How to Refinance Your Home Loan for a Better Deal

Unlocking New Opportunities: Why and How to Refinance Your Home Loan

Refinancing your home loan can seem like navigating through a maze of rates and terms, but it’s often worth the journey. By replacing your existing mortgage with a new one, you typically aim for a better interest rate, lower monthly payments, or a different loan term. This strategic move can free up cash, consolidate debt, or accelerate your path to paying off your home sooner – as long as it is done the right way!

Definition and Benefits of Refinancing

Refinancing involves taking out a new mortgage to replace your current one. This switch can offer several advantages:

  • Reduced Interest Rates: Lock in a lower rate to decrease your monthly payments.
  • Debt Consolidation: Combine multiple debts into a single, manageable loan.
  • Equity Access: Free up cash from your home equity for renovations or other significant expenses.
  • Term Adjustments: Modify the length of your mortgage to fit your financial scenario better.

Current Interest Rates and Opportunities in 2024

In the wake of the rate shocks of 2022 and 2023, many homeowners are keenly observing interest rate trends. Most economists predict a softening of the cash rate towards the end of this year, although this adjustment might be postponed to early 2024 if inflation remains high. In light of these forecasts, Proptrack produced this simple graph that outlines the major fours outlook on when they expect the RBA to commence their rate-cutting cycle and by what degree – crystal balling of course!

Evaluating Your Current Home Loan

Before you leap into refinancing, assess your current mortgage. Consider these factors:

  • Interest Rate: How does your rate compare to the new rates available? Is there a significant benefit to you to refinance? Can you stay with your current lender if they improved their rate?
  • Fees: Are there early repayment penalties or high ongoing fees?
  • Loan Features: Does your loan include features like an offset account or redraw facility, and do you use them?
  • Repayment Flexibility: Are you able to make extra payments without penalties?
  • Internet banking: Given the lack of branches these days it is important to know what their digital solutions are like. Still, in 2024 there remain enormous differences between the banks and lenders in regard to their customer Internet banking solutions – you would be surprised to know.

The Refinancing Process Explained

Refinancing can be broken down into several straightforward steps:

  1. Goal Setting: Define what you hope to achieve with refinancing.
  2. Financial Review: Assess your financial health and creditworthiness with an experienced mortgage broker.
  3. Loan Shopping: get assistance to compare suitable loan products that meet your needs and not the banks.
  4. Application: Submit your application and required documentation with expert assistance from your helpful mortgage broker at every step.
  5. Settlement: Once approved, the new loan will pay off your existing mortgage.
  6. Post-settlement: This is an important one. A great mortgage broker, like the ones at Axton Finance, will keep in touch with you and automate the review process to ensure you are never ripped off by your new lender. It’s in our interests to ensure you remain on a great rate, not your banks.

Conducting Market Research

Understanding the broader market context is crucial. Research recent trends in home loan rates, consider economic forecasts and review mortgage brokers and lender reputations and reviews (at the time of publishing we have almost 300+ five-star Google reviews). This information will guide you in choosing the right loan product and lender.

How We Can Help

At Axton Finance we specialize in helping homeowners like you navigate the complex world of mortgage refinancing. Our team of experts will guide you through evaluating your current loan, choosing the best new loan, and handling all the paperwork. Let us help you secure the best deal possible and achieve your financial goals. Contact us today to get started!

Should You Be Loyal To Your Bank?

When it comes to your money, especially a significant commitment like a mortgage, loyalty to your bank might seem like a good idea. Many homeowners tend to stick with their original lender out of familiarity, a sense of loyalty or sometimes because they think it’s too hard to change. However, the mortgage landscape is constantly evolving, regardless if interest rates are increasing, decreasing or going sideways and sticking with your bank probably isn’t always in your best interest – not that they will tell you this…

Is maintaining allegiance to your bank when you have a mortgage crucial? Or does prudently exploring better deals that align with your interests make more financial sense?

The myth of loyalty

The notion of loyalty to your bank is deeply ingrained in many individuals. Often, people associate familiarity and a long-standing relationship with their bank as a form of security. However, while loyalty may have its merits in certain aspects of life, it might not always pay dividends in the realm of your home loan and your hard-earned dollars.

New to bank = a better deal

You would think that being loyal means you should get a better rate or a discount like you do with your insurance company, but this is often not the case. While you might get a slight improvement by haggling with your old bank the overall system is hugely hungry for ‘book growth’, meaning banks and lenders will usually trip over themselves to get new customers in the door and rely on their ‘loyal’ customers to stay put at higher rates – it’s just the way the system often works. Even when you get your current bank to tweak your rate, there will come the point when the ‘computer says no’ because the return on their loan isn’t worth it anymore for a host of technical reasons – you might think you got a better deal, but did you?

