How Much Does It Cost to Refinance Your Home Loan?

Thinking of refinancing your home loan? If you are, then you’re not alone. Before you jump the gun, however, you should first find out, how much does it cost to refinance a home loan? Is it free or are there fees associated with such a move?

As a homeowner with a mortgage, paying your home loan regularly is a must. Unfortunately, with the recent increase in cash rates, which influences the interest rates of variable-interest home loans, paying in full and on time has become a challenge for many. One option people turn to when they face such a dilemma is a refinance.

When mortgage rates rise due to circumstances like the one mentioned above, the prospect of securing a lower interest rate through refinancing can be alluring. However, beneath the surface of this seemingly advantageous strategy lies a complex web of costs and considerations that homeowners must navigate. 

This article will guide you through the intricacies of home loan refinancing costs and will provide insights into the economics behind the process, offering you practical tips for making informed decisions.

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The Basics of Home Loan Refinancing

What is home loan refinancing? In a nutshell, a refinance involves the replacement of an existing mortgage with a new one. This new loan can come with altered terms, modified amounts, or most enticingly, a reduced interest rate. It can also come with extra cash that you can use for other purposes.

This opportunity to secure a lower rate is often what people aim for, primarily when there is an uptick in mortgage rates due to the changing financial landscape. It also grants homeowners the flexibility to transition from a variable interest rate to a fixed one, or vice versa, based on their financial preferences and risk tolerance.

Figuring Out the Cost to Refinance

Calculating the cost of refinancing a home loan is an essential step in making informed financial decisions. This process involves a meticulous assessment of various factors, which can include the potential savings from lowered interest rates as well as fees that may be associated with it, such as exit and application fees. You should also factor in the impact of break costs if refinancing occurs before the end of a fixed term.

Understanding these components and conducting a comprehensive cost-benefit analysis will give you the ability to gauge the financial viability of refinancing. By looking into the intricacies of these costs, individuals can confidently navigate the complex financial landscape, ultimately making choices that align with their long-term goals and aspirations.

Deciding If You Should Refinance Your Home Loan

The decision of whether to refinance a home loan is not a one-size-fits-all proposition. It’s a case-by-case decision that’s influenced by a number of factors. These include current interest rates, the remaining term of the loan, and individual financial goals.

Some experts suggest it might be prudent for homeowners to consider refinancing every two years. This is to ensure that they are consistently accessing the most favourable mortgage rates available. This idea, however, is something you should ask a professional mortgage broker about so you go into such a plan with the right information.

Weighing the Costs and Benefits of a Refinance

Reduced interest rates and enhanced terms may seem like a good idea, but the reality of refinancing fees and costs shouldn’t be ignored. You should conduct a thorough cost-benefit analysis before diving into the process. This is so you will know how much you end up saving and if the cost to refinance mortgage loans is higher than you expect, you might want to rethink such a plan.

On a positive note, the fierce competition among lenders has compelled them to waive certain refinancing costs and introduce compelling incentives for potential clients. This competitive landscape empowers borrowers to negotiate and seek deals that not only optimise their financial situation but also help offset the upfront costs of refinancing.

Breakdown of Refinancing Costs

Understanding the added rates on refinancing mortgage loans is key to making informed decisions. The cost of refinancing can vary significantly depending on factors such as location, loan amount, and individual circumstances. It will also depend on which refinancing fees are applicable to your case. Note, however, that some lenders offer cashback refinancing to help minimise these costs, so you might want to talk with a professional mortgage broker about this.

To give you an overview of what these costs are, here’s a breakdown of the common refinancing costs:

• Bank Discharge Fees – These fees can vary from one bank to another, so you will need to check with your bank for the exact amount here.
• Break Fees – If refinancing occurs before the fixed term concludes, break costs may apply. These costs are designed to compensate the lender for potential lost profits due to the early contract termination. The amount of break costs varies based on the loan amount and can potentially reach tens of thousands of dollars.
• Registration of New Mortgage Fees – $225
• Settlement Fee – $200
• Discharge of old mortgage – This is usually around $225, but costs can vary. To get the right amount for this, you can use the fees calculator provided by Titles QLD for those registering a release of mortgage. 
• Property Valuation Fee – This fee is typically waived, with Low Doc loans being the exception.
• Land Registration Fees – These fees are paid to remove the existing mortgage from the current lender’s records and register the new lender’s mortgage.
• Lenders Mortgage Insurance (LMI) – If the equity in the home is less than 20%, LMI may be required. This insurance protects the lender in case the borrower defaults on the loan.

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Equity Requirements for Refinancing

For those thinking of tapping into their home equity for refinancing purposes, there’s a crucial threshold to bear in mind. To avoid paying lender’s mortgage insurance (LMI), it’s advisable to have at least 15% to 20% equity in the home. Consulting with an expert mortgage broker can provide clarity on the amount of equity available during the refinancing process.

Exploring Refinance Cashback Opportunities

Due to the competitive nature of the lending landscape, some financial institutions may offer cashback deals to incentivise homeowners to refinance. These deals can range from direct cash rewards to gift certificates to discounts on annual fees and more.

