October 13, 2015

Interested in buying a larger block of land – or freeing up some money for renovations? With interest rates sitting incredibly low at the minute, there’s a good chance you could get a better deal if you refinance your home loan. We asked local mortgage broker Colin McAlister of Good Life Financial Services for his tips.

“We’ve seen a huge spike in home loan refinance requests in recent weeks, following the cuts to interest rates,” Colin says. “Even with just a 0.1% decrease on a $100,000 loan, you could save more than $2,000 over the course of a 30 year mortgage. On a $500,000 loan, a 0.5% reduction could save you approximately $54,000 of interest charges.”

If you’re one of many residents looking to refinance your home loan to secure a larger block of land in the area, now is a great time to do it. But there are many factors to consider:

  • Prepare for the worst: interest rates may be low right now, but that could change soon. “Don’t forget, interest rates were at 7.5% not that long ago,” says Colin.
  • Don’t assume growth: “If interest rates and unemployment levels were to rise considerably, some analysts suggest the value of a property in a certain area could decrease by 20%. That’s unlikely and an extreme example, but it’s worth thinking about.”
  • Ask for help: if you borrow more than 80% of the value of the home you’re purchasing, you have to take out lenders mortgage insurance (LMI). “A parent guarantor could save you tens of thousands of dollars.”
  • Check for exit fees: “Check that the savings you can make from switching are higher than any exit fees from your current provider.”
  • Shop around: “Working with a network of over 40 lenders, I can get extremely competitive rates for my clients,” says Colin. There are drawbacks to doing this yourself, as lenders might automatically run a credit check during the process.
  • Grow your portfolio: if you’re refinancing because you want to move to a bigger block of land, do your numbers and consider keeping your existing house as an investment property. “You may have built up equity in your house that can be used to restructure your loan to get a highly competitive rate. Then you can earn income by renting out the smaller property, and potentially reap the benefits of negative gearing.”

“The most important piece of advice I would give people is to seek advice! The right loan for you depends on your individual circumstances. Talking these through will help you understand what’s achievable and what’s not, and how to get there,” says Colin.

Colin and his team can offer independent advice on a range of loans including home loans, commercial loans and business loans. Best of all, consultations are free. To see if you could be better off, call Colin for a quick chat on 0410 637 111 or 02 4508 7000, email colin@goodlifefs.com.au or visit www.goodlifefinancialservices.com.au

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