As we head into the home stretch of 2020 many people are trying to recover from the head spin that has been this unprecedented year. In addition to looking after our physical and mental health, checking in on our financial health should be at the top of the to-do list.
In a year that has seen so many Australians struggle with completely lost or significantly reduced income, counting your dollars and cents has never been more important. One of the best ways to save yourself some cash and make sure you’re in the best financial position is to review your borrowings, especially your home loan. The market for owner occupied and investment property loans is incredibly competitive right now with interest rates at all-time lows. And while your interest rate is very important, there are a number of great reasons to consider changing lenders.
Is your loan rolling out of a honeymoon period or fixed rate term?
It is always a good idea to review your loan interest rate and terms regularly, but it is particularly relevant when you know your loan is changing. Banks will regularly advertise great promotional offers or low fixed rates to entice people to choose them, but often these great low rates are temporary. It is really important to keep an eye on your rate once these initial periods end or you could end up paying much higher interest rates in the long term.
Is your loan no longer suitable for your needs?
Our circumstances change. There are a huge variety of loans and loan features available in the market, and with changing circumstances come changing needs. Perhaps you originally bought a home and set up a basic loan with a low rate, but not a lot of frills. If you’re a few years into it now and find that you have more savings you may want to consider changing to a loan with redraw or an offset account. Or if you originally signed up for a packaged loan with all the bells and whistles but have discovered that you don’t really need all those shiny bits and pieces, maybe it is time to look for a loan with lower fees and just the basics to help you pay down debt faster.
Do you need to access more cash?
Whether it is to renovate you existing property, buy a new home or investment property, or just invest as you see fit, accessing equity in your home can be a great reason to refinance. Different lenders have different credit policies that dictate how much cash they are happy to release, what evidence (if any) that you’re going to need as to how you intend to spend the money, and how much you can afford to borrow.
Do you foresee a change in your income structure?
If you are considering private practice or a change from PAYG income to a contracting or locum role you may want to consider reviewing your finances before your circumstances change. Once you are self-employed most banks will want to see two full years of tax returns to prove your income level before they will lend to you. That means even for people who have existing debts that they’ve never had a problem making repayments on, and move to an income structure where they are earning more, they may not even be able to change lenders for a much better deal because their type of income has changed.
It is best to make sure that all your ducks are in a row with your home loan(s) before switching from employee to self-employed because you may be stuck for a while in a higher rate or unsuitable product if you don’t. For medicos there are some lenders who can consider less than the 2 full years of tax returns as evidence of steady income, but with the goalposts seem to be changing all the time so better to be safe than sorry.
Whether you’re new to seeking finance or ready for a review, we’re available to chat live on our website www.credabl.com.au or you can call one of our specialist lenders on 1300 27 33 22.
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