These play a significant role in offsetting the overall costs of refinancing. The specific terms of these incentives will vary from lender to lender, providing homeowners with additional leverage in the negotiation process.

Strategic Timing of Home Loan Refinancing

Timing is a critical factor when considering home loan refinancing. When is it the right time to explore refinancing opportunities? Here are some suggestions:

• Low Loan Value Ratio (LVR) – If you have an LVR ratio below 80%, you can avoid lender’s mortgage insurance.
• New Customer Rates – Taking advantage of “new customer” lending rates can be a strategic move to secure better terms.
• Conclusion of Introductory Rates – When the “honeymoon” or introductory rate of a mortgage ends, it’s a great time to consider refinancing options.
• End of Fixed Term – The end of a fixed-term period is also a good time to review refinancing opportunities.
• Adapting to Economic Changes – Changes in economic circumstances, whether personal or global, can be triggers for considering refinancing. One example of this is the rising cash rate in the country.
• Unleashing Home Equity – Having a substantial amount of equity in the home is a compelling reason to explore refinancing possibilities.
• Adding Loan Features – If the need arises to incorporate additional features into the home loan, refinancing can be a suitable avenue.

How long does it take to refinance a home loan?

How long the refinancing process takes is dependent on a variety of factors. Usually, this takes somewhere between two to four weeks, but there are circumstances that affect how long the process takes. The factors that affect how long it takes to refinance your home loan include the following:

• Completeness of your documents
• Speed in which you complete the lender’s requirements
• Application strength (this can include your credit score, current finances, state of your employment, and other similar factors)

Working with a Mortgage Broker for Your Refinancing Needs

Collaborating with a Professional Lending Solutions mortgage broker can be a strategic move when you’re considering refinancing a home loan. Our team can bring a wealth of industry knowledge and experience to the table, offering you personalised insights tailored to your unique financial situation.

If you want to know how much it will cost to refinance your home loan, we can help you figure it out. Our team can also guide you through the refinancing process. To optimise your refinancing journey, make informed decisions, and learn more about your refinancing options, don’t hesitate to contact us so we can help.

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No one really likes paying interest on their home loan. For most people, paying interest is a kind of necessary evil – a depressing reality that will ultimately help you achieve your goal (owning your own home).

So, when people hear that an offset account could help them pay less interest, they usually get excited. But what exactly is a home loan with offset account? Is it worth having a mortgage offset account? And how can you make the most of your home loan offset account?

This is offset account explained.

What is a Home Loan Offset Account?

A home loan offset account is an incredibly useful tool for homeowners. With an offset account connected to your mortgage, the balance in the account is used to reduce the amount of interest charged on the home loan. This makes an offset account a great way to save on interest and reduce the time taken to pay off the loan.

This type of account is particularly useful for those who have a regular flow of income, such as salary or investment income, as the balance in the account will be constantly changing. This means that the amount of interest charged on the home loan will be constantly adjusted, allowing for maximum savings. Additionally, an offset account allows for easy access to funds, with no penalty for early withdrawals. For those looking to reduce their home loan while still having access to funds, a home loan offset account is a great option.

How do offset accounts work?

How offset account works is that it pretty much operates just like an everyday bank account – you can have your salary deposited straight into the account, you can set up direct debits and you can use the funds to buy groceries, fuel, or your morning latte. But any money you have sitting in your home loan offset account will be used to “offset” the balance of your mortgage. In other words, when calculating how much interest you owe on your home loan, the lender will first deduct the total balance of your offset account. The figure remaining will then be used to determine your monthly interest.

So does offset account reduce monthly repayments? Yes — in fact, it is a great way to reduce your monthly loan repayments. An offset account effectively reduces the interest you are charged on the home loan, as the bank is no longer calculating interest on the full loan amount. This can result in a substantial decrease in your monthly home loan repayments, which can be extremely helpful if you are struggling to make ends meet.

How an offset account can benefit your home loan

An offset account can help you save money on your home loan in a variety of ways. Below are offset account benefits:

• reduce the amount of interest you pay on your loan
• help you pay off your loan faster
• reduce the amount of time it takes to pay off your home loan.
• help you save on taxes by allowing you to deduct the interest you pay on your offset account from your taxable income
• help you manage your cash flow, as the money you deposit in the account is immediately applied to your home loan balance

With these benefits, an offset account can be a great way to maximise your savings and make the most out of your home loan. However, keep in mind that there are also offset account disadvantages when used without a thorough evaluation of how exactly it can fit your needs. You can ask the following questions to determine if you need a home loan offset account:

1. Am I willing to pay the potential extra fees associated with an offset account?
2. Am I comfortable with the risk of not having access to my funds in an emergency or if interest rates change?
3. Am I able to maintain a consistent balance in the offset account to make it worthwhile?
4. How often will I be able to make withdrawals from the offset account?
5. Will having an offset account impact my ability to make additional repayments on my mortgage?
6. Is an offset account the best option for me, or are there other options that may better suit my needs, such as a redraw facility or a fixed-rate mortgage?

Is an offset account worth it?