You don’t know what you don’t know

Mortgage rates fluctuate regularly. What might have been a competitive rate when you initially secured your mortgage a few years back could now pale in comparison to newer, more favourable deals available in the market. By limiting yourself to one lender, you could potentially miss out on a better interest rate or more favourable terms offered by other banks and lenders.

Why reviewing your mortgage regularly is crucial

One of the keys to ensuring you’re not missing out on a better deal is to review your mortgage at least every one to two years. This proactive approach allows you to assess if your current loan still aligns with your financial goals and if there are better options available. You are probably unsurprised that banks don’t prioritise this process, and they are not obliged to always act in your best interest – licensed mortgage brokers are, however! This means you may be unaware of a better rate available from your current lender or someone else in the market.

This is where the expert mortgage brokers at AXTON Finance can help save you a lot of time and money. AXTON Finance is committed to empowering homeowners by regularly reviewing their loans with automated repricing tools that needle your bank or lender to ensure you get the best rate for your scenario. After all, if we are not doing this on your behalf, we are certain you will and that you may leave us! One of our primary goals is to create a long-term relationship with you as your trusted mortgage broker. We do not treat you as a once-off transaction!

Our efficient digital systems ensure that your mortgage is reviewed at least annually, ensuring that you are getting the best possible rate and terms that suit your needs.

Why AXTON Finance are Melbourne’s leading Mortgage Brokers

Unlike dealing directly with banks and online lenders, AXTON Finance is dedicated to working in your best interest. Our team of experienced mortgage brokers navigates the complex mortgage market on your behalf, identifying tailored structures and negotiating to secure lower interest rates and favourable terms.

We provide you with personalised attention, ensuring that your financial goals are understood and catered to effectively.

We build relationships – not transactions

While bank loyalty may have been a thing when 20th-century bank managers had authority, it’s now essential to recognise that in modern home and investment loans, blind loyalty to your bank might only sometimes serve your best interests. Regularly reviewing your mortgage and exploring better deals is indeed a smart financial move but getting experienced advice from the leading mortgage brokers at AXTON Finance will help ensure your best interests and not the banks are being served!

We know that your mortgage is not just a set-and-forget transaction but an evolving instrument that adapts to your changing financial needs. Don’t wait for your bank to offer you the best deal; take control of your financial future today. Contact AXTON Finance, Melbourne’s trusted mortgage brokers, and experience our personalised service, efficient systems, and dedicated team, who can help you secure a better mortgage approval.

Is Your Cheap Fixed Rate Mortgage Expiring?

The pandemic saw a torrent of ultra-low fixed interest rates set up for Australian homeowners and investors alike. However, many of these fixed loans are set to expire, and borrowers will face a sharp increase in their interest rates, which has been dubbed somewhat ominously by the Australian media as the “mortgage cliff.”

The expiry of these fixed rates over the coming months and years could cause significant financial stress for borrowers who are unprepared for the sudden increase in their mortgage payments. In some cases, monthly mortgage payments could double, putting a significant strain on an already elevated household budget.

Thankfully, there are some sound options available for those with fixed rates to mitigate the impact of the so-called cliff!

  1. One of the most effective solutions is to pick up the phone and call your current lender to needle them to improve your rate. It is a well-known fact in the banking industry that it is cheaper to keep a current borrower than to seek out a new one so you might be surprised by what they may be able to offer you. Once you have done this you can compare the market yourself or use the services of a mortgage broker to assist you in comparing like-for-like options.
  2. Failing a decent response from your current bank or lender, you can seek to refinance your home loan. This is best done by a professional mortgage broker, who will be experienced in comparing like-for-like products, policies and structures. Since interest rates started to rise in 2022 lenders have slowly increased the assessment criteria that may result in you being unable to refinance your current loan based on the revised stress-tested rates even though you are making repayments at a higher rate today! Further compounding this complexity is the fact that borrowers with higher LVR’s (Loan to Valuation Ratios) may have experienced a reduction in the value of their property which can make refinancing uneconomical. An experienced broker will help you clearly navigate the benefits and costs early on before you commit to any decision.
  3. Switch your loan to interest only and/or extend the term. This really should be a last resort option because while your monthly repayments may drop considerably, the true long-term cost can add tens of thousands of dollars to the total cost over the life of your mortgage. Extreme caution needs to be applied when looking at this option and getting a professional broker in your corner to model out the effects is highly advisable.

By working with an experienced mortgage broker, like the team at AXTON Finance, we can help you understand the terms of your current loan, including any hidden fees or penalties that could impact the refinancing process.  Will will have a high degree of confidence that your decision will be an informed one that one helps you avoid any costly mistakes.

The mortgage cliff is a looming challenge for borrowers with expiring ultra-cheap fixed home and investment loans. However, there are some simple solutions available, such as refinancing, that can help mitigate the impact of rising interest rates.

