Is your mortgage failing?
Updated: Feb 7
Australians have enjoyed some of the lowest interest rates in history. Australia’s already record low interest rate was cut again to the historically low level in February 2015 to 2.25% and many commentators are predicting a further cut in the next few months. Within a few days, most of Australia’s lenders jumped on the bandwagon; slicing up to 30 basis points from some already pretty competitively priced standard variable rates.
These unprecedented rates can basically been seen as good news for all - the mortgage rate cuts mean the cost of borrowing is now more affordable than ever. In fact, the recent rate cut has taken home loan interest rates to 60 year lows, which for most buyers is well before their house-buying lifetime.
Therefore it is a common notion that many home owners are now seeking cheaper and better mortgage deals. And fortunately, these deals are becoming readily available.
There are a few easy steps that you can take to not only see if there is a better deal out there for you, but secure a better mortgage for your needs, including:
1. Do your research:
At a time when rate cuts seem to be flying in all sorts of different directions, it is easy to get confused and overwhelmed. It is important to do your own due diligence and look into the different products on the market and what options are available before plunging into the first offer that comes your way.
2. Get to know your mortgage:
Do you know what your current mortgage rate is?
Recent research showed more than half of Australia’s mortgage holders do not know their mortgage interest rate.
For some, knowing your mortgage rate is an afterthought as long as the mortgage is tracking along just fine. But for many, it is one of the biggest financial commitments a person can make, so it is good practice to know everything about it. Moreover, the better you know your mortgage, the better placed you will be to ascertain which features are important to you and those that you currently have but could live without.
3. Consider the mortgage features:
Once you have looked into your current mortgage and gained an understanding of exactly what features your mortgage has, you can decide on exactly what you don’t need and what you do. Does your loan have a series of features you don’t use? If so, you may want to look into switching to a ‘cheaper’ loan with fewer options. Or, you may benefit from a loan with more features, such as an offset account.
4. Compare lender interest rates:
Whilst you are diligently researching the different loans and rates available, it is important to understand these different rates and then compare and contrast them against what else is on the market. It can be easy to get carried away with trying to get the lowest rate possible, but it’s also important to remember that interest rates aren’t everything; nevertheless your perfect lender should be very competitive on rates.
5. Investigate the associated fees:
Many lenders will charge various fees that are not always visible on the surface. It is essential that you are aware of the total loan package. Ask your CSM mortgage broker to compare how the lender stacks-up in terms of the fees and charges on the loan. (eg. for loan features, transactions, late penalties, early repayments, top ups etc.).
6. Consider lender support capabilities:
Whilst shopping around, make sure you familiarise yourself with the additional support systems lenders have in place. If you are in need of weekend branch access and 24 hour phone support, then it is important to partner with a lender that offers such facilities.
7. Contemplate future commitments:
Unfortunately the future still can not be predicted. Therefore before you decide to settle with one lender, look into whether or not they offer a wide range of loan options to suit you, should your personal or financial situation change (eg. if you need a loan top up, access to funds for renovations or you wish to refinance an existing loan).
8. Liase with a professional:
Once you have armed yourself with a wealth of knowledge and research and decided on whether or not there is a better product out there for your needs, it pays to engage a professional – a mortgage broker who can organise the best loan for you and do all of the paperwork on your behalf.
9. Check if there are 'breakup' costs:
It is important to note that there are often fees associated with refinancing into another home loan. A professional mortgage broker will be able to help you identify whether or not the cost of switching to a different mortgage outweighs the benefits of doing so.
10. Look carefully at the contract:
Once you have decided to refinance, it is important to go through your new home loan contract with a fine tooth comb. A meticulous approach will ensure that you know exactly what you are getting yourself into. Ask yourself are you happy with the mortgage features and the fees associated with this new product? If so, then it it’ll be worthwhile getting in contact with one of our expert mortgage brokers on 02 9299 7044 or visit us via www.clarencestreetmortgages.com.au.