To answer this question, you’d first need to assess the loan product on offer. Does it come with added fees? Is the interest rate competitive? You’d then need to calculate how much money you’ll be able to deposit in the offset account. With the right conditions, a mortgage offset account could substantially reduce the amount of interest you’ll need to pay over the life of your home loan.

For example, imagine you had a 30-year loan with a balance of $550,000 and an interest rate of 4.5%. If you were to deposit $30,000 in your offset account, you could potentially save yourself $77,497 and pay off your loan over 2 years earlier than planned!

What is the maximum amount in offset account?

This will depend on the terms and conditions of your mortgage and offset account. Generally, there is no set limit, but there may be restrictions on the amount of interest that can be offset against your mortgage.

In some cases, lenders may impose a cap on the amount that can be held in an offset account. This is because the lender is essentially “losing out” on the interest that would be charged on the portion of the loan that is being offset. They may also charge fees or penalties for holding a large balance in an offset account.

We recommend speaking to your lender or mortgage broker if you have any questions regarding your home loan offset account.

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How to use an offset account?

Below are the basic steps to using an offset account:

1. If you don’t already have an offset account, you’ll need to open one with your mortgage lender. Be sure to check the terms and conditions of the account, including any fees or minimum balance requirements.
2. Once your offset account is open, you can start depositing funds into it. This can include your savings, income, or any other money that you can spare. Remember, the more money you have in your offset account, the more interest you’ll save on your home loan.
3. You can use your offset account like any other transaction account. This means you can withdraw money, transfer funds, and use it to pay bills and other expenses. Keep in mind, though, that every time you make a withdrawal, your offset balance will decrease, which means you’ll be paying more interest on your home loan..
4. To get the most benefit from your offset account, you’ll need to keep a close eye on your balance. Try to maintain a consistent balance in the account, and avoid making unnecessary withdrawals. The more money you keep in the account, the more interest you’ll save on your home loan.
5. Consider making extra repayments on your mortgage. This can help you pay off your home loan faster and save even more money on interest in the long run.
6. Finally, review your offset account regularly, especially if your financial situation changes. You may need to adjust your strategy to make the most of your savings and reduce the amount of interest you pay on your home loan.

7 Ways to make the most of your home loan offset account

There are some steps you can take to maximise the benefits of having an offset account. These include:

1. Depositing your savings into the account

Most of us are taught from a young age that savings belong in a savings account, where they can earn interest. However, depositing your savings in your offset account will often deliver better results in the long term. This is because the interest you save on your home loan will typically be more than the interest you’d earn with a savings account. Additionally, you’ll be charged tax on any interest you earn, but not on the interest you save. The great thing about putting your savings in an offset account is that you can still access the funds when you need them.

2. Putting any income straight into your offset account

Because an offset account is transactional, it’s easy to get your wages deposited straight into the account. And what many people don’t realise is that interest is calculated daily on an offset account. So, every extra dollar you have in there (even if it’s just short term) will help to reduce the total amount of interest you owe.

3. Use your offset account in conjunction with a credit card

Another way to maximise your offset account is by using a credit card to pay for your monthly expenses. This defers any withdrawals from the offset account until the end of the month when you can make a single withdrawal to pay off your credit card. However, keep in mind that this will only be beneficial if you pay off the credit card in full (and on time) every month.

4. Maintain a consistent balance in the offset account

Maintain a consistent balance in the account. This means keeping as much money as possible in the account at all times to maximize the amount of interest you save on your home loan.

5. Keep your offset account separate from your everyday spending account

To avoid spending your offset account funds on everyday expenses, it’s a good idea to keep your offset account separate from your everyday spending account. This can help you stay focused on your long-term financial goals and prevent you from accidentally dipping into your savings.

6. Consider making extra repayments on your mortgage

In addition to depositing your savings into your offset account, consider making extra repayments on your mortgage. This can help you pay off your home loan faster and save even more money on interest in the long run.

7. Use a mortgage offset calculator

To get a better understanding of how much money you could save with an offset account, consider using a mortgage offset calculator. This tool can help you estimate the amount of interest you could save by depositing your savings into an offset account, and how long it could take to pay off your home loan.

Don’t have a home loan offset account?

An offset account can be a useful tool for reducing interest, but consider all the pros and cons before making a final decision. To find out more about home loan offset accounts, or to see whether an offset account could be beneficial for you, get in touch today on 0421 934 033 or 07 5597 6049.

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Buying a home is a wish that many people on the Gold Coast dream about. But with prices so high right now, it can seem like it is impossible to get there. Most banks prefer you to have a 20% deposit for a home loan approval. Fortunately, that does not always have to be the case. A lot of people are looking for ways to get access to no deposit home loans — but do they actually exist?

Read on to learn about several ways you can get into the housing market without needing a full 20% deposit. Buying a house with no deposit or a low deposit could be a solution for you to find that dream home. It is strongly recommended you chat to a professional mortgage broker before applying for a home loan to ensure you know all the options available to your personal situation.

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Can you buy a house with no deposit?

I guess the real question is can you get a home loan with no deposit?

To be brutally honest, a home loan zero deposit is almost virtually impossible. Home loans without deposit do exist, but they are so rare and are not offered by most lenders. They also come with higher interest rates and a stricter criteria set for eligibility.