How To Get Approved When Refinancing Your Home Loan

With the rapid increase in interest rates in Australia and many people coming off ultra low interest rates there has been a cause for concern for many people looking to refinance their mortgages. With the onset of higher interest rates, lenders are substantially more cautious and selective when it comes to approving mortgage applications. We are even seeing many examples where people cannot refinance to a better rate because various lenders are applying higher assessment hurdles to a loan they are already servicing which is locking people into their home loans. However this may not need to be the case, there are a few clever but very simple ways to increase your chances of getting your refinance mortgage application approved. Here are some tips to help you get started:

  1. Review your credit score

    A higher credit score can increase your chances of getting approved for a mortgage, even if interest rates have risen. Review your credit report and make sure there are no errors that could negatively impact your score. If you have a lower score, consider working to improve it before applying for a mortgage. Being late on loan repayments, making too many credit applications, moving address regularly or having numerous consumer debts can all negatively affect your credit score.

  2. Demonstrate a stable income

    Lenders want to see that you have a stable income that can support your mortgage payments. This is especially important if interest rates have risen since you first took out your mortgage. Provide documentation of your income, including pay stubs, tax returns, and bank statements. Bonus income can also be used in many circumstances but policies vary considerably from lender to lender – best to speak to us about your option first.

  3. Reduce your debts

    Lenders look at your debt-to-income ratio, which is the amount of debt you have compared to your income. If you have a high debt-to-income ratio, it could be a red flag to lenders. Consider reducing your credit card limits or paying off some debts before applying for a mortgage. Reducing your credit card limit by just a few thousand dollars can have a fairly substantial effect on your loan. As of the time of publishing, most lenders want to see your debt-to-income ratio less than six times.

  4. Shop around for lenders

    Different lenders have different requirements and criteria for mortgage approvals. Shop around and compare rates and terms from multiple lenders to find the best fit for your financial situation. Of course the best way to do this is through the professional services offered by the team of experienced mortgage brokers at AXTON Finance.

  5. Be prepared to provide additional documentation

    Currently, banks and lenders are requesting additional documentation or information during the application process. Be prepared to provide this information in a timely manner to keep the process moving forward which will reduce the time it takes to ‘yes’ and for you to enjoy your lower rate.

  6. Extend your loan term

    This one can make your borrowing capacity higher but can make your mortgage ultimately a lot more expensive. So while you may be able to get a loan term of 35 or 40 years this can be very costly if you are already 10 years into a 30 year mortgage – tread with caution on this one but an experienced mortgage broker will be able to model out the pros and cons for you.

In summary, getting your refinance mortgage application approved despite rising interest rates requires some simple planning and preparation. With these tips in mind, you can increase your chances of getting approved for the refinance of your home or investment loan and secure a better interest rate.

Get in touch with one of the experienced team at AXTON Finance today to refinance to a better rate.

Call us today on 1300 706 540 or book a quick obligation-free mortgage review online here.

10 Ways To Get Your Finance Approved First Time

Whether you’re refinancing or looking to purchase your first or third home, financing can be daunting. Even for the experienced, getting your finance approved can be a stressful process and with the effects COVID-19 creating extra scrutiny being prepared matters more than ever. To have your financed approved first time is the dream, one that can be made a reality with a little groundwork. With these ten tips, you’ll be well on your way to making that dream come true:

1. Assess your goals

Knowing how much to borrow from a lender is one of the most important pieces of knowledge you will require for this process. The goals you have in mind for the property you wish to purchase will have an impact on this. Know what you’re looking for in terms of a lifestyle and financial perspective. Marrying those together will help you buy for tomorrow.

Buying for tomorrow is distinctly important. Ask yourself; ‘Will this property be suitable for me in a year or two’? While the price-point may seem agreeable today, and it suits your current lifestyle, are either of those likely to change? It is much more expensive to trade up to something more appropriate further down the line than it is to get it right the first time.

Further, determine your own borrowing limit. Banks and Lenders maximum lending rates are stress-tested relative to interest rates. If or when interest rates increase, you could experience a great deal of mortgage stress by borrowing at the Lenders maximum rate. By using loan repayment calculator, you can look at what rates to expect to pay today, and at higher interest rates. This will allow you to know what loan size you need before speaking to Lenders.

2. Do you research

Knowing is half the battle, and with mortgages, it’s no different. Understanding what products are available, their features and the lingo will leave you informed before making a decision. While some features can seem alluring, such as offsets, you have to ask yourself: ‘does this benefit me’? ‘Is this offset worth higher rates, or extra fees’? Quite often the most basic mortgage products can be just as affordable and effective as more complex products.

Secondly, know the difference in the policies of lending institutions. Policy is one of the largest differences between lenders. By knowing what can and cannot be done, you can approach securing finance with a greater degree of confidence.

