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GUEST OBSERVATION
In the past, many borrowers would often stay with their home loan lender for the entire loan term.
But now that the mortgage industry is even more competitive, it is worth looking for a better deal.
There are a number of myths that may have stopped you from refinancing in the past, but we have busted a number of them below.
<ul>
<li>Too costly to refinance </li>
</ul>
With exit fees being abolished on 1 July 2011 (for loans established after this date), refinancing should no longer cost as much as you may think. Most lenders will charge fees to discharge the loan and possibly a legal fee. These cover the cost of releasing the title and closing down the loan account.
The main cost that may deter a borrower from refinancing is lenders mortgage insurance. If you borrowed more than 80% of the value of the property initially then there is a good chance you would have been charged mortgage insurance. Mortgage insurance is lender specific so if you subsequently look to refinance and the loan is still above 80% of the value of the property then mortgage insurance may be levied again.
Although there may be some fees included to switch lenders, if you find a lender who offers lower interest rates, little or no upfront fees or ongoing fees, you may find that you will receive greater savings over the life of the loan that outweigh these initial fees. But make sure you thoroughly research the options available to ensure you are getting the best deal.
<ul>
<li>Too much hassle to refinance</li>
</ul>
Refinancing will require some research, but won’t necessarily be a hassle. With competition between lenders being extremely strong, most lenders are eager to bring in new borrowers and make the application process as stress free as possible. To make things easier for you, collect as much financial paperwork as you can (e.g. payslips, work summaries etc) to help speed up the process.
If you find that a lender is not making the effort to respond to your enquiries or process the paperwork promptly, they may not be the most suitable option for you. Poor service before you apply could mean that service ongoing is poor and be an ongoing frustration.
One of the best places to start is comparing interest rates being offered by different lenders and then contacting your current lender to see if they will reduce your rate to match. If you are successful then you will have been able to reap the benefits of refinancing without much hassle at all!
<ul>
<li>Not worth refinancing if rate is only 0.5% lower than current rate</li>
</ul>
No matter how big or small the interest rate discount is, it can help save you money. For example, if you had a $400,000 loan over 30 years with a 5.5% interest rate, but then switched to a loan of 5.0%, you could save close to $125 a month or close to $45,000 over the loan term.
However, the interest rate isn’t the only factor that can help save you money on your home loan. Factors such as the differences between the ongoing fees for your current and new loan will need to be considered. A discount of an annual fee from $495 to $299 or even no ongoing fees could mean more money in your pocket over the long term.
There are a number of features that can save you a significant amount of money over the life of the loan. An offset account, free redraw and unlimited extra repayments are just some examples.
<ul>
<li>Borrower’s with a fixed rate loan cannot refinance</li>
</ul>
Borrowers are able to refinance with a fixed rate home loan, but there is a good chance there will be extra break costs.
Calculating break costs is complicated and takes into consideration how much your fixed rate is and how much variable rates have changed plus the term remaining on your fixed rate. However, you may discover that the savings you receive from refinancing could be more than the break fees you will incur. Before making any decisions, speak with your current lender about what break costs are involved to ensure these costs do not outweigh the benefits of refinancing.
<ul>
<li>I was approved for my current home loan, so I’ll be approved for a refinance</li>
</ul>
Many borrowers make the mistakes of assuming they will be approved for a refinance home loan because they were approved for their current loan.
When you apply to refinance, you will go through the same application process. The lender will look at your current financial situation and this may cause problems if you have taken on more debt since taking out your current loan.
The value of properties generally increase over time, but you may find that the value of your property has actually gone down. Research property values in your area to help ensure that you have sufficient equity to refinance.
The new lender will most likely get a valuer to inspect the property. A property in bad repair, termite damage or a partially completed renovation could mean that the new lender is not willing to use the property as security for the new loan.
Gavin Smith is director and general manager of <a href="https://www.statecustodians.com.au." target="_blank">State Custodians</a> and has over 20 years’ experience in leadership roles within the banking services sector.