However, there are ways to obtain no deposit housing that lenders would consider.

How to buy a house with no deposit:

1. Guarantor loans

A guarantor loan is a loan where a family member or friend guarantees the loan repayments in the event that the borrower is unable to pay. This means that you can buy a house without a deposit, as the lender will take the equity in the guarantor’s property as security.

The guarantor must have enough equity in their property to cover the deposit for your new home. This option can be risky for the guarantor, so it’s important to discuss the risks and responsibilities before going ahead.

Read: How Can Your Parents Help You Secure Your First Home Loan

2. Using equity in another property to buy house without deposit

If you already own a property, you may be able to use the equity in that property as a deposit for your new home. Equity is the difference between the value of the property and the outstanding mortgage.

You can use a home equity loan to borrow against the equity in your existing property to use as a deposit for your new home. However, this option also carries risks and responsibilities, as you are taking on additional debt.

3. Get a non-refundable monetary gift

If you have family members who are willing and able to help, you may be able to receive a monetary gift to use as a deposit for your new home. This gift must be non-refundable, meaning that the giver cannot expect the money back at any point. Lenders will want to see a gift letter outlining the details of the gift and the giver’s relationship to the borrower.

Go Lower with 5% Deposit

Some Gold Coast no deposit new homes are potentially available to prospective homebuyers. But they usually come with very strict criteria for approval:

• Virtually perfect credit history
• Stable and lengthy work history
• Often a higher interest rate than other loans

If these are roadblocks for you though, many lenders also have much lower deposit loans available.

In some cases, you could have as little as 5% of the property price saved and still secure a loan. You may have to pay additional costs like lender mortgage insurance (LMI). But this could be a great alternative to buying a house with no deposit if you can swing the 5% deposit.

Understanding First Home Guarantee Scheme (FGHS)

The First Home Guarantee Scheme (FHGS) allows eligible first-time home buyers to purchase a new or existing owner-occupied property with a minimum deposit of just 5% and avoid paying the Lenders Mortgage Insurance (LMI) premium.

The scheme is limited to 35,000 eligible first-time buyers per year, and the government acts as a guarantor, paying the difference between the deposit saved and the 20% threshold required to waive the LMI. The FHGS can be used in conjunction with other QLD first home buyer grants, and interested applicants can apply through a participating lender or broker.

To qualify for the FHGS, applicants must meet specific criteria related to income, age, citizenship, and property value, as well as provide relevant financial documents during the mortgage application process.

Understanding the First Home Owner Grant

The First Home Owner Grant is a national scheme that provides a one-off grant of $10,000 to eligible first-time homebuyers. 

The grant itself can be used to help offset the cost of a home deposit. It may not cover the whole thing, but it could help a great deal.

Please note that the FHOG usually is paid on settlement for new homes or highly renovated ones. This means that if a home is being built or under major construction, you will not receive the grant until you make the first progress payment on the loan.

Also, you will bear the cost of other home buying expenses like moving, legal fees, and the like. These regulations vary by state and territory, so make sure to check all the requirements for your area first.

Can I Use My Superannuation?

Your super may also help pay for your home deposit using Australia’s First Home Super Saver Scheme (FHSS).

The FHSS allows for voluntary concessional and non-concessional (before and after-tax) contributions into your super fund to be used for your “first home savings”. You can then release these contributions and earnings toward the purchase of your first home.

There are some requirements you need to know with the FHSS scheme:

• You must occupy the home as soon as it is practicable.
• You must plan to stay in the property for at least 6 of the first 12 months of ownership.

There are also other requirements to using this program. Check with an expert to better understand everything you need to have in place for this benefit.

Get the Home Buying Help You Need

For first home buyers Gold Coast who need some more information about no deposit home loans, get in touch with Professional Lending Solutions. My team and I will work with you to help you understand all the home loan options available to you.

Chat with us today and get the ball rolling on your own new home.

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Have you heard of the phrase “mortgage prison”? Are you:

• trapped in expensive home loans Gold Coast deals with high interest rates;
• unable to switch to more affordable loans due to strict affordability tests;
• feeling helpless and stuck, with little hope of improving your financial situation?

Chances are, you could be in a mortgage prison yourself. While taking out a mortgage is often a necessary step towards achieving the dream of homeownership, a combination of the least unfavourable circumstances could send homeowners to mortgage prison.

Let us take a closer look at what a mortgage prison is, how it can happen, and most importantly, how to escape it. I will provide practical advice and guidance to help homeowners take control of their finances and weather the storm during this cycle of high mortgage rates in Australia.

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More and more homeowners are refinancing their home loans

Refinancing activity has seen a spike in 2022 during the start of the RBA cash rate hikes. In 2023, refinancing value soared to $19.9 billion or 2.7% in February this year, according to the latest Australian Bureau of Statistics lending data. It rose to 14.9% over 12 months.

The trend in external refinancing of housing loans is going on an upward slope at a much faster pace than new lending. In fact, the former may very well soon overtake the latter, the value of which currently sits at $22.6 billion — a 30.9% drop over the 12 months to February.

