Is it time to switch your home loan?

WORDS: Jason Oxenbridge PHOTOGRAPHY Supplied

Switching a home loan has become increasingly straightforward with many lenders discovering that refinancing can lead to substantial savings over the life of their mortgage.

Mortgage brokers play a crucial role in this process by offering expert guidance and access to a wide range of lenders, ensuring borrowers find competitive rates that suit their financial situation.

Ocean Road talks to expert Shelley McGinty about the benefits and pitfalls of refinancing.

Are more borrowers making the switch on their home loans?

Yes, current market conditions are prompting many Australians to reassess their existing loan arrangements. With a mortgage broker’s support, the transition is not only seamless but also advantageous. Brokers take on the heavy lifting by handling paperwork and negotiations, making it easier than ever for homeowners to switch loans without hassle. This empowerment through choice and potential cost savings is driving more Australians to explore refinancing options, reaffirming the vital role of mortgage brokering in today’s housing market.

Can I just ask my current lender for a better deal?

Absolutely, but it’s important to consider the broader benefits that a mortgage broker offers, especially in the Australian market. While your lender might offer some improvements to keep your business, they are ultimately limited to their own suite of products. This is where a mortgage broker comes into play.

Mortgage brokers have access to a wide array of lenders and home loan products, far beyond what any single bank can offer. This means they can compare and contrast different deals to find one that truly matches your financial situation and goals. In contrast, a bank will only present its own products, limiting your options.

Additionally, brokers are experts in navigating the complexities of the loan process. They understand the nuances of the Australian mortgage landscape and can negotiate on your behalf, often securing more favourable terms than you might achieve on your own. Their comprehensive service also saves you time and effort, as they handle much of the paperwork and legwork involved.

Choosing a mortgage broker over sticking with your current lender provides you with competitive options, professional negotiation skills, and personalised service tailored to your needs—a smart choice for any discerning home buyer or owner in Australia.

How important is my credit score when negotiating a home loan?

Your credit score plays a significant role when negotiating a home loan in Australia, as it is often used by lenders to assess your creditworthiness. A higher credit score generally means better loan terms, including lower interest rates and more favourable conditions. However, it’s important to note that not all lenders place the same emphasis on credit scores.

Mortgage brokers have access to a wide range of lending solutions, including those from banks that do not primarily focus on credit scores. They can connect you with lenders who consider other factors beyond the credit score, such as your employment history, income stability, and overall financial health. So, while your credit score is significant, leveraging the expertise of a mortgage broker ensures that you’re not limited by it. Instead, you’re presented with comprehensive choices tailored to your unique situation.

Can I negotiate the length of my home loan?

Several factors influence the loan term a lender may approve, including age and servicing capacity. We typically advise our clients to secure the longest possible loan term while also equipping them with an offset account. This approach prevents the restriction of future borrowing capacity that can occur with shorter loan terms on existing debts, while the offset account helps reduce the interest paid on the loan. Although conventional wisdom often suggests opting for the shortest term available, if portfolio growth is a priority, it is crucial to collaborate with a broker specialising in this area to avoid limiting future investment opportunities.

How many quotes should I get?

When considering a home loan, obtaining multiple quotes is not just advisable; it’s essential. As a broker, I provide my clients with access to at least three different banks or financial institutions, each offering unique products and terms. This variety allows you to compare interest rates, fees, and repayment options comprehensively. Banks are limited to their own products, which may not always align with your specific needs. By exploring multiple quotes through a broker, you’re ensuring a more tailored financial solution that could save you money in the long run. In short, aim for at least three quotes to make an informed decision.

Is lender’s insurance important to the process?

 As a broker, understanding the intricacies of Lender’s Mortgage Insurance (LMI) is crucial for guiding clients towards the most advantageous home loan products. While LMI serves as a protective measure for banks against potential borrower defaults, it can significantly inflate the overall cost of a mortgage. This is where obtaining several valuations from different banks becomes paramount.

Banks are limited to conducting only one valuation per property, which can often result in a conservative estimate. By sourcing multiple valuations, brokers can identify instances where the value of a property is assessed higher by certain lenders. This strategy is invaluable as it may result in a higher Loan-to-Value Ratio (LVR), potentially reducing or even eliminating the need for LMI altogether.

Conducting multiple valuations is a paramount process for all of my clients’ finance applications as minimising or avoiding LMI not only lowers the upfront costs for borrowers but also enhances their loan’s competitiveness. It allows for better interest rates and terms that are more favourable in the long run. Therefore, while LMI itself is an important component of the lending process, strategically navigating around it through multiple valuations can yield significant financial benefits.

If you would like further information from an expert visit: www.prestonpointcapital.com.au