How your deposit size can shape the rate you pay

It’s commonly known that the bigger your deposit, the smaller your home loan, and thus, the lower your monthly repayments. But today we’ll look into another way your deposit size could reduce your repayments: by potentially reducing your interest rate.

A question we’re commonly asked (believe it or not!) is “how can I get a lower interest rate?”

There’s no straightforward answer to this one as it usually depends on a myriad of factors, including whether lenders see you as high risk or low risk, the competition in the market at the time and, as we’ll discuss today, how big your deposit is – or more technically, your ‘loan to value’ (LVR) ratio.

What’s LVR?

To cut through the jargon, LVR refers to how much of your home’s value you’re borrowing.

If you plan to buy a home priced at, say, $600,000 using a deposit of $120,000, you’ll need to borrow $480,000, or 80% of the property’s value. For lenders, this means you have an LVR of 80%.

Why does this matter?

Well, a bigger deposit lowers your LVR. This in turn helps reduce the risk you represent to a lender.

A loan with an LVR of 80%, for example, may be seen as less risky than one with an LVR of 90%.

As a general rule, lenders tend to reward borrowers for that reduction in risk with a lower home loan interest rate.

But note: these figures don’t include stamp duty and other up-front costs, which you may also need to budget for.

Average interest rates by LVR

Mozo checked out the average variable rates for different LVRs.

As you can see below, for home loans with an LVR of 95%, meaning a 5% deposit, the average variable rate is about 7.38%.

Borrowers who can pull together a slightly bigger deposit may see their rate fall. As a guide, on an LVR of 90% (deposit of 10%), the average variable rate falls to 7.13%.

That’s a potential rate saving of 0.25%. This may not sound like much. But along with lowering your monthly repayments, a lower rate could mean paying less in interest charges over the life of your loan.

– LVR 95%: average variable rate of 7.38% p.a.
– LVR 90%: average variable rate of 7.13% p.a.
– LVR 80%: average variable rate of 6.85% p.a.
– LVR 70%: average variable rate of 6.81% p.a.
– LVR 60%: average variable rate of 6.77% p.a.

How your LVR can see you save in other ways

Your LVR doesn’t just shape the rate you’re likely to pay.

If you have a small deposit, usually less than 20%, you could be asked to pay lenders mortgage insurance (LMI).

This is a type of cover that protects the lender if you can’t keep up your loan repayments.

LMI can be a substantial up-front cost.

There are options for first home buyers with a small deposit to avoid this expense. The First Home Guarantee Scheme, for instance, allows eligible buyers to purchase a first home with just a 5% deposit and no LMI.

What if I’m refinancing my home loan?

If you’re refinancing your mortgage, your LVR will be shaped by home equity.

The same basic rule applies. The more equity you have in your place, the smaller the loan you may need.

This may help lenders see you as a lower risk (all other things being equal), so chances are you may be offered a lower rate.

How we can help

With so many loans and lenders to choose from, home loan interest rates can vary widely.

Yes, your deposit or home equity can play a role in the rate you pay. But a variety of other factors come into play also.

That’s why it’s important to speak to us if you’re buying a first home, your next home, or refinancing.

We can help you find a home loan that’s suited to your needs at a competitive rate in line with your LVR and any other contributing factors.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

The pros of having a mortgage broker on your side

What exactly can a mortgage broker do for you? Well, we don’t mean to toot our own horn, but we can make your home loan journey a whole lot easier, letting you focus on the fun part: planning for your new home!

The words “home loan application process” can strike fear in the hearts of many.

Trawling through different loan products is a time drain. The bureaucratic tape can be a headache. And let’s not forget banks scrutinising your finances.

But it doesn’t have to be a drag.

The majority of home loan seekers have now cracked the code: turning to mortgage brokers to help them land a loan.

In fact, between July and September 2023, mortgage brokers wrote 71.5% of all new residential home loans in Australia, according to the MFAA.⁣
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That’s the second-highest mortgage broker market share the industry has ever recorded.⁣
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Let’s find out why so many Australians have jumped on the broker bandwagon.

1. We do the legwork for you

Let’s face it, life gets busy. You’ve probably got a million things on your plate.

Carving out time to deep dive into home loan products across lenders can be tough. And often overwhelming.

Mortgage brokers can take that tedious task off your hands – we can assess your situation and find home loan options to suit you and your goals.

We’ll even lodge paperwork and apply on your behalf, then chase things up to ensure everything goes as smoothly as possible.

And fret not: all brokers are bound by a best interests duty.

That means we’ll always put your best interests first – not ours nor the bank’s!

2. We could help boost your chances of success

When looking around for a loan, having a knowledgeable professional on your side could be a game-changer.

We can explain the whole home buying and loan process, which is particularly helpful if you’re a first-home buyer or if it’s been a while since you’ve applied for a mortgage.

We know the application process inside and out and can prime you to have your paperwork and finances ready to roll the moment the perfect property comes along.

We have a wide range of lenders within our network – potentially providing you with access to a variety of home loan options across different banks and lenders.

Whether your financial situation is complex or straightforward, we can use our panel of lenders to help you find a suitable loan. We can also let you know which lenders have a history of approving applications similar to yours.