Why refinance?

More people are refinancing their mortgages due to the increasing number of low fixed-rate home loans taken from the Australian mortgage marketplace in 2020 and 2021, which are now on the verge of expiring.

Worries over inflation and concerns about further rising interest rates on homes are the main reasons why this is the case. Another reason is the fact that refinance rates generally more competitive than existing home loan rates. Lenders tend to offer better interest rates and terms to encourage you to refinance with them. 

What does this suggest?

Given the current economic climate, it is worth considering refinancing your home, even if you haven’t made plans to do so yet.

But what if you are unable to refinance?

Then mate, you could be in mortgage prison. Let’s delve into this pressing issue.

What is mortgage prison?

A mortgage prison refers to a situation where a borrower is unable to refinance their mortgage, leaving them trapped on a high or average interest rate. 

This can occur due to several reasons, including:

• a decline in the value of their property, leaving a homeowner with less equity and a high loan-to-value ratio (LVR);
• being too old to refinance (folks over 50 years old may find it harder to refinance)
• stricter serviceability standards (the Australian Prudential Regulation Authority (APRA) increased the home loan buffer to 3% from 2.5%)
• reduced borrowing power due to rising cost of living and/or stagnant income levels
• having poor credit scores from missed repayments
• the anxiety over transitioning to a higher fixed Australia mortgage rate when the current term ends

8 Ways to avoid or escape mortgage prison

To avoid or escape mortgage prison, here are five things you can do:

1. Evaluate your financial health

Reviewing your budget and expenses can help you identify areas where you can cut back on spending, which can free up funds to pay down your mortgage or other debts. This can help improve your financial situation and make it easier to qualify for a new loan with better terms.

2. Get rid of your other debts

Reducing your other debt, such as credit card debt or personal loans, can improve your overall financial situation and make it easier to qualify for a new mortgage. This can also free up more funds to put towards your mortgage repayments.

3. Increase your household income

Finding ways to increase your household income, such as taking on a side job or negotiating a pay raise, can help improve your financial situation and manage your monthly repayments.

4. Cut down your credit card limits

By reducing your credit card limits, you can decrease the amount of debt you have, which can improve your debt-to-income ratio and make you a more attractive borrower to lenders. You can also avoid overspending and accumulating more debt this way.

5. Ask for a better loan term 

Requesting a new, longer loan term can lower your monthly repayments and make it easier to keep up with your mortgage repayments. However, a longer loan term means you will pay more interest over the life of the loan, so carefully consider whether this option is right for you. 

6. Consider interest-only payments

Moving to interest-only repayments can reduce your monthly repayments, but it’s important to note that you will still owe the principal at the end of the term.

7. Contact your bank for hardship assistance

If you are struggling to keep up with your mortgage repayments, contact your bank to see if they can offer hardship assistance. This may include options such as a temporary repayment holiday or a loan modification.

8. Reach out for debt counselling

Seeking advice from a debt counsellor can help you develop a plan to manage your debts and improve your financial situation. They can also provide guidance on how to avoid getting trapped in mortgage prison in the future.

You can try reaching out to the National Debt Helpline (NDH) for guidance.

Manage your home loan with Professional Lending Solutions

If you feel any kind of hardship related to your mortgage, don’t hesitate to contact me and my team. We will help you explore your options and find a solution that works for your unique situation. 

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The consecutive RBA cash rate hikes have certainly put a damper on real estate sales activity. According to the Housing Industry Association (HIA), sales in the three months to February were 46.85% lower compared to the same time last year. In Queensland alone, the RBA rate rise has caused a 51.2% dip in sales.

This, despite wages climbing 3.3% which is the fastest growth spurt in a decade. The steep home loan rate increase is eroding consumer confidence; this has been a tremendous upward movement of Reserve Bank interest rates Australia has not seen since 2012.

Are you aware of how the increases in the RBA cash rate actually affect your home loan and your very property? In this blog we thoroughly tackle the four major ways that this negatively impacts you as a homeowner.

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What is the cash rate?

The RBA cash rate is the target interest rate that the Reserve Bank of Australia sets for overnight loans in the money market. This rate is determined by the RBA’s monetary policy, which aims to achieve its objectives of price stability, full employment, and the economic prosperity of the country

The RBA board meets on the first Tuesday of each month (except January) to review the cash rate and decide whether to leave it unchanged, increase it, or decrease it. The RBA interest rate announcement is closely watched by financial markets and the public.

This is because changes in the cash rate can have a significant impact on the economy and individual households, and especially on mortgage holders on variable rate home loans.

Current cash rate Australia

On March 2023, the board decided to increase the RBA cash rate by 25 basis points, so the current RBA cash rate sits at 3.6%. The RBA cited the continued efforts to combat inflation as the main factor supporting its decision to maintain the current monetary policy stance.

4 Ways the RBA cash rate hikes affect your home loan

1. Increase in your monthly repayments

The most obvious implication of RBA cash rate hikes is causing mortgage monthly repayments to SOAR. As a matter of fact, a $500,000 mortgage now requires $11,800 MORE in annual repayments!