3. Speak to an experienced mortgage broker

There is a discernible difference between speaking with an experienced mortgage broker and direct with a lender. Lenders will only have one product and set of policies to offer. An experienced mortgage broker will have access to the broader market. With this access to the broader market, brokers will be able to identify a solution tailor-made to your scenario and needs. Experience matters.

With their exposure to the greater market, an experienced broker is invaluable. Their exposure equips them with the knowledge of lender products and policies. An experienced broker will talk you through policies and help you secure a product based on your needs. There are many brokers out there, some more experienced than others. As before, research matters, so research brokers. Look at their websites and reviews on Google. Even better still, ask for personal referral. They could prove a prime opportunity for a personal introduction to a quality broker.

4. Supporting information and documents

When it comes time to provide documentation and information, it pays to get it right the first time. Lenders will comb through your supporting documents seeking out inconsistencies between them and your customer fact find answers. Providing everything needed and answering the fact find honestly can and will avert many issues that may arise.

Banks and lenders have an obligation to report on the conduct of savings and mortgage accounts. There are many tools that lenders use to automatically read documents to determine your conduct as a customer. By keeping accounts paid up and to date, as well as not overdrawing, you will ensure your account is in good conduct. Conduct is very important factor in securing finance.

5. The Importance of savings

The importance of saving cannot be overstated. One of the first questions a bank or broker will ask is: ‘how much is your deposit’? This is because, as a very general rule, the larger your deposit, the easier it is to secure finance approval.

When looking at savings, lenders and banks are looking for what is termed ‘genuine savings’. Genuine savings are identified as funds that have stood in good stead for at least 3 months. Sudden windfalls will usually not all that favourable when securing finance. Genuine savings can also be recognised as shares or equity in other properties the customer owns or even rent currently paid.

Ideally, your deposit should be at least 20% of the value of the property you wish to acquire. This will allow you to avoid paying mortgage insurance. Mortgage insurance is a one-off fee, and in the name sounds fine, but it is of no benefit to the customer. This one-off fee, paid by the customer, only protects the lender and offers no insurance to your situation. While only a one-off fee, it can get quite expensive. The higher the loan amount, the more expensive the fee, relative to the Loan to Value Ratio (LVR). An LVR of 80% (loan is 80% of the price, deposit 20%) means no mortgage insurance is paid. An 82% LVR leaves mortgage insurance at a more reasonable level. Once in excess of 90%, the mortgage insurance premium becomes extremely costly. Talking to a broker about your current LVR and where you’d like it to be is an important step before making a finance application.

6. Don’t be late

More than ever, Lenders are looking for good conduct on your accounts. So it is imperative to avoid overdrawing your savings. The same goes for missing payments on mortgage loans or credit cards. When accounts are provided to lenders for assessment, their systems will usually automatically scan for tell-tale signs of poor conduct, such as late fees. This can affect your chances of securing finance.

Lenders will typically look back through the accounts provided across a period of six months. During the lead up to applying for a mortgage, it’d be best to keep all accounts ‘squeaky clean’. There can be issues that arise around credit defaults that may be listed, such as late payments on bills and utilities. Ideally, the defaults of this nature should be avoided. While it isn’t entirely detrimental, it can create unnecessary hurdles.

7. Do you really need it?

The advent of the ‘Pay-now, buy-later’ systems such as AfterPay and Zip Pay has created new hurdles in the process of securing finance. These systems, while technically not treated as credit, can still adversely impact the approval process. Lenders treat these systems as a form of conduct and affordability. They view this as conduct as by using this system, the customer has demonstrated they lacked the funds at the point of purchase. Ideally, it’ll be best to avoid have an AfterPay system, or equivalent, attached to your accounts.

8. It’s not all about the rate

While your gut reaction may be to ask ‘What’s the cheapest rate in the market’, you shouldn’t get hung up on the rate entirely. It’s an important question, but not all mortgage and loan accounts are structured the same. The rate you pay is influenced by several factors. How large the loan is, your LVR and credit history, features of the loan, funding models and more play into determining the rate you pay.

A more worthwhile question to ask is ‘can you identify the best products based on my scenario’? A good lender will ask you a series of detailed questions to determine your situation. From there they will be able to take you through and compare products that are ideal to your scenario. Products better suited to your scenario will ensure a greater chance of success in having your finance approved.

9. Be realistic

Due to increased compliance requirements, and the disruption caused by COVID-19 to bank processing systems, patience will be required. Pre-approval and overall approval of loans will likely take some time depending on which lender you use. It is important to be realistic about how long this may take. Pre-COVID, this process still took some time, with processing times between lenders varying from a few days to many weeks.

Same day approvals or ‘instant pre approvals’ should be taken with a grain of salt. These systems typically are computer generated and subject to the vetting of support documents. Quite regularly, there will be a disconnect between the questions you answer the assessment the lender applies to you. Applying for finance well before bidding for properties will be important.

