Tag: mortgage rates

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Mortgage

The Reality of Mortgage Repayments

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In spite of the loan solution you carefully select, you should comprehend the way in which a loan works, and what it implies. Understanding the reality of mortgage repayments is the first step to making the right decision to fit your financial status.

Understanding Interest

Recently, Australians have benefited from low and attractive interest rates. So, how does this influence your mortgage repayments? Mortgage providers grow or diminish their rates, to mirror the movement exercised by the set cash interest rate. At the moment, interest rates are estimated at around 4.5 per cent, depending on the lender.

Although selecting fixed mortgage repayments over variable ones might seem the right choice, as it protects you from fluctuations, some other aspects should be considered. If you’re locked into a variable home loan, when the cash rate lowers, your interest will also decrease. Even though this is an unmatched advantage, Aussies should know that low rates don’t plan on staying this way forever.

To grasp the way in which this phenomenon influences your mortgage repayments, hear us out. A standard variable rate for a 25-year old loan of $200,000 would have a $1112 monthly payment, with 4.5 per cent interest rate. If this would change with as little as one per cent, it will either rise to $1228 or diminish to $1001.

Also, bear in mind that, over the life span of a loan, fluctuations may reach $100 per month. What we’re trying to say is that you should embrace a repayment plan with the right contingency measures, in the case in which the interest rate spikes.

When the Loan Matures

You should also note that the market conditions are due to change. That is inevitable. In this respect, you should take advantage of whichever opportunity you have to refresh your financial approach. An option might be to discuss with your financial advisor. But, before doing that, there are some solutions for adjusting your mortgage repayments:

  • Refinancing: When the interest rates are low, you can always consider refinancing. That may be a more convenient option. Even though there are exit and entry costs that should be factored in, as a general rule, you’ll recoup those expenses over the life of the loan.
  • Pay ahead: If the interest rates are low and your budget enables you, you should consider getting ahead on your mortgage repayments. If you manage to make a considerable repayment during this time, not only that you will decrease your overall loan balance, but you’ll save a lot on interest rate payments.
  • Fix your loan: If your credit conditions are permissive enough, we advise you to lock in the new low rate.

To conclude, comprehending the market conditions does pay off. When you sign a loan agreement, you should know what it implies, how the market is due to change and how it can affect you.

In spite of your current status, don’t hesitate to refresh your mindset, in the case in which the market alters in your favour. Why shouldn’t you take advantage of it? Nonetheless, bear in mind that you should discuss with your financial advisor before taking the leap.

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Home Loans Interest Rates

Are You a Victim of High Mortgage Interest Rates?

how to avoid high interest rates

In recent years, many of us became victims of high mortgage interest rates without even realising. This problem affects mostly the home loans because their term is the longest. But how can you know if you are in such a situation, too?

High Mortgage Interest Rates – Are you a victim?

Verify your current loan

In the case of home loans, the term is rarely shorter than 25 years. Most probably, when you have signed for the loan, you have checked it thoroughly and chosen what was the best for you at that moment. As the years have passed, the circumstances may have changed. For example, if you have opted for some flexible features, such as an offset account that you no longer need, it would be a good idea to downgrade your loan to a basic one now.

If, after verifying your current loan, you decide that you are a victim of high mortgage interest rates, you may consider getting a better rate from another provider.

Check the refinancing costs

As you decided to switch to a newer loan or provider, you may be so excited about the savings you can make that you simply forget about the refinancing costs. Don’t rush to conclude that your mortgage interest rates are the worst on the market and you can completely change the situation by changing lenders.

In most of the cases, calculating the refinancing costs will discourage you from making a change, as they are higher than the savings. Check to see if you have paid the lender the mortgage insurance and establish what are its terms and conditions, as well as the discharge fee. Also, calculate the costs of the application and valuations fees if you opt for a new lender.

Analyse the options

If, after calculating the refinancing costs, you still consider that you need to refinance, analyse all the options before making a decision so that you avoid being a victim of high mortgage interest rates once again.

This analysis should include a comparison of the loan types, in order to decide if a variable, split or fixed rate loan is suitable for you. If you don’t need any flexible features, don’t opt for them, because your mortgage rate will increase.

Another important aspect of this evaluation is to check the potential providers. Find out which of them have the best deals, who is reliable or not, etc. Moreover, read the contract carefully and don’t be afraid to ask all the questions you have before signing for a new loan.