When the RBA increases the cash rate Australia, banks and other lenders typically pass on the higher interest costs to borrowers by raising their variable interest rates. This means that borrowers with variable rate mortgages will see an increase in their monthly repayments, as they will now be paying a higher interest rate on their outstanding loan balance.

Borrowers who had previously been on fixed rates are now facing higher variable rate repayments, as their fixed rate term has expired and the variable rate has increased.

As a result, these borrowers are now spending 30% of their income on mortgage repayments, which could put them at risk of financial difficulties — as opposed to 5%-20% of their income from just a few years back.

There will be 800,000 homeowners with fixed rate mortgages who are going to have it rough when they switch to revert rates once their term ends. Those who did not save during the period of low fixed borrowing costs and spent more money are especially vulnerable.

2. Interest rates on existing mortgages becoming less competitive than new rates on the market

For fixed rate mortgage holders that locked in 2% rates, the transition to today’s rates that range from 5% to 6% will be quite a whiplash.

However, those with variable rates are left to brace themselves for impact after every RBA interest rate announcement, hoping for the cash rate to remain the same or go lower.

When the Australian Reserve Bank interest rates climb up, interest rates on existing mortgages may become less competitive compared to new rates on the market. This is because existing borrowers are locked into their current loan arrangements, and they may not be able to take advantage of lower interest rates that are now available to new borrowers.

In other words, when interest rates on new mortgages become more competitive than the rates on existing mortgages, it means that new borrowers may be able to secure loans at lower rates than what existing borrowers are paying. This could lead to existing borrowers refinancing their loans with another lender or renegotiating their rates with their current lender to get a better deal.

In fact, that is precisely what is happening right now. Around 2370 homeowners are refinancing home loans every business day!

3. Your loan-to-value ratio increases

Unfortunately, not all homeowners have the option to refinance. One factor that hinders them from switching home loans is their increased loan-to-value ratio as a result of the RBA cash rate increase.

The loan-to-value (LTV) ratio is the ratio of the amount borrowed to the value of the property used as collateral for the loan. When the Australian RBA interest rates increase, it affects the interest rates that lenders charge on loans, including home loans.

When interest rates increase, it means that the cost of borrowing increases, and this can affect the LTV ratio in a few different ways:

• If a borrower has a variable interest rate loan, a cash rate hike may lead to an increase in the interest rate they are charged. This means that the monthly repayments on the loan will also increase, which impacts the borrower’s ability to make repayments. If the borrower is unable to make the higher repayments, it may lead to the lender requiring the borrower to provide additional security or collateral to maintain the same LTV ratio.
• An increase in interest rates may also cause property values to decrease. If property values decrease, the value of the collateral (usually a home with equity) used to secure the loan may decrease as well. This can result in a higher LTV ratio, as the amount borrowed remains the same, but the value of the collateral has decreased.

4. Your home value and equity decrease

As mentioned in the third item, an increase in interest rates may also cause property values to decrease. To be clear, it does not directly cause a decrease in property values or equity. However, it can indirectly impact property values and equity through its effect on the broader economy and the housing market.

When the RBA raises the cash rate, it can increase borrowing costs, making it more expensive for borrowers to take out loans, including mortgages. This can reduce the demand for property, particularly among first-time buyers who may be deterred by higher borrowing costs. If demand for property decreases, this can put downward pressure on property prices, which can lead to a decrease in property values.

A decrease in property values can also result in a decrease in equity. Equity is the difference between the value of the property and the amount owed on any mortgages or loans secured against the property. If property values decrease, the amount of equity a homeowner has in their property will also decrease, as the value of the property is lower than before.

To add, an increase in the cash rate can also impact the broader economy, which can also affect property values and equity. If the cash rate increases, it can decrease consumer spending and economic growth, which can negatively impact the housing market. This also leads to a decrease in property values and equity.

Case in point: A recent RateCity analysis showed that a Sydney first home buyer who purchased a $1.3m house in July 2021 with a 20% deposit will only have 17% in equity today after the median price fell to $1.2m!

Know your next move with Professional Lending Solutions

For refinancing homeowners and first home buyers Gold Coast who are unsure what the next step to take is during this tight cycle, don’t hesitate to ask help from a finance broker Gold Coast such as myself.

My team and I will answer your questions and make every effort to work with you and your financial situation. Click the button below to book a call with me today.

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The non-stop cash rate hikes have left a lot of Australian homeowners with mortgages overwhelmed and burdened by the increasing mortgage payments. If you’re struggling to make ends meet and are considering debt consolidation, you’re not alone.

When you consolidate debt you can simplify your finances and reduce your monthly repayments. But what does debt consolidation mean, and will it help you pay off mortgage faster?

In this post, we’ll explore the ins and outs of debt consolidation and how it can impact your mortgage payments. Keep reading if you’re looking for great debt management ways and to get back on track financially.

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Worrisome cash rate hikes and why people are refinancing

More and more Australian homeowners with mortgages are rushing to refinance their home loans because of the nonstop cash rate hikes. With the current cash rate at 4.10%, no wonder people are trying to be smarter and more proactive about their home loans.