10. Be realistic with your borrowing capacity

Your own assessment of repayments based on current interest rates is not what lenders look at. In their assessment, they look at interest rate increases in the future. They consider if the loan you are acquiring will still be suitable when interest rates rise in the future. They will also consider that some income is inconsistent, such as commissions or overtime. Subsequently, lenders will shade a component of this payment to around 60% to 80%. Rental income may also not be accepted in fullness, and may only be accepted at around 70%.

The living expenses banks apply to you may differ from your estimates. Banks apply a Living Expense Ratio lower than your actual expense ratio. Therefore, it is important to have a realistic assessment of your expense before doing a Customer Fact Find or finance application. Lenders will digitally assess savings accounts statements to apply a sense check to compare your estimate to theirs. This is another important consideration when applying for financial approval.

Finally, have contingencies in place for lenders and your income. Consider which lenders would be second or third choice if your ideal one doesn’t work out. Consider what will happen if your income is disrupted or reduced in a meaningful way. It isn’t wise to put every spare cent available to mortgage repayments. Nor is it wise to secure finance approval and not have emergency buffer funds available. It is also highly recommended to look into insuring the asset you are in the process of acquiring. Information and advice should be gathered from a licensed financial planner regarding this. They can provide valuable advice around income and risk insurance regarding life, trauma and Total Permanent Disability (TPD).

Securing approval for finance from a lender has many moving parts. With the right guidance and research, you’ll be ready to secure the approval tailored to your scenario. With that, you’ll be well on your way to refinancing and securing a better rate or securing an approval to allow you to bid competitively at that next action. 

Good luck in your ventures, and if you have any further questions, do not hesitate to reach out to our team of experts, we’ll always be happy to assist you with securing the best structure possible!

The team at Axton Finance                

Ph: 1300 706 540

Alternatively see our availability and book an obligation free Zoom meeting here.

COVID19 – AXTON Support Page

Firstly our small team at AXTON Finance hope that you, your friends and your family are looking after yourselves during this time. Please listen to government advice on how you can play your part to keep yourself and others safe during this pandemic.

Australian banks and lenders pitch in

On Friday 20th March The Australian Banking Association (The ABA) announced a unified response to assist Australians during this crises.

Below is a summary of COVID19 links available from each lender in the Australian market place.

This page is being updated as more information comes to hand.

Key points to consider – our brief summary

– The term ‘repayment holiday’ SHOULD NOT be interpreted as interest being waived. It is only repayments (interest) being deferred. You still have to pay the capitalised interest added to the loan balance in the future.

– Qualification requirements are likely to apply (eg unemployment, significantly reduced hours, at risk industry etc)

– Our opinion is that the deferred repayment should be used where genuine hardship is being experienced or is expected. In the long term adding (capitalising) interest for six months or more can add a significant amount of interest to your total loan cost.

– Most lenders are offering up to six months relief in repayments. Some are offering up to three months with a checkin at that point for a further three months.

– Credit reporting agencies and lenders have already outlined that the hardship arrangements are typically not reported as defaults, and therefore do not impact a borrower’s credit score, with APRA also stating on Monday 23rd March 2020 that banks need not treat repayment holidays as arrears.

– The very cheap fixed options we are starting to see should be considered carefully. Often you cannot make extra repayment on a fixed rate, there is often no redraw and expensive break costs can also apply should you pay the loan out early.

– It may be economical to consider refinancing to a new lender to take advantage of cheaper rates, a new interest only term or one of the current cash back rebates available before you simply defer your repayments.

Speak to your AXTON broker if you would like a mortgage review (click here for a free review) or to discuss any of the points above.

Useful COVID19 Lender Links

ANZ

CBA

Westpac Bank

NAB

Macquarie Bank

Bank Of Melbourne (click link on main page to COVID Information)

Bank Of Queensland

Firstmac

Resimac

Pepper Money

Liberty

ME Bank

ING

BankWest

Suncorp

If in doubt or if you just want to chat about your situation please contact your mortgage broker to assist where possible.

Contact details are as follows:

Our office number (1300 706 540) is still actively being monitored as we run a full VOIP system and can be contacted as per normal.

Many thanks

Your team @ AXTON Finance

Photo by Branimir Balogović on Unsplash

10 tips that can help your mortgage application

As you have probably heard in the media the nations lenders have clamped down on their lending criteria as a result of pressure from various government agencies like APRA and ASIC and from recommendations made during the Banking Royal Commission into banking misconduct.

It would be fair to say that many lenders have perhaps taken this a little too far which has resulted in a market place full of inconsistent applications of an incomprehensible set of rules for borrowers to deal with.

As a result of this we felt that the following information can be used as bit of a guide to help maximise your chances of securing finance approval by implementing any number of the following tips.

