As the figures above show, around two-thirds of mortgage holders in most states reported being concerned about the possibility of falling property prices and the flow on effect that could have on home equity.
That’s particularly true for homeowners in New South Wales (71%) and South Australia (70%), though slightly less so for residents in Western Australia (54%).
Refinance strategy: Tips for property owners
If refinancing seems like a tall order, the first thing you should do is research what’s on offer elsewhere, along with what your lender is offering new customers, and try to negotiate your current rate down. If your lender won’t budge, consider ways you can become more appealing to another one.
One thing to keep in mind is that when lenders assess refinance applications, they pay close attention to a borrower’s recent repayment history. So if your mortgage has been on pause for several months, lenders won’t have much to go by when determining your ability to service a loan.
To get around this problem, would-be refinancers will have to get a few months’ worth of repayments under their belt with their current lender before shopping around. For some, especially those whose financial situations have stabilised since March, this won’t be such a large hurdle.
Beyond this, it’s also a good idea to lower your day to day expenses and focus on tackling any other debt you might have. And when it comes time to find another lender, avoid making inquiries with too many as this might affect your credit score. Instead, do your research upfront and narrow down your options to a select few.
A final note from our report: most homeowners don’t shop around on home loans. As such, they might not even realise the savings that can be had by doing the right research.
For this report, Mozo found that:
- One in ten mortgage holders didn’t shop around when obtaining a loan.
- By switching from the average to best rate on the market borrowers can save $2631 per year on average.
So, if you can get yourself into a stable financial position, there are excellent long term savings to be had by switching your home loan.
In summary, here are some questions to ask yourself:
- How does my current rate compare to the rest of the market?
- What’s being offered to new customers by other lenders?
- Does my recent repayment history look reasonable to a lender?
- Can I also lower my current day to day expenses?
- And, can I lower my overall debt?
- Have I pinpointed just a select few lenders to approach about refinancing?
This report was a collaboration between Niko Iliakis, JP Pelosi and Tom Watson.