Debt consolidation is an option readily available for those who want to refinance their mortgages. And for folks who are already refinancing, consolidating their other debts (e.g., credit cards, car loans, personal loans) into their mortgage is seemingly becoming a popular option.

What is debt consolidation?

Debt consolidation is the process of bringing together all your debt and rolling it into one easy-to-manage loan. This may help you to combine your outstanding financial obligation into one convenient loan, potentially at a lower interest rate than you might be paying now.

How does debt consolidation work?

Here are the benefits of debt consolidation:

• get the opportunity to secure a lower interest rate than what you are currently paying on your individual debts. This can save you money in the long run and help you pay off your debt faster.
• have one payment to make each month, rather than juggling multiple payments to different creditors and risk missing payments.
• combining your debts into one loan with a longer repayment period may enable you to reduce your monthly payments
• pay off high-interest credit cards or other debts that may be hurting your credit score — positively impacting your credit score over time
• ability to choose a repayment period that better fits your budget or opt for a fixed interest rate that won’t fluctuate over time.

How will debt consolidation help you pay mortgage faster?

Debt consolidation can help you pay off mortgage faster by streamlining your debt payments and potentially reducing your overall interest rates.

Consolidating your high-interest debts like credit card balances or personal loans into your mortgage allows you to secure a lower interest rate and reduce the amount of interest you pay over time. This can help you save money on interest and free up more of your income to put towards your mortgage payments.

You may also be able to reduce your monthly repayments and free up more of your monthly budget to put towards your mortgage payments. This can help you pay down your mortgage faster and potentially save you money on interest over the life of your loan.

Is there anything I have to know before consolidating my debts?

While there are potential benefits to consolidating your debts, there are also some potential drawbacks to consider. You may end up:

• with an extended repayment period than what you had with your individual debts
• paying more interest over the life of the loan than you would have with your individual debts, which can increase the total cost of your debt
• being responsible for paying fees and charges associated with consolidating your debts
• incurring new debt while you’re paying off your consolidated loan because you have freed up some of your monthly budget

Is debt consolidation for you? Professional Lending Solutions can help

Of course each individual has their own circumstances, so it’s best to cover all bases and explore other options.

If you need help figuring out if consolidating your debts into your home loan is the right move for you, don’t hesitate to contact myself and my team so we can assist. We also offer guidance to folks who are refinancing personal loans or their mortgages as well.

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Hey there mortgage seekers and first home buyers Gold Coast! Are you tired of scrolling through endless Google search results and feeling overwhelmed by the mortgage process?

Have you considered reaching out to a mortgage broker for help with Gold Coast home loans, but are hesitant to trust them to act in your best interest?

Well mate, it’s time to take a deep breath and relax. In this blog we will dive into the world of mortgage brokers and this nifty little thing called Best Interests Duty.

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What do mortgage brokers do?

A mortgage broker Gold Coast is a professional who act as intermediaries between borrowers and lenders. They work with a wide network of lenders, including banks, credit unions, and other financial institutions, to offer a variety of mortgage options to their clients.

Here’s what mortgage brokers typically do:

• assess their clients’ financial situation, including their income, assets, debts, and credit history, to determine how much they can afford to borrow and what type of mortgage would best suit their needs.
• present a range of mortgage options from different lenders to you based on your financial profile
• prepare and submit loan applications to the chosen lender on their behalf
• negotiate with lenders on behalf of their clients to secure the best possible mortgage terms and interest rate
• continue to provide support and guidance to their clients by helping them with any questions or issues that arise during the loan repayment period.

What is Best Interests Duty and how does it help me as a borrower?

It is essential for clients to have trust in their mortgage broker when navigating one of the largest financial commitments of their lives. To give them greater security and assurance during this process, the Australian Securities and Exchange Commission (ASIC) introduced the Best Interests Duty (BID).

Best Interests Duty is a statutory obligation that was implemented based on the recommendations of the Royal Commission. It mandates all mortgage brokers to act in the best interests of consumers and prioritise the consumers’ interests when providing credit assistance.

ASIC formally introduced this new legislation on 1 January 2021. Ultimately, it aims to align the consumer’s expectations and interests with those of the mortgage broker’s.

When does best interest duty apply?

While it may seem obvious what a client’s best interests are, there could be instances where a client’s objectives contradict them.

Here are some examples:

• client is insistent upon an interest-only loan or an offset account despite not being in a position to get much value from those features;
• client doesn’t want to entertain any products from, say, a credit union or one of the big four banks, which rules out some excellent products which would suit their personal situation.

The Best Interests Duty provides additional assurance for consumers seeking advice from mortgage brokers. Under this new regulation, the broker must:

• explain why these requests are not in the best interests of their clients
• make “all reasonable efforts” to educate clients about different borrowing option
• help them understand why certain solutions may be more beneficial
• have systems and processes in place that empower customers to make informed decisions about their mortgages
• provide clear information on fees and charges associated with different products and services as well as outlining the pros and cons of each option

At its core, the Best Interest Duty provide protection for consumers who may otherwise be vulnerable to bad advice or misaligned incentives.

Mortgage broker vs bank: does the Best Interests Duty apply to banks and lenders?