1. Fill out your application form in full

Lenders will often apply a score to your loan application based on the information you supply and if you skip on optional questions this can be detrimental to the strength of your application if things a little tight. For example even if you have a savings account with another bank with a small amount in – tell your proposed lender. If you have a middle name don’t forget to include it – it matters. If you have moved a couple of times try and be accurate with your living history as lenders often marry up data they can see on your credit file with the information supplied in your application.

If you are looking to refinance or buy your next property check out client fact find here – this is a fantastic form which is responsive to asking you the questions we know a lender will want to know – nothing more and nothing less! We can contact you after you have completed to run some tailored options past you.

2. Don’t submit your application to too many lenders or brokers

Lenders get very concerned when they see on your credit file that you have applied to a number of credit providers within a short period of time for about the same amount of money. The lender in question will often take the pessimistic view and think that there is something wrong with your application and has been declined by other lenders prior to it so will pick over your file with more detail trying to find out why you would apply so many times.

3. Do you have credit defaults?

This might sound scary and a reason for a lender to decline a loan but many lenders have different policies that may consider your scenario depending on the circumstances and what you have done to remedy the situation. As a general rule of thumb defaults from utility providers like power and telecommunication companies have less impact on your scenario than do defaults on financial service providers like personal loans, credit cards and home loans.

It is important to realise that with the evolution of the positive credit reporting regime lenders can now increasingly see the conduct of other institutions credit facilities. So if you are late on your credit card payment with the CBA and your home loan application is with Macquarie Bank, then there is a good chance that they can see this on your credit file down to which months you were on time and those that were not!

Treat your repayment history with a healthy level of respect and you will find your application will run pretty smoothly. A good mortgage broker or banker will be able to work with you prior to submission to identify any sort of severity and work out the best course of action and the lenders most suited the scenario you have presented.

If in doubt you can get a free copy of your credit file from mycreditfile.com.au (a service from Equifax Pty Ltd). We can take a look at it for you free of charge and provide you with some insight – feel free to contact us here.

4. To Afterpay or not…

The advent of the ‘buy now and pay later with no interest’ companies like Afterpay and Zip Pay creates an interesting situation for lenders. In simple terms these are not seen as a great look on your bank statements because the lender makes the assumption that these often relatively low cost purchases were made because you did not have the money in the first place and with retailers quick to jump on the band wagon with this offering its even available on products and services that may be considered essential. Our recommendation is generally not to have these buy now pay later arrangements if you are seeking to make a mortgage or finance application.

5. Support Docs

You will of course have to supply items like payslips, ID, mortgage statements and tax returns etc depending on your situation. This often slows down the process when the information requested is not provided in a timely manner. Many lenders simply get to your file and if information is missing they request whats needed and place your file at the back of the queue again. Sometimes information supplied can result in additional questions being asked so be prepared for this to happen and its nothing unusual albeit it can be frustrating.

6. How much do you spend?

OK I get it that a budget is boring but again an increased focus is being made on just how much borrowers are spending on living expense and there is a general reduction on the reliance of HEM (Household Expenditure Measures) standards and a more tailored approach. Having a summary ready before your finance meeting will help you have a more productive and realistic expectation of your borrowing capacity for any sort of approval. There are often many ways that you can reduce and improve your living expense without making drastic changes in the months lading up to when you are looking at securing a mortgage. Go through your statements and look at where you may save money via;

  • Reducing utility bills by shopping around suppliers
  • Reducing or eliminating credit card debt
  • Do your food shopping with a list and don’t buy by impulse
  • Take a packed lunch (this $10 per day can save you $216 per month in after tax dollars!)
  • Love coffee (so do we) but consider a pod machine or something similar over the 4.90 large flat white with almond milk once or twice a day
  • Pay yourself first (savings) – putting money away first before you pay for everything else is a simple yet powerful process to help you get ahead. Think of every time you get a pay rise how easy it is spend that new amount of hard earned cash! There are some great online tools that can help with this. One that we love is Raize.com.au and ING Bank – these two companies have variations of a system that automatically squirrels away savings by rounding up your purchases to the nearest dollar and allows a regular savings plan. Simple, effective and above all – happens without effort. (note if you click the link above to Raize you receive a $5 credit to your new account as do AXTON Finance)

7. What happens if you are having or planning for a child

Lenders are now required to ask about any expected changes to your future income that may affect your ability to meet repayments. This of course is a requirement to be answered truthfully and is strengthened by your ability to provide other information about how you may deal with such a situation. For example if you are about to go on maternity or paternity leave you could state that you have a certain amount of funds available for the estimated period of you being on reduced income to meet the commitments of your loan. A return to work letter and using a lender with a strong appetite for this sort of scenario will also help you a lot.

8. How good is your mortgage broker or banker?

Of course we may be a little biased here but having an experience broker working with you will help explain things in plain English for you and be across the lending policies of dozens of lenders and not just one (like you would get directly at a bank).

