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A Professional Mortgage Broker Shares How To Manage Rising Interest Rates And Home Loan Tips

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At Chapters Retirement Partners we help our clients over 50 to put plans in place to retire in financial comfort and to ‘Finish Strong’.

Many Australians have property debt in their 50’s and managing and repaying this debt is an important financial consideration.

We recently asked one of the experts on our panel of mortgage broking business partners- Ron Cole, the following questions and his insights (in italics) are below:

What are some tips for borrowers to manage rising mortgage rates?

I consider a major strategy to set in place your loan repayments calculated on an interest rate say 2% greater than the actual rate. To absorb this type of repayment, increasing now will soften the blow if we continue to have interest rate rises regularly into the near future.

What if you have a fixed rate until later this year and are concerned with your home loan rate?

I recommend that you ask your broker to ascertain what the  current fixed interest rate is currently and what it the likely variable rate likely to be.

Now is the time to start shopping around for better variable rate deals. Your broker is able to discern the different types of products and recommend the loan type that meets your needs.

Are some home loan customers paying a ‘loyalty tax’ by staying with their existing lender?

Unfortunately, lender customers surely are! A number of lenders have introductory interest rates to new clients, and these are not available to existing clients.

What is a ‘mortgage prisoner’ and what can people in this situation best do?

A “mortgage prisoner” is someone who lacks the equity or serviceability to refinance their home loan. This is a terrible bind for those struggling to make repayments.

The logical step is to step up loan repayments. But how you might ask? Tough decisions must be made to cut back on discretionary spending. This will more rapidly increase your equity. Even smaller amounts regularly have an impact.

You should ask your broker as you might be surprised about your equity for your broker to arrange an upfront valuation to clarify what equity you currently hold.

What is happening with loan terms for mature borrowers over 50?

The lender is concerned for the borrower as to what happens if loan amount nearing retirement is large and prompts the question what plans does the applicant have in place to clear the debt.  The actual term of the home loan in years is likely to be reduced to ensure a greater amount of principal is paid off earlier. However, your broker can mitigate the age issue with a plan based upon retirement age.

Is interest only home loans still available for property investors?

Yes, Interest only loans are most certainly available for investment properties. What needs to be considered is that the interest rate is generally higher than a principal and interest loan.

Are principal and interest home loans still offering a discounted rate vs interest only loans?

The lenders prefer clients to repay principal and interest to mitigate any drop off in property values. I recommend not to be dissuaded with principal and interest repayments as in early years of the loan the taxation benefit on outstanding loan is small.

How can mortgage brokers improve a property purchase experience requiring a home loan?

A broker brings a wealth of industry experience and knowledge to the table. In addition the broker has access to multiple lenders. A mortgage broker MUST act in the best interests of you the client. If you deal direct with any lender it is unable to conform to best interest duty legislation for obvious reasons.

How can mortgage brokers assist clients with a review of their existing property loans?

There are a number of ways brokers can assist with a loan review and I provide some bullet points for consideration.

  1. Why not arrange an up-to-date valuation to ascertain current equity in your property.
  2. Loans that were originally approved with less than 20% deposit are generally priced higher than 80% or less and if equity has increased to 80% the rate can be negotiated with your current lender or refinanced elsewhere.
  3. Ask your broker to request an interest rate reduction on your loan for you.
  4. Refinancing your current loan for an improved deal and gain a cash bonus for refinancing to a competitor is always an option.

 

For a review of your property loans with a mortgage broking expert- please consider contacting Ron Cole directly on the following details:

T 0417 918 228

E ron@roncole.com.au

W https://www.roncole.com.au/

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