April 17, 2020 by Melinda Halloran
Your home loan is your biggest financial commitment, so here is how you can make it work for you during coronavirus.
A lot has changed in the wake of the coronavirus outbreak, and you’re probably feeling the weight of uncertainty – even if you are in secure employment.
Questions I have been hearing include…
- Are lenders still approving new home loan applications?
- How can I save money on my home loan?
- Is refinancing a good idea in the current climate?
- Can I access equity for investing?
With interest rates at record lows, there are things you can do now to look after your finances.
So below I’ll take you through the latest updates and what you can do now to either apply for a new home loan or to review your existing loan so you’re saving on interest.
One thing to note before we dive in: these tips are the main pathways available, but there are more options for specific circumstances.
I’m in your corner and able to point out other alternatives based on your situation. Every lender operates differently, and there are also new policies and stimulus measures being announced regularly, so be sure to seek out the most up to date advice.
1. Applying for a new home loan
Right now buyers have more bargaining power and interest rates are at all-time lows. You may want to take advantage of this situation by purchasing property – but will a lender reject your home loan application, even if you’re employed?
This is something many people are concerned about, but it really depends upon many factors.
In short, yes home loans are still being approved, but lenders have pulled back in some areas.
The biggest issue some borrowers are facing has nothing to do with their employment: it’s the size of their deposit.
Generally if you do not have a 20% deposit saved, you have the option of lenders mortgage insurance (LMI). However some lenders have revised their loan-to-value ratio (LVR) protocols for now, which means that if you need to borrow more than 80% of a property’s value, not all lenders will accept your application. That doesn’t mean you don’t have any options, it just means you need to know which lenders are still offering LMI.
If you need some ideas for boosting your savings, here are four pain-free ways you can top up your home deposit.
Lenders are also making increased checks to ensure your employment is secure, and the loan assessor may contact your employer to confirm your employment status and current income.
If you’re planning to apply for a home loan or pre-approval, these are the things to take note of:
- Home loan applications are currently taking longer to process, so factor this into your planning.
- Loan assessors are making extra checks to ensure your employment is legitimate and secure.
- Do your homework to find out which lenders have policies that align with your situation.
2. Access a lower interest rate by refinancing
If you already have a home loan, now is the time to think about refinancing given that the cash rate was recently cut to 0.25%.
This means home loans are at record lows. At the time of writing this, our lowest fixed-rate loan is 2.09% p.a. (4.02% p.a. comparison rate).
So if you haven’t reviewed your home loan for more than 24 months, chances are you could be getting a better deal by refinancing.
If you have multiple debts, you can also use refinancing as an opportunity to consolidate them into a single loan. This will streamline your repayments and reduce the overall amount of interest you are paying on your debts.
A free home loan health check is the simplest way to find out whether refinancing will put you in a better financial position. Find out what a home loan health check is and how it works here.
3. Accessing equity in your home loan
Another reason why you may want to refinance is to unlock the equity in your home loan.
In an uncertain market, you may want to take advantage of investment opportunities and equity is one way of doing so.
This is something we’ve recently helped a client with, so lenders are still unlocking equity at this stage. So if you’re contemplating investing, we can review your options with you.
This option is best suited to home owners who have been paying off their loan for at least a few years and have begun paying down the principal on their mortgage.
Get the most up to date home loan advice during the coronavirus crisis
It can be confusing to stay across the financial policies coming directly from lenders and the media. That’s where we come in to break it all down for you and explain which lenders are right for you.
I’m also helping clients before they approach their lender to seek hardship, so you know what options to ask for and who to contact. There may be other alternatives available to you too.
If you want to discuss your options, we can chat via telephone, Zoom or a Google Hangout. – Luke
What’s next?
- Get more home buying tips
- See our online reviews from real home buyers
- Calculate how much you can borrow
Your Mount Gravatt Mortgage Broker, Brisbane | 0419 733 862
