Part 2 of 2: In last week’s article, we took you through your options when it comes to the fixed rate on your home loan expiring – read that article in full here.
On the back of that, we thought it would be useful to sit down with our own Kym Bowker, Credabl Residential Lending Specialist, to delve into the process and get the best rate possible.
Firstly, you’ll want to contact your existing lender to negotiate a better rate, or see if there is anything they can offer to make a loan with them more appealing.
One important thing that Kym highlights is that your interest rate is based off your loan to value ratio (LVR) - if you have not had a valuation in the last few years, this will affect your LVR and make a difference to your rate. More equity in the property means a lower LVR, which lenders typically perceive as less risk for them (should you default) and a generally lower interest rate. This may be mentioned by your lender or broker when you ask to renegotiate your interest rate, but if not make sure to mention this.
If your current lender has come back with an interest rate that isn’t appealing, the next step is to have a look at what offers are on the market and begin speaking to a broker or other lenders. Do this by looking online and contacting lenders to find out what offers are available.
One important thing to note here is that you need to know both the approximate current value of your property and what you're currently owing on the loan before you speak to your broker or a lender to see what offers are available.
The interest rate isn't the only cost that affects your total cost on the loan – you need to consider all associated costs, mostly in the form of various hidden fees that will drive your overall expenses up. When looking at loans, ask about these to get the entire picture.
You will also need to consider in and out costs to refinance, which includes government fees to discharge and register a new mortgage, as well as discharge fees from your existing lender.
The loan type you choose will affect your interest rate amongst other things, so this is an important decision. Fixed vs variable rates have a myriad of pros and cons - for further information, refer to this article.
Kym advises that your lender/broker should help you with a loan structure and features based on your personal situation. Factors like whether you expect a change in income, have additional funds available should rates go up, any expected lump sums of cash incoming, or plans to sell, upgrade or downgrade all need to be considered. In these cases, you may not want to fix your interest rate if you want to change your mortgage in the near future.
Based on the decision you make regarding loan type, your lender can give you options on features on the loan (e.g. offset account, no ongoing fees, loan type) which can help to lower your overall cost.
Select a lender that has experience in the sector you work in or your lifestyle, as they have the knowledge to get the best type of loan for you. We specialise in finance for doctors, dentists and vets and are especially knowledgeable in understanding their complex income structures - this means we can access different loan structures that others can't.
One example of this is our ability to offer a 95% lend without mortgage insurance to doctors, dentists and vets, which is a huge bonus to these clients and could save thousands in fees. If this is one financial incentive you would like to consider, read about our home loan options or speak to a Credabl consultant today on 1300 27 33 22 to learn more.