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As long drawn and gruelling your property purchase and mortgage settlement may have been, continuing to monitor your home loan is an absolute necessity to capitalise on quicker homeownership and saving opportunities. Here’s a look at why and how you should go about doing it.
To benefit from a decline in interest rates, you need to make sure that your lender passes on the cut to you. Unfortunately, most lenders tend to pass on the rate cut to new customers. Regularly monitor your interest rate and compare it with what your lender is offering new applicants. If there’s a gap, have a word with your lender and ask for your rate to be matched. If your lender doesn’t budge, then consider refinancing. Even a half per cent dip in your interest rate could save you thousands.
Property Equity is nothing but the difference between how much you owe your lender and the price or value of your property. For example, let’s say you purchase a $500,000 property with a loan of $400,000. In this case, your equity is $100,000 or 20%. The higher your property equity, the lesser is your risk as a borrower. As the value of your property appreciates, your equity will go up. Higher equity also translates into a lower LVR (Liquidity Value Ratio) or percentage of the property cost that is covered by the home loan. A rise in property equity allows you to negotiate a lower rate. Calculate your current equity and corresponding LVR and check what your lender is offering new borrowers for the corresponding LVR figure of your property. If there’s a gap proceed with a discussion for a rate match. In addition to a better rate, property equity can also be used to collateral to access more funds. In other words, you could use your property equity to borrow more money for renovation projects or even to purchase another property.
Learn how much you can save through refinancing.
Redraw facility, offset account, flexibility in payment frequency and ability to fix a portion of your loan are just some of the many features of a mortgage than can expedite homeownership. As the mortgage space continues to evolve, lenders offer more refinements to home loan offerings. Stay atop new loan features and analyse how they could be beneficial to your circumstances.
Change in personal circumstances
A mortgage is a long-term commitment spanning more than a decade or two. Your personal and financial circumstances are likely to change substantially during such an extended period. You may need to change a co-applicant or may be able to pay off your loan sooner in the wake of improved earnings or perhaps a sudden windfall gain. Whatever the case, it’s best to regularly evaluate your current financial and personal circumstances against changing goals followed by necessary changes to your mortgage.
The best approach to managing your home loan after its settlement is to rely on the professional advice of your mortgage broker. In addition to helping you with loan paperwork, your broker can also help with scoping the market for the lowest interest rates and latest loan features along with avenues for saving and quicker homeownership.
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