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Want to kickstart 2021 the right way?
Here are some great mortgage saving opportunities.
2020 was the year that established the Australian property market's resilience and its many benefits as a reliable means of wealth generation. It has also been a year with great incentives for everyone across the property spectrum ranging from first home buyers to investors and existing mortgage holders. Here's a quick look at how you could kickstart 2021 by capitalising on some great saving opportunities.
1. Take charge of your mortgage
With interest rates at an all-time low, there are three approaches you could consider
- Speedup homeownership by paying in more: If your mortgage is older than a year, there is a healthy gap between what you can afford to pay and what you are currently paying. This is so because banks test an applicant's ability to repay a mortgage at a 'test rate' which is usually higher than the rate the loan is settled at. If you are financially secure, use this opportunity to pay in more.
- Ensure that your rate is competitive: The RBA has revised the cash rate multiple times. However, it is the lender's discretion to pass on the rate cut to clients. Lenders who do pass on the rate cut, usually offer the most competitive rate to new customers. Regularly check your home loan rate to ensure that you are being charged the same rate as new customers. If you find a gap, have a discussion with your lender. If your lender's rate isn't competitive, rely on a mortgage broker's professional advice to find the most competitively priced product for your needs without compromising on essential loan features.
- Leverage your property equity: The interest rate you are charged is inversely proportional to your property equity. Property equity is nothing but the difference between your property's current value and the amount you owe your lender. If your property is valued at $500,000 and you owe your lender $300,000, your property equity is $200,000. As the value of your property appreciates, your equity increases. An increase in equity puts you in a position to negotiate a better rate or leverage your equity to gain more funds.
2. Consider Getting on to the property ladder
If you are a first home buyer, this is undisputedly the best time to consider a purchase for the following reasons
- Historically low rates
- Flatlining property prices that are now gradually beginning to rise
- Great government schemes and incentives to support first home buyers.
- Better savings due to no daily commuted and eating out (plough back your savings into your first home loan deposit).
Even if you are looking at breaking into the property investment space an investor, with immigration coming to grinding halt, there are some fantastic deals on investment properties. Getting all your ducks in a row before immigration picks up could be an astute move.
3. Build value into your existing property
With most folks having a lot more time on their hands in the wake of remote working and saving on their daily commute, this could be the ideal time to take on a renovation project. Invest the time to build value into your property. A well-maintained property will command a premium at the time of a sale. With some of the lowest interest rates in our history, if you are financially secure, consider getting an affordable renovation loan. You could even use your existing equity to do so.
The best approach to figuring out the next steps is to rely on a mortgage broker's professional guidance. A broker will help make an informed decision and scope the market and handle any paperwork should you choose to apply for finance.
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.