The quality of your application submission that is made by your broker or banker can really dictate how smoothly your application goes. Do some simple research like looking up your preferred broker or banker online through Google, LinkedIn and the other usual social media links. Usually you will get a pretty quick impression as to how experienced and professional they are. If in doubt trust your instincts!

9. Consider the wider market

It is often that the more competitive products and policies lie outside the big four banks. Well over 50% of all mortgage lending goes to just four of the major banks. At AXTON finance, only 20% of our lending in the last six months has gone to a majors! There are better deals to be had if you are willing to look outside of the square it can save you tens of thousands over the life of your loan.

10. Is the cheapest rate the best?

A business mentor once told me of the following three things;

Good, fast and cheap…. pick two. It is impossible to have all three. 

Wise words to live by indeed.

A quick search of the internet may list some amazing rates that look too good to be true and while it is still may be worthwhile considering you should also think about;

  • How volatile is that rate online? Sometimes a great rate may be unsustainable for a lender to offer for a long term and you end up getting rate creep with increases outside of RBA changes. While you will be rather annoyed if this happens it would be good to understand what sort of history has been evident with the lender in question?
  • Does the lender’s computer say NO?.  In many instances lenders try and shoe horn customers into rigid processes with offshore credit decisioning driven by computer systems. If you fall outside of this sort of lenders policy due to any complexity then you want a human with experience going into bat for you. Paying an extra 0.1% or 0.2%pa in rate can often mean the difference between submitting to a lender who may view your application as being poor versus another one that is fine with your set of circumstances. Use a quality mortgage broker who understands the rules to maximise your outcomes and reduce your stress.
  • Does the lender have a good application and onboarding process or is it a process with baked in systems that worked in 1991 when fax machines were cool? This can have a significant impact on turn around times – a good broker will have excellent experience of this fist hand and can guide you.
  • Cheap online specials often blow out credit application queues resulting in turn around times that can take weeks (even months). Currently there is one lender that is out to almost 20 business days to pick up a file – do you have that sort of time to wait?
  • Enquire about what sort of service the lender has with clients. A quick look up of reviews online can give you a feel about one lender over another. However read with caution as people often use the internet to complain and rarely to praise.
  • Ensure that you understand the product that you are seeking really does have the features you need. There is no point paying for stuff you are unlikely going to benifit from if there is a cheaper and/or simpler product available that does what you need it to?

So there you have it – ten tips on helping get your mortgage application approved!

Please feel free to contact us on 1300 706 540 and ask for Clint or one of the team to help you out. We a sure you will love speaking to an experienced person and not a call centre!

Best regards,

Clint Waters
0422 464 353
AXTON Finance

How Does Refinancing Your Home Loan Save You Money?

How Does Refinancing Your Home Loan Save You Money?

When Australian academics researched the difference between renting for life and investing your hard-earned income into property ownership, the results were clear. Taking the leap into buying your own property gives you a better return in all Australia’s capital cities. The University of Melbourne economists came to their conclusion after studying data from 1983 – 2015 and compared buying a house with renting and investing in a combination of term deposits and shares.

But as house prices increase around the country, shopping around for the best possible home loan deal with a low interest rate is more important than ever.

If you’re already lucky enough to be a property owner, refinancing your existing loan in order to get access to  a better deal could be a smart move for your mortgage.

Choosing A Home Loan For Refinancing

The days of signing up for a mortgage with a 30-year repayment term are gone as banks and other lenders scramble to offer great deals that help them win customers. But as today’s workforce habits continue to evolve, flexibility is an important thing for borrowers to enjoy, and it’s important to remember that the best mortgage for you might be about more than just a low interest rate. To help you benefit from refinancing your existing home loan, take a closer look at extras on offer, and weigh up the benefits those extras may offer, in combination with the all-important interest rate.

The three main types of home loans include:

Basic loans: these no-frills frills loans typically have limited added features and a low interest rate. Although many now offer redraw facilities, there can be restrictions and fees, so if you want to make extra repayments at some point in the life of your loan this may not be the best deal for you.

Standard loans: you’ll enjoy greater flexibility that may include the ability to redraw money you have paid in, or the option to switch to a fixed rate, or perhaps split your home loan into both a fixed rate and variable rate home loan. You can also enjoy a 100% offset account but it’s important to shop around to find a loan with a cheaper interest rate and similar features.

Home loan package: this can include a standard loan with an interest rate discount that, depending on your loan amount, might be cheaper than many basic loans. The package can include a free transaction account and a credit card with no annual fee. But be warned of other hidden costs, including high package fees that can add up over the life of your mortgage.

Variable or fixed?

In these times of hefty house prices, low fixed rates can sound tempting.