You would be surprised to know that NO, it does not!

Banks and other financial institutions do not have to adhere to this duty when providing credit assistance. This means that when you approach banks directly for credit, you are not always guaranteed the best options available.

You will only be presented with one set of options – generally those available at that particular lender – as they only offer their own products. This means no comparison can be made between different lenders or products.

Are mortgage brokers worth it?

YES, a hundred percent, mate. Bound by best interest duty mortgage brokers are held to a high standard of trust and accountability when advising consumers.

If you’re looking for a trustworthy mortgage broker to work with, look no further than Professional Lending Solutions. My team collectively has decades of experience helping hundreds of clients get the right lending solutions for their circumstances. With this, I can confidently assure you that my team and I will ALWAYS act in your best interests.

Trust Professional Lending Solutions with your property purchase journey — and make sure to give me a call!

Speak with a car broker Gold Coast

If you’re looking to make the plunge and buy your first car, congratulations! But before you do, there are a few things you should consider in order to secure the right type of Gold Coast car finance.

For first time car buyers, let’s start off on the right foot! This blog post explores everything that comes along with getting a car deal that puts a smile on both your face and pocket.

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How does a car finance work?

In Australia, car finance typically works by allowing individuals to borrow money from a lender, such as a bank or dealership, to purchase a vehicle.

The borrower then repays the loan, plus interest, over a set period of time. The vehicle serves as collateral for the loan — meaning, you will borrow money against your car. If the borrower defaults on the loan, the lender can repossess the vehicle.

There are several types of Gold Coast car finance available, including personal loans, secured car loans, and leases. Each option has its own advantages and disadvantages, and it is important to compare and understand the terms and conditions before making a decision.

We recommend enlisting the help of a car finance broker. They have access to a wide range of lenders, can help you get the right deal, and assist you with the paperwork. Best of all, they can help you understand the car financing process.

What do you need for car finance?

Am I eligible for a car loan?

Here are the general requirements for car finance in Australia:

• Proof of income: Lenders will typically require proof of income, such as payslips or tax returns, to determine your ability to repay the loan.
• Good credit history: Lenders will check your credit history to assess your creditworthiness. A good credit history and a high credit score will improve your chances of getting approved for car finance.
• Residency: Most lenders will require that you are a permanent resident or citizen of Australia.
• Age: Some lenders have minimum age requirements, typically 18 years or older.
• Vehicle: The vehicle you wish to purchase must be less than a certain age, usually 5-7 years.
• Collateral: Some lenders may require additional collateral such as assets or another vehicle as security for the loan.
• Deposit: Some lenders may require a down payment or a deposit.

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How to check if car has finance

• PPSR (Personal Property Securities Register) check: This is a national database that allows you to check if a vehicle has any outstanding finance, or if it has been reported as stolen or written off. You can do this by searching the vehicle’s VIN (Vehicle Identification Number) or the registration plate number on the PPSR website.

• REVS (Register of Encumbered Vehicles) check: This is another national database that allows you to check if a vehicle has any outstanding finance. REVS check is similar to PPSR check and it is also done by searching the vehicle’s VIN or registration plate number.

• Ask the seller: If you’re buying a car from a private seller, it’s always a good idea to ask them if there is any finance outstanding on the vehicle. They are legally required to disclose this information to you.

• Car finance broker: A car finance broker can also check if there is any finance outstanding on a vehicle. They have access to many different databases and they can also check the car’s history and check if the car has been stolen or written off.

What to consider when getting Gold Coast car finance

So how to finance car in the least stressful way possible? The first step is to do your due diligence by researching all there is to know about car loans Gold Coast.

Below are factors to weigh in when getting a first time car loan.

1. Interest rate

Interest rates determine the overall cost of the loan, and it can change over time. Best to compare interest rates from different lenders to get the best Gold Coast car finance deal for your circumstances.

2. Loan terms

A longer loan term means that you will pay more in interest over the life of the loan, which can significantly increase the overall cost of the car. Conversely, a shorter loan term means that you will pay less in interest and the overall cost of the car will be lower.

3. Fees and charges

Be aware of any fees and charges associated with the loan, such as application fees, early repayment fees, and ongoing fees.

4. Deposit

Consider how much deposit you can afford to put down. A higher deposit usually means you get a lower interest rate and a smaller monthly repayment.

5. Credit score

Your credit score can have a big impact on the interest rate offered. It’s important to check your credit score and address any issues before applying for Gold Coast car finance.

6. Type of loan

There are different types of car loans available, such as secured and unsecured loans. It’s important to understand the differences to find the best option for you.

7. Lender’s reputation

Research the reputation of the lender you are considering. You can do this by reading reviews and checking their credit rating to ensure they are a reputable lender.

Get Gold Coast car finance with the team at Professional Lending Solutions

All in all, there are a plethora of things to factor in and think about before you even start looking at cars, let alone signing on the dotted line.

With Professional Lending Solutions by your side from beginning to end, you can rest assured that we will take care of everything for you. All you need worry about is which car color looks best on YOU!

Get started by giving us a call or visiting our website to get car finance pre-approval today.

Speak with a car broker Gold Coast