Refinance case study: one conversation could save you $141,759

You might be surprised at the potential savings from refinancing your home loan. Emily and Jack bought their first home in Rozelle six years ago and had not reviewed their home loan since then. However, with recent changes to the market, they were now ready to discuss refinancing.

We looked at their financial position and discussed their goals. They were looking for a lower interest rate, better online services, to pay down their loan sooner and consolidate debts. Comparing over 30 lenders we were able to select a loan tailored to their needs and objectives.

We selected a loan with a lower interest rate, minimal fees, an offset account and redraw facility.  The offset account works for Emily and Jack as they both earn an annual bonus, and putting the bonus income in the offset will allow them to pay off their loan sooner by reducing the interest payable.

When we refinanced the mortgage, Emily and Jack also took the opportunity to consolidate their debts. By borrowing an additional $25,000 they were able to clear and close their credit card and car loan. This had the benefit of reducing their overall monthly loan repayments, and an additional benefit of streamlining their finances as they only had to manage the one monthly repayment. The lender we selected has an excellent online banking portal - something that was very important to Emily and Jack.

We selected a low interest rate with a $4,000 cash back incentive to maximise savings. With their $1,200,000 mortgage this refinance will save them an incredible $8,725.36 in the first 12 months, and a total savings of $144,759,000 over the life of the 30 year loan*. This savings, achieved purely by refinancing, allows Jack and Emily to pay off their mortgage sooner, a primary financial objective when we first spoke.

We are up to date with the latest market information and are committed to finding you the best possible rate. If you want to chat about the refinance options available to you, contact Garreth today on 0414 444 683.

*Interest rates are not fixed and will vary in accordance with the market.

Expert advice from a broker committed to finding the best solutions for your needs

What is home equity and how can you use it?

Accessing the equity in your house can help you with your next major purchase.

Using the equity built up in your home can be a smart way to use your wealth to make a major purchase.  If you are looking to buy a car, renovate your home, or buy an investment property you can use your home equity to make such a purchase.

Equity is very simply the difference between your home’s value and the amount you have outstanding on your mortgage.  If you have a million-dollar home and owe $500,000 on the mortgage, then your equity is $500,000.  People usually build equity in their home by paying down the initial mortgage and through rising home values over time. 

Equity can be accessed for many different purposes: consolidation of credit cards, paying for a holiday, buying a car/boat/caravan, home improvements, or even to pay for a wedding. 

Along with those purposes listed above, using equity to buy an investment property is a very popular way of using your accumulated wealth to invest and create more wealth. 

Often when accessing equity to buy an investment property there is the opportunity to borrow enough that your out of pocket expenses with a property purchase are covered.  This means that you don’t have to tap into your savings for things like stamp duty.  You might also be able to balance out so that the rental returns cover your outgoings, creating passive income. 

Typically, I would not recommend borrowing more than 80% of the property’s value, but there can be exceptions. 

Things to consider:

• You will need to be able to show that you can afford the repayments on the extra amount owing (and any investment loan if that is the loan purpose)

• The lender will assess your situation and want to understand what the equity is to be used for, and will sometimes want to see proof

• If you are using equity to purchase, for instance, a car, you should understand the cost differences between adding debt to your 25 year mortgage as opposed to taking out a six year car loan

There are a few simple steps to accessing home equity:

1.       Work out how much equity you have. 

This can be done simply by establishing the value of your home and subtracting the amount owing on the mortgage.

2.       Calculate the equity you can realistically access. 

You will need to be able to service the repayments on the extra loan amount and this will impact the amount of equity you can access.

3.       Review the options available to you. 

We can help you to research suitable lenders and products, comparing features, rates and costs to find the loan that best suits you.

4.       Work out the costs and fees. 

If you switch lenders there may be additional fees with government fees, application fees, and break costs on your existing loan.

5.       Apply for the loan and proceeding to settlement. 

We will work with you to apply for the loan and to see you through to settlement.

If you want to understand more about home equity and how is can be accessed, please speak to us.  We would love to hear from you!