on hold for several months. But behind the scenes, Mozo reports that lenders have been “astonishingly busy” adjusting their home loan rates – both up and down.

Key movements over the last month include NAB, CommBank and Bank of Queensland lifting some of their variable rates.

However, in the fixed rate market, plenty of lenders including big banks such as CommBank, ING and Macquarie have slashed their fixed rates.

It goes to show, you can’t assume your home loan still offers a competitive rate just because the official cash rate hasn’t budged.

Question is, how does your loan shape up against the market?

Average variable home loan rate

Across owner-occupied home loans, the average variable rate right now is 6.60%.

Remember though, this is an average. It can be possible to pay far less.

We are still seeing home loan rates starting with a ‘5’ rather than a ‘6’. This makes it worth checking to see what you’re currently paying.

Fixed rates prove a mixed bunch

As of early September, fixed rates are averaging:

– 6.36% – one year
– 6.57% – two years
– 6.60% – three years

If you’re bold enough to fix for five years, the average rate is currently 6.49%.

These fixed rates assume a $400,000 loan with a 20% deposit, meaning a loan-to-value ratio (LVR) of 80%.

When could we see rate cuts?

It’s the question everyone is asking: when will interest rates start to fall?

First the good news.

A number of banks, including ANZ and Westpac, are tipping the cash rate has peaked and could stay the same for some time.

Westpac thinks we could see the cash rate fall by September 2024. AMP meanwhile is forecasting rate cuts even sooner.

But … not everyone agrees.

NAB economists expect one more rate hike before the end of 2023, with rates likely to fall by next Spring.

And the Reserve Bank of Australia (RBA), which makes the official rate calls, is warning we could see more rate hikes depending on how inflation and the economy are tracking.

Make a rate cut of your own

Even the experts can’t agree on where rates are heading.

But the banks aren’t waiting around for the RBA to drive their rate decisions, and neither should you.

Call us today to see how your home loan rate compares to the broader market. Chances are there’s a better deal out there just waiting to be claimed.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

More Aussies turn to mortgage brokers for a hand managing hikes

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An avalanche of rate hikes over the past 18 months has supersized home loan repayments. But savvy homeowners aren’t panicking. In fact, more mortgage holders than ever before are reaching out to brokers for expert help.

A recent survey by the Mortgage & Finance Association of Australia (MFAA) shows 95% of mortgage brokers are meeting with homeowners who have never used a broker before.

And it’s a move that’s paying off.

The MFAA reports nine out of ten brokers have successfully secured a rate discount for their clients this year.

And more than eight out of ten have helped their clients refinance to a new lender.

It just goes to show that if you’re struggling with mortgage repayments, you don’t have to go it alone.

How much could you slash from your home loan?

Part of a broker’s service involves contacting your current lender to negotiate a lower rate.

But if they don’t come to the party, real savings action can lie in refinancing.

Mozo has done the sums on the savings potential of switching from the average variable rates (6.60% for owner-occupiers; 6.96% for investors) to one of the lowest rate loans on the market.

They found that homeowners and investors in capital cities across the country who switch to a new lender can slash their repayments by $474 per month, on average

That’s as much as $5,691 annually.

Now, the lowest rate loan might not be available to you in your situation (we’d have to help you check), but it does highlight that there are big savings to be made if you can refinance to a lower rate.

What if you have a fixed-rate home loan?

You’ve probably heard about the ‘mortgage cliff’ – it’s a term used to describe the financial shock that homeowners can face when their super-low fixed rate comes to an end.

And we’re not out of the woods (or away from the cliff) just yet.

The Reserve Bank of Australia says around one million borrowers will come off a fixed rate over the next 18 months.

Crazy thing is, a Finder survey shows more than one in ten people with a fixed rate home loan are in the dark about when their fixed rate will end.

That matters because skyrocketing interest rates mean the average mortgage holder farewelling a fixed rate could face a $1,677 hike in their monthly loan repayments.

So if you’re on a fixed-rate home loan, it might be worth checking when the fixed rate period is due to end, and if it’s soon, what options are available to you.

Time to call in the experts

No matter whether you’re feeling the pressure of higher rates, thinking of refinancing, or unsure about what’s happening with your fixed rate, it’s important to reach out for expert help.

Give us a call today for a helping hand with your home loan.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

One-in-three first home buyers use guarantee schemes

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Know anyone who wants to buy their first home? A new report confirms that low deposit schemes are getting younger buyers into a place of their own sooner.

First home buyers are ignoring headlines warning that it can take years to save a deposit.

Instead, they’re flocking to guarantee schemes that allow them to get into the market with just a 5% deposit – and without the cost of lenders’ mortgage insurance (LMI).

NHFIC, which runs the First Home Guarantee schemes set up by the federal government, says that in 2022/23, close to one-in-three first home buyers tapped into the guarantee schemes.

That’s up from one in seven the year before.

In total, 41,700 home buyers got into the market with the help of guarantee schemes last financial year, following an uptick in the number of places available.

Younger Australians are buying a home

What’s especially exciting about NFHIC’s research is that it shows the schemes are allowing younger buyers to crack the property market.

In 2022/23, more than half of all places in the First Home Guarantee and Regional First Home Buyer Guarantee were taken up by people under the age of 30.

There has also been a fivefold increase in the number of buyers aged 18-24.

Key workers are buying with just a 5% deposit

The low deposit schemes are also helping a growing number of key workers such as teachers, nurses and social workers purchase a home.

Around 7,721 guarantees were issued to key workers last financial year. Great news for these essential workers in our community!

Debunking the low deposit myth

The First Home Guarantee has at times attracted criticism. This has largely been around the risks of buying with just a 5% deposit, which can mean taking on a larger loan with higher repayments.

But NFHIC data suggests this hasn’t been a problem.

Fewer than 0.1% of homeowners using the schemes have fallen behind on their loan repayments, which is less than the market average for all buyers with a low deposit loan.

Better still, close to 10,000 scheme borrowers (over 12% of total guarantees issued to date) have already transitioned out of the scheme, with most of these buyers having accumulated enough equity to achieve a loan-to-value ratio (LVR) of less than 80%.

Could you be eligible for a 5% deposit scheme?

If you’re a first home buyer struggling to save a 20% deposit, it’s good to know there is a pathway to home ownership that can get you into a place of your own sooner.

And it can also help you to avoid paying LMI – which can cost you anywhere between $4,000 and $35,000, depending on the property price and your deposit amount.

Conditions apply for the 5% deposit schemes, but new rules mean you can buy with a sibling or mate and still be eligible for this valuable financial helping hand.

With property values rising in many markets across Australia, time is of the essence.

Call us today to see if you can buy a home with a 5% deposit and zero LMI.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.