REFINANCING LOANS

10 Years ago, I met a most delightful woman when I provided her a Seniors Loan, otherwise called a Reverse Mortgage. She had the most adorable timber cottage that matched her bubbly personality and which she had designed herself. The cottage nestled into the vegetation and a floral trimmed timber deck and sunny sitting room overlooked a lush and fern filled gully. She had the whole house filled with quaint souvenirs from all over the world which were a tribute to her travels, and she had no desire to ever leave her beautiful haven and the wonderful garden she had created. She wanted to take some of the equity from her home to add to her lifestyle and travels.

Recently she called me again as the 10-year loan term had passed and she now needed to renew her loan. She wanted to take out additional equity and do more traveling. The value of the home had increased and she was now 10 years older so her circumstances now qualified her to take a new Reverse Mortgage, a better loan with a specialist Seniors Loan provider at a lower interest rate and with no ongoing fees, and this new loan provided her with her updated needs.

Reason number one for refinancing is to bring your loans into line with your current position and current needs.

This week I met a lovely couple who have downsized into a peaceful modern garden complex. Like so many, they had found it harder and harder to keep up with paying the daily expenses on the pension. They had a Reverse Mortgage with a major bank and high-interest credit cards with increasing balances. Refinancing their Reverse Mortgage with a specialist lender at a lower rate and no ongoing fees, as well as incorporating the credit card debt into the Reverse Mortgage, will save them several thousand dollars in interest and fees in the first year – and every year after that! They will now be free of increasing credit card repayments and have enough savings to take a holiday, or renovate, or fulfill some wish from their bucket list.

The second reason to refinance is to consolidate debt, and make repayments easier, reduce interest and fees, and save considerable money.

Both the above clients refinanced a Reverse Mortgage or Seniors Loan to obtain a better outcome. If you have a Reverse Mortgage and you would like to investigate some enhancements to your current loan, maybe see if you qualify for a little more money for some special treats, or maybe pay out some credit card debt, it may well be possible to improve your current situation. The best Reverse Mortgage on the market is currently 6.19% interest.

It really is worth the effort of having your loans assessed by a qualified finance and mortgage broker who has access to a large spectrum of loans. Some brokers charge a brokerage fee which can be minimal or quite expensive, however many brokers will provide this service at no charge and will be able to suggest better opportunities to save money if you refinance to a better loan. Make sure you check that you have a broker who will provide this service for free.

Take the young family struggling to meet the mortgage repayments each month while paying all the mounting expenses of raising children. If they have a mortgage of $500,000 and an interest rate of 4.5%, they will pay $1,875 every month just in interest. If they refinance to 3.89% they would pay $1,620 per month in interest and save $254 every month that can be spent on other things for the family. That is a significant saving – $3,050 in 1 year – enough to go on a family vacation. What about an even lower rate of 3.69%? Now the saving in interest becomes $4,050. Suppose their current interest rate is higher, say 5%, then the savings from refinancing go up to $6,550. What could a family do with an extra $4,000 – 6,000 a year? Perhaps consolidate a credit card or two that simply seem to grow instead of getting cleared, and the savings get even bigger. This should encourage every home owner to get their home loan assessed regularly with an accredited Finance and Mortgage expert.

The third reason to refinance is to save interest and use your money for better things and more importantly to stop giving the already rich banks more of your money than you need to.

When it comes to those of you who have one or more investment properties the need to assess your loans is even more critical. The savings an investor can make over several loans when refinancing can mount up to a very significant amount.

If you have fixed rates you can usually only revise the loans at the end of the fixed rate period or there may be penalties amounting to the interest the lender will miss out on when they re-lend that money, especially if the rates have dropped.

If you have variable rates the banks can increase the rates whenever they wish, so you need to keep very aware. All investment loans should be assessed every 12-18 months and refinanced if significant savings can be made. That may simply require your Broker negotiating with the current lender but more likely there will be special offers in the market that will be more appealing.

Investing in property is a business and as such costs need to be kept to a minimum and interest is a cost of doing that business. Your Broker will be revising your loans periodically and will contact you if you need to make some changes. Ultimately however, no-one can look after your money as well as you can, so call your Broker every 12-18 months and have a chat. They will be able to update your serviceability and equity position and may suggest when you have the capacity to purchase another investment property.

The fourth reason to refinance is to keep your investment business costs to a minimum and to be always ready for further investment.

For more information about an assessment of your loans, contact Sandra from Every Loan on 96532034 who will be happy to clarify your options in specific detail.