11 Feb 2021

Australians With Existing Home Loans Are Losing Thousands By Not Doing This

Australians With Existing Home Loans Are Losing Thousands By Not Doing This

How old is your home loan? There’s no need for a home loan calculator to figure this one out. If you’ve held your existing home loan for at least three years, you’re likely losing thousands of dollars on repayment.


Here’s the good news: There’s a simple way to avoid losing out.


According to the Australian Competition and Consumer Commission, or ACCC, the older your home loan, the more you’re paying compared to new customers.[1]


How much more exactly? The ACCC’s final report shed some light on the subject.


As of September 2020, here’s the average difference in interests rates paid by new and existing variable rate home loan customers:

  • Customers holding a home loan for 1-3 years paid 0.47% more, on average.
  • Customers holding a home loan for 3-5 years paid 0.58% more, on average.
  • Customers holding a home loan for 5-10 years paid 0.71% more, on average.
  • Customers holding a home loan for more than 10 years paid 1.04% more, on average.


This issue is so common that it has a name: the “loyalty tax.” While it’s not an actual tax by definition, the premium being paid by existing home loan customers hurts the wallet just as much.


The Simple Solution That Could Save You Thousands On Your Home Loan


Have you checked home loan interest rates lately?

[1] https://www.accc.gov.au/system/files/Home%20loan%20price%20inquiry%20-%20final%20report.pdf 



The Truth About An Interest Rate Drop & How It Affects Your Home Loan


There are a number of misconceptions about interest rate drops, including who they impact and how exactly individuals may be affected.


Let’s start with the basics.


What Exactly Happens When the Interest Rate Drops?


The Reserve Bank of Australia announced an interest rate drop to 0.10% in November of 2020. That rate is the interest rate that commercial banks pay to a central bank when borrowing money.


That relationship then goes on to affect individual customers of those commercial banks in different ways.


But a cut in the base interest rate (described above) doesn’t necessarily mean your commercial bank must drop their own rates.


Why does the interest rate change? It’s the job of any central bank to adjust rates based on current economic conditions.



Does an Interest Rate Drop Affect You?


That depends on the type of home loan you have: fixed-rate or variable-rate.


If you have a fixed-rate home loan, the drop in interest rates won’t impact you because you’re locked into a certain rate for a certain period of time.


If you have a variable-rate home loan, the interest rate cut will affect your rates by however much your commercial bank passes on to you.


Depending on what portion your lender holds back, choosing to refinance your home loan could prove financially beneficial.


If you’d like to find a home loan that could save you thousands with better rates and fees, start here.



The Pros & Cons of Interest Rate Cuts




Dropping interest rates give homeowners a chance to save thousands on repayment by switching to a different lender. The fixed interest rate on your home loan won’t change. You’ll have to wait for the fixed rate period to end.
Lower interest rates generally mean an increase in borrower capacity. Savings interest rates go down, meaning you’ll earn less interest on the cash in your bank account.
When variable interest mortgage rates go down, the lower rate on your mortgage means you’ll have smaller payments or be able to pay off the loan quicker. Especially for fixed-rate loans, a dropping interest rate often means having to pay higher closing costs.



Want to refinance your home loan? Would you like to know more about home loan interest rates? Need access to a comprehensive mortgage calculator?


Click here for every resource you need.



Making a Mortgage Choice?

Here’s When a Fixed-Rate Home Loan is Perfect


If you’re thinking about a fixed-rate home loan or even refinancing to a fixed-rate loan, you’re not alone.


After the Reserve Bank of Australia slashed the interest rate to 0.1%, the vast majority of Australian mortgage lenders cut fixed rates below 2%.


So, does that mean a fixed-rate home loan is right for you? Let’s take a look…



Why Choose a Fixed-Rate Home Loan?


Choosing a fixed-rate home loan means locking in the interest rate throughout the entirety of the fixed-rate period. So, your rate will remain the same even if the lender you’re borrowing from changes their rates.


That framework comes with several advantages:

  • Because your payments will be consistent until the end of your fixed-rate period, budgeting becomes easier.
  • Fixed rates are currently at the lowest levels they’ve ever been, so you’ll save more compared to previous fixed rates.
  • You’ll have advantageous payments if the variable interest rate climbs since that won’t affect your loan during the fixed-rate period. While the payments of everyone on a variable rate are going up, your payment will remain the same.


Why Avoid a Fixed-Rate Home Loan?


While a fixed-rate home loan is often a great choice for individuals seeking consistency over a long period of time, these mortgage options have a downside.


Here are the cons of a fixed-rate home loan:

  • Managing repayments can become an issue at the end of your fixed-rate period, as your loan will switch to variable rates, which could be higher than your fixed rate.
  • You’ll have to pay break costs—which can be if you refinance or close the loan when you sell your property before the fixed period ends.
  • Fixed-rate home loans offer less flexibility. For example, you’ll likely have a limit on the number of extra repayments you can make during the fixed-rate period.


To discover more about fixed-rate home loans or to get started today, click here.


Considering refinancing to a fixed-rate home loan? Use Mortgage House’s Switching Mortgage Calculator to gain the information you need.




If You’ve Never Used a Home Loan Calculator, Start Here…


Purchasing a home is one of the most important financial moments of your life.


This is due in large part because the home loan you choose can mean the difference in thousands upon thousands of dollars in repayment.


Yet finding the right type of home loan isn’t always as simple as it should be.


Luckily, using home loan calculators can help you discover the perfect choice for your situation. But even these calculators can add to the confusion when they aren’t properly explained.


