The end of financial year is for the finance industry what summer is to your social calendar – mayhem. Our advice? Do your homework early and get moving on managing your debt now, rather than later.
If you’ve racked up the debt post-silly season it could be a good time to reassess your home loan.
People’s Choice spokesperson Stuart Symons explains: “We’re in a period of historically-low interest rates with credit unions and banks looking to attract new business with extremely competitive offers.
“Many commentators are forecasting rates will rise later this year, so we are in a window of opportunity for anyone holding debt.”
Consolidating your debts into your home loan could see you take advantage of a much lower home loan rate, so you can pay off your total debt more quickly. It could potentially save you hundreds of dollars every month.
Yet refinancing you home loan is not just as simple as ditching your current loan for a new offer.
First your need to do some research.
Are you clear about what you want? Do you want to reduce your payments or pay down your total debt faster? Your answer will help shape the structure of your new loan.
Any refinance requires details of your regular income, your expenses and those of your family, and your standing financial commitments – regardless of whether you intend to consolidate those commitments into your new loan. You’ll need to have these details ready to go before your lender can move ahead with your application, Symons explains.
“Your lender will then undertake checks on your credit rating, your property and standing commitments to assess your loan serviceability before being able to give you the go-ahead,” he says.
“Once a formal offer has been made and accepted, it may take some time to bring all parties together to finalise the old facilities into the new home loan, as your new lender will likely be waiting on all to return information for a mutually-agreed date.”
To start enjoying the savings a new home loan could potentially afford sooner rather than later, it could pay to start this process well before every financial institution’s busiest period – tax time.
When it comes to talk of an interest rates rise, many experts are running with the theme of “not if, but when”.
“Markets are expecting a rise in interest rates later in the year, pointing to growing international growth forecasts and rising rates in the United States,” Symons says. “On the other hand, the Reserve Bank recently said inflation – which is its key measure when setting its own cash rate – is expected to remain low ‘for some time’. You would therefore have to look for an answer between those two points. We have historically low interest rates, so it is reasonable to expect them to rise. When? That is always the question.”
For those considering refinance, the uncertainty around this question could be another reason to move quickly.
So, is there a specific type of home loan that debt-ridden souls should look out for?
The short answer is no. Everybody’s reasons for wanting to consolidate their debts are different, so it comes down to the individual’s circumstances and what they are wanting to do with their money in the long-term.
However, Symons does share a few key points to remember:
Read the original article on Realestate.com.au