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Five myths that may have stopped you from refinancing

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GUEST OBSERVATION
Purchasing your first home is a great achievement, but do you feel like you are in over your head? 
Buying your first home won’t necessarily happen overnight. So, to help keep you on the right track, we gathered the top apps that covers everything from government grants and home loans to finding the perfect property.
<ol>
<li>
<a href="https://itunes.apple.com/au/app/house-hunter/id445304335?mt=8" target="_blank" style="line-height: 1.3em;">House hunter </a>Buying a property is full of new procedures that can be extremely confusing if you are new to the property market. The House Hunter app is a great tool for first home buyers as it can make the process easier and quicker. Some of the useful features include: track and compare and unlimited number of houses, a scoring method to help identify which house suit your needs, list of information of each property including ‘must-haves’ and ‘missing’, a mortgage calculator and a Quick Notes feature to save time and typing when putting in information about a property.  
</li>
<li>
<a href="https://itunes.apple.com/au/app/sro-mobile/id390079760?mt=8" target="_blank">SRO Mobile </a>Are you buying your first property in Victoria? Then this app will be extremely useful. The State Revenue Office of Victoria app helps first home buyers assess what Victorian grants they are eligible for. The Land Transfer Duty calculator is also available with this app. 
</li>
<li>
<a href="https://itunes.apple.com/au/app/tapmortgage-australia-mortgage/id402187202?mt=8" target="_blank" style="line-height: 1.3em;">tapMortgage </a>Do the terms stamp duty, transfer fees, first home concessions and mortgages make your head spin? Then take a look at the tapMortgage app to help clear the air. This app has a range of calculators for the items above as well for total interest paid, total savings for weekly or fortnightly repayments compared to monthly repayments as well as the savings you would make based on any extra repayments.  tapMortgage can help give you an indication of how much you can afford. 
</li>
<li>
<a href="https://itunes.apple.com/us/app/myofi/id660150695?mt=8" target="_blank" style="line-height: 1.3em;">MyOFI </a>Open inspections are a large part of house hunting, but can be time consuming.  MyOFI is a great way to organise and speed up your open for inspection schedule. Being one step ahead of other potential buyers in the market can make all the difference.  All you need to do is sign up, enter your contact information and property search requirements and the app will give you an individual QR code. You can then give this to the real estate agent at every open house instead of filling out your information, saving you time. This app also allows you to log all of your inspections to help you keep track. It will store the photos, address and agent’s details as well as any notes you wish to include yourself. 
</li>
<li>
<a href="https://itunes.apple.com/au/app/savings-goals/id507466769?mt=8" target="_blank" style="line-height: 1.3em;">Savings Goals </a>Are you struggling to save for a 20% deposit? Saving 20% of the purchase price or more cannot only help give you a more competitive interest rate, but it can also keep other costs to a minimum, such as Lender’s Mortgage Insurance.  With this app, you simply enter a target amount and a target date and this app will give you a suggested schedule and will also track your progress. It will let you know how close you are to your target date, what proportion of your target you’ve saved and whether you are ahead or behind schedule. What’s even better is that you can create as many savings goals as you like.  Saving for a large deposit can be extremely advantageous when it comes to applying for a home loan, so the more you can save, the better. 
</li>
<li>
<a href="https://itunes.apple.com/au/app/state-custodians-approve-me/id574346429?mt=8" target="_blank" style="line-height: 1.3em;">Approve Me </a>This app is great for those looking to obtain a home loan. You are able to select the product most suited to your requirements as well as see the current interest rates. You are also able to calculate if you can afford the home loan repayments and even obtain an instant online pre-approval. This would be extremely useful if you are out house hunting as you will have an idea of how much you will be able to afford.
</li>
</ol>
Gavin Smith is director and general manager of <a href="https://www.statecustodians.com.au." target="_blank">State Custodians</a> and has over 20 years’ experience in leadership roles within the banking services sector.
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Gavin Smith

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