So, if you’re considering a home loan and would like some much-needed clarity, start right here…



Two Home Loan Calculators are Better Than One


Choosing the best home loan is all about having the best information. To acquire that information, use two calculators:

  1. The ‘How Much Can I Borrow?’ Calculator
  2. The Mortgage Repayment Calculator



How Much Can I Borrow?


Break out the ‘How Much Can I Borrow?’ Calculator when it’s time to narrow down your mortgage choices or real estate options.


This specialised tool helps you discover your buying power.


Here’s how it works:

  1. Plug in the interest rate for the loan. Check out interest rates for different loans or get an idea of the average interest rate by clicking here.
  2. Decide how long the loan period will be. Most home loans are either 15 or 30 years.
  3. Select whether you’ll be applying for yourself or with a partner, then choose the number of dependents.
  4. Input the net income per year for yourself and your partner, plus any additional income per year. Your incomes should reflect the number after taxes.
  5. Input all monthly expenses, such as credit card payments and monthly bills.


The ‘How Much Can I Borrow?’ Calculator will show you the amount up to which you can borrow and what a monthly repayment amount would look like at that amount.



Mortgage Repayment Calculator


A great mortgage repayment calculator will show you how much your payment will be for three different payment types:

  • Weekly, or 52 payments per year
  • Fortnightly, or 26 payments per year
  • Monthly, or 12 payments per year


To discover your repayment amount, plug in some basic loan information:

  1. The interest rate of the loan
  2. The loan amount, or how much you’re trying to borrow
  3. The loan period
  4. The loan type: Principal & Interest or Interest Only


For a principal and interest loan, each repayment is made toward both the principal amount of the loan and the interest of that loan.


An interest only loan means the borrower only pays back interest for an agreed-upon time period. This is a popular choice for real estate investors who aim to sell the property for profit before the end of the interest-only period.


To access a comprehensive mortgage repayment calculator and see how much your monthly, fortnightly, or weekly repayment amount would be, click right here.




These 3 Tips Keep Your Credit Score Healthy When Buying or Refinancing In 2021


A high credit score is vital to getting a great rate on your upcoming home loan or refinance. A healthy score can have a significant impact on both qualifying for certain loans and the size of your monthly payment.


Here’s three ways to bolster your credit score to get you prepared for that home loan or refinance…


  1. Keep Old Credit Card Accounts Open


A significant aspect of your credit score is credit history. In order to enhance that part of your track record, keep old credit card accounts open.

It’s human nature to close out an account once you’ve paid it off, but your credit score is interested in how long your credit lines have been open. So, you don’t have to use the account anymore if you have other credit cards for your regular purchases, but refraining from closing out that old account can result in a better monthly payment on your new home loan.


  1. Wait On Other Loans or Debt Until After Your Home Loan or Home Loan Refinance


If your main goal is acquiring the best home loan or refinance possible, avoid new loans and debts until after you’ve secured your loan.


Why? New loans often require a hard credit check or inquiry. And new debts mean a higher credit utilization rate. Both of the above hurt your credit score and/or make you look riskier to the lender.


So, if you know you’re going to be refinancing your home or securing a new home loan in the near future, wait to open a new credit account or to get other loans.


  1. Decrease Your Credit Utilisation Rate


Like we mentioned before, a high credit utilisation rate can be harmful to your chances of securing the best possible rates on your home loan or home refinance. In essence, the more credit you’re using, the lower your credit score.


To lower your utilisation rate, you should:

  • Pay down balances as much as possible. This has the added benefit of decreasing the amount of interest you’ll pay on those debts.
  • Ask for a credit line increase. By securing a credit line increase, either by clicking a few buttons or calling your credit card company, you’ll need to use a lesser percentage of that credit and therefore decrease your utilisation rate.


Of course, don’t forget to do the simple things, like set up auto-payments on your bills.


Use these tips to boost your credit score and get the best possible home loan or refinance deal.


Ready to find the best home loan for you? Click right here.


Ready to refinance? Click here.



Looking for a Car Loan?

Make Sure You Get These 4 Benefits…


When it comes to securing your next car loan, there are common features that everybody is aware of. You want to get the best rate, for example.


But not everybody knows about four key benefits that only premier lenders provide in the ideal car loan.


Here’s what you should be looking for…



  1. The Flexibility to Take a Month Off


Flexibility can be key when you’re looking to improve your financial situation or when you need to free cash up. The best car loans come with a fail-safe redraw facility, which means you can take a month off of payments when you’ve already made enough extra repayments to cover a payment period.


  1. Ability to Borrow More Than the Price of the Car


The cost of a vehicle isn’t the only expense you need to take care of in order to get out on the road. There’s insurance, on-road costs, and more to consider.


The best lenders will allow qualified applicants to borrow more than the price of the car, which allows them to take care of those auxiliary costs with the money included in the car loan.


  1. 24-Hour Approvals


Let’s say you’ve just found the perfect car and you’re ready to get it out on the road. Who wants to sit around waiting for days or weeks while the lender takes its time sorting through paperwork?


Look for lenders who, when you have your documents and application ready to go, can get you into that dream car of yours the very same day.


  1. Discounts On Bundles


Many of us have both a car loan and a home loan. Why not bundle them together and save?


Premier lenders will offer discounts on home loans or a home refinance once you’ve taken out a personal car loan.


When it’s time to go shopping for the perfect car loan, make sure you get all four of these great benefits.


You can apply online for a home loan today with Mortgage House. Start your application here.


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