Unfortunately, taking a 'fix it and forget it' approach to your mortgage could cost you thousands over the life of your loan. Since your mortgage is a long- term commitment usually spanning over two decades, you should regularly evaluate your goals as per your changing personal and financial circumstances. Maybe you've had a windfall gain and would therefore like to close your mortgage or perhaps park the extra funds into an offset account and benefit from the interest. Or you may want to change the co-applicants of your mortgage. Whatever the case, monitoring and managing your home loan after its settlement is essential. If you find it hard to navigate the complexity of the mortgage landscape or monitor changes applicable to your home loan, you could rely on your mortgage broker to do it for you. Since your broker is paid by the lender upon settlement of a loan, generally, your broker's service should be free for you. Here's how your mortgage broker could continue to add value even after settlement of your loan.
Lowest rate your lender is offering
Along with monitoring rates across the market, your broker can also guide you on the rate your lender is offering new customers. As you may already know, lenders usually pass on any rate cut only to new customers. So, if there's a gap been your rate and your lender's rate for new home loan applications your broker can keep you abreast of it and coach you on a negotiation conversation with your lender if required.
Whether you should negotiate with your lender or refinance?
Even if you're receiving the best possible rate from your lender, there may be more competitively priced products with better features in the market. Since your broker scopes the market day in and out, he/she is an excellent position to check if your current loan is serving your needs in the best possible way or if it's time for you to consider another option.
The best rate for your needs
Sometimes the lowest rate offering may not be the best option for you. There are several loan features that can boost savings and expedite homeownership. Switching to a lower rate while making a compromise on these crucial features is therefore not advisable. Your broker will be able to guide you on the most competitively priced product that offers features that may be necessary for your needs.
New Loan features and saving avenues
The mortgage market is competitive and dynamic, with lenders continuously striving for a larger market share with better product features. However, once again, it's usually new customers that are likely to be provided with these options. Your broker could keep you abreast of new features that are being rolled out and how you could ask for and benefit from them.
Ways to leverage your property equity
Property equity is nothing but the difference between your property value and the amount you owe your lender. Your property equity is inversely related to your loan rate. The higher your equity, the better is your ability to negotiate a lower rate. Your loan covers a percentage of your property cost – this is called LVR (Liquidity Value Ratio). So, if your home loan covers 80% of your property cost, then your LVR is 80%—the lower the LVR, the lower your interest rate. E.g. a borrower with a 70% LVR will be charged a lower rate than a borrower with an 80% LVR. As your property appreciates and as you pay off your loan, your equity increases, and the percentage of your property covered by your loan declines which means your LVR drops too. So, you can, therefore, use your increase in property equity to negotiate a better rate. You can also use property equity as collateral to gain access to more funds. Your broker can help you with calculating your current LVR and identifying the rate your lender is charging new borrowers for that level of LVR.
In addition to helping you monitor your mortgage; your broker will also help with the paperwork should you choose to switch lenders or change your home loan.
Reach us for the best way forward as per your circumstances.
The information is a compilation from various sources for your benefit and should not be relied upon in lieu of appropriate professional advice.