Keep an eye out for reduced flexibility, including restrictions that may prevent you from making extra payments – something that can see your total interest soar over the life of your mortgage.

With rates always fluctuating, it’s difficult to predict if choosing a fixed rate over the next three or five years will save you money in the long-term. By asking yourself if you can afford a higher interest rate, you can make a well-informed decision about whether fixing the rate for at least part of your loan might be a good option.

A split loan can offer the best of both worlds and it’s something you’ll understand better by talking to an experienced mortgage broker.

Don’t Forget The Loan Fees

To help you choose the best refinancing deal for your mortgage, remember that interest rates are just one of the costs to think about. Always check the ongoing fees and charges that add up over the life of your home loan.

Asking for a better deal might just be the best thing you can do for your mortgage but it’s best to go into any refinancing deal with your eyes wide open.

Some common fees include:

Application fees

Valuation fees and lender’s legal fees

Lender’s mortgage insurance (LMI)

Monthly or annual fees

Break costs

Favourite Home Loan Features

Depending on your personal circumstances, there might be some home loan features you’ll love. These include:

  • Extra repayments – make accelerated repayments to pay off your home loan sooner
  • Redraw facility (some redraw facilities are easier to access than others, so talk to your broker to understand what’s on offer before committing)
  • Repayment holidays (with some mortgages allowing you to take a ‘repayment holiday’ for a short period to help you through lifestyle stages – such as having a baby – it’s smart to shop around to find one that suits your individual needs)
  • Interest only – although this will be more expensive these days (check out our other blog topic here why this is the case)
  • Mortgage offset accounts – the balance of your savings account reduces the interest charged on your mortgage and is usually calculated daily.

To help cut through the confusion and find the best deal to refinance your mortgage, talk to our team today or just call us on 1300 706 540 to discuss your scenario.

4 Easy Ways To Get a Better Interest Rate For Your Home Loan

Have you ever had that feeling of frustration that comes from buying an item at a store, then seeing it substantially cheaper at another shop?

It can also happen with your home loan. And if you’re refinancing your mortgage, it’s smart to shop around for a better interest rate.

The reality is that, even though your interest rate might have been fantastic when you first applied for your mortgage, other lenders are competitive and can have better deals on offer.

And if your current interest rate is not ideal, the end result can be many thousands of dollars wasted over the life of your home loan.

The good news, though, is that you can take practical steps to fix the situation.

In the current Australian home loan market, there are always discounted interest rates available and by comparing the different options available to you, there could be valuable savings to enjoy.

To help you refinance your home loan,  try these tips to save money on your mortgage by shopping for a better interest rate deal.

1 – Improve Your Credit Rating

Even if you already have a home loan and you are keen to refinance your mortgage for a better deal, improving your overall credit rating can still have an impact.

With a healthy credit rating, you have more choice available – and the more options you can access, the better chance you have of securing a competitive interest rate.

Always pay utility bills on time (or, better yet, pay them well before the due date and save money with the earlybird discount).

When it comes to credit cards, get rid of any unnecessary extras and keep the available balance as low as possible on the one you do keep. By reducing available credit and avoiding late payments and defaults, you give your credit rating the best possible boost that lenders appreciate.

2 – Research The Rates

In these days of the online world, when comparison rate websites put information at our fingertips, shopping around for great interest rates is easier than ever. The days of approaching your bank for a home loan because of some sense of customer loyalty are gone and the truth is that the interest rates deals that can benefit you the most may be found in some unexpected places.

For access to the best interest rate comparison, talking to an experienced mortgage broker is always recommended. Researching available rates is more than just comparing numbers on a screen – it’s about understanding which lenders service which client demographic best and what unique criteria each lender has as a potential barrier to your entry into doing business with them.

By putting some effort into researching a great rate that is actually available to you, you can save tens of thousands of dollars – and years – from your home loan.

3 – Be prepared to switch banks

Switching banks for a better deal on your mortgage payments is not the enormous hassle it once was. Make sure you do your research – checking application fees and other associated costs will reveal the true picture of the complete cost of your mortgage. If crunching the numbers reveal that switching banks really will save you money in the long-term, it is worth making the switch to save money on your interest rate for the life of your loan.

4 – Ask For A Better Interest Rate

Sometimes, it’s possible to access the benefits of these competitive interest rates without even having to change home loans. Depending on your lender and the history of your loan with them, simply letting them know that you are keen to shop around for a better interest rate can be enough to get them to offer you a lower interest rate in an effort to hold on to your business.

Try asking your current lender this question: “I’m shopping around for a better interest rate and I want to know if you can give me a better deal on my mortgage?”

Or, better yet, get an experienced mortgage broker to do it for you. By having a thorough understanding of different interest rates available at a wide variety of lenders, professional mortgage brokers are in a strong position to negotiate a more positive deal.

For more information about refinancing your property, talk to our team today.