This potentially cuts down on countless hours trawling through lender websites for the right type of home loan. It may also lower your risk of rejection, which can negatively impact your credit score.

3. You’ll get continued support

Once you’ve been approved for a home loan, the party doesn’t stop there.

We can continue to support you by regularly reviewing your rate with your bank on your behalf.

That way you can avoid the “loyalty tax” – where new customers tend to get the lower rates.

You can contact us any time with any questions you may have. And when you’re ready to refinance, unlock equity in your home, or anything else finance-related, we’re here to help.

Get in touch today

Are you ready to make the home loan process a whole lot easier?

Get in touch today to get the ball rolling. We’ll take care of finding your home loan so you can focus on planning for your new home.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

5 New Year’s resolutions for your home loan

Thought of a New Year’s resolution yet? Or perhaps you’ve broken one already? Either way, check out our list of possible mortgage goals for 2024 – try one, or have a go at them all – to save a bundle in the year ahead.

It’s that time of year when Aussies love to set resolutions.

According to Commonwealth Bank research, as we dive into 2024, three out of four Australians will make at least one financial resolution, often involving plans to follow a budget or spend less.

But when it comes to New Year goals, it’s worth shining a spotlight on your mortgage.

After all, it’s likely to be your largest debt, and setting (and achieving) a few goals for the year ahead can help you pocket savings and become mortgage-free sooner.

Here are our top 5 home loan resolutions for 2024.

1. Give your home loan a health check

Don’t just assume you still have the home loan that’s right for you.

Chances are, life has dished up a few changes over the past few years.

Or maybe there are big things on the horizon for 2024 – like starting a family, upgrading to your next home, or tackling a major renovation.

Checking that your mortgage is still well-suited to your needs can be a starting point to achieve these goals.

Talk to us about a free home loan health check to be confident you’re heading into 2024 with a loan that still ticks all the boxes for your situation.

2. Ditch lender loyalty

Interest rates soared in 2023. Yet less than one in 10 home owners refinanced their home loan to get a better deal last year, according to Canstar research.

At the start of 2024 we’re still seeing big variations in rates between banks, with many lenders still offering lower rates to new customers, according to Reserve Bank of Australia (RBA) statistics.

So, staying loyal to a lender can cost you.

We can compare your mortgage to many others in the market to see how it shapes up in terms of rate, features and flexibility.

That’ll help you decide whether to stay, or save by switching to a new loan and/or lender.

3. Check you’re not paying for features you don’t use

Home loan features can be very handy, but the more features a loan has, the higher the rate (or fees) may be.

That’s not a problem if you regularly use features such as, say, an offset account to save money.

However, if you’re not using particular loan features, you could save with a more basic loan that potentially comes with a lower rate.

Not sure which features your loan offers? Call us today for a quick rundown and we’ll help you check it all out.

4, Plan now for the end of a fixed rate

The fixed-rate cliff is not over yet.

The RBA says 450,000 home owners will roll off a super-low fixed rate in 2024.

If that includes you, it could pay to act now.

We can help you plan ahead and decide the right course of action – be it reverting, refixing or refinancing – so that your finances won’t be too squeezed when the end of your fixed rate rolls around.

5. Leverage your home loan to achieve other property goals

A home loan doesn’t just have to be a debt.

It can also be a valuable tool that lets you work through a personal bucket list by putting home equity to work.

And you could be starting out 2024 with a lot more equity than you realise.

Back in January 2023, the median home value across Australia’s state capitals was $770,374, according to CoreLogic.

Fast forward to January 2024, and the median value has increased to $832,193.

That might mean extra money (aka equity) up your sleeve to build wealth through an investment property, for example.

Call us today to get a clearer picture of your home’s potential equity – and how you could use it to tick off your wish list in the year ahead.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

Merry Christmas! Season’s greetings from all of us to you

The year has flown past, and as our thoughts turn to trees, tinsel and turkey, we’d like to thank all our fantastic clients for your support throughout 2023.

It’s been quite a year, with higher interest rates, soaring national property values (who’d have thought?) and a few welcome surprises including more help for first-home buyers.

There is plenty in store for 2024, and we look forward to partnering with you again to help you navigate whatever goals you have planned in the new year.

In the meantime, we hope you can take the time to relax, unwind and enjoy all the fun of the festive season.

There’s no doubt the next 12 months will dish up its fair share of surprises. But some things never change – we will be here for you in 2024 and beyond.

So, wear that ugly Christmas sweater with pride, relish the magic of the festive season, and celebrate all you have achieved this year.

May your happiness be large and your bills be small! We look forward to being part of your property journey in 2024!

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

Ho ho ho! The smart move that has 1 in 10 borrowers feeling jolly

Home owners have been battling rising interest rates for over a year and a half now. But a new report reveals the important step some savvy borrowers are taking to rein in higher rates and swap “oh no!” for “ho, ho, ho!”.

It’s no secret that refinancing has the potential to slice a big chunk off your monthly loan repayments.

And according to Canstar, 1 in 10 mortgage holders chased a better deal in 2023 and switched to a new lender to save on their repayments.

But what’s surprising to us is that 9 in 10 didn’t.

So what’s holding them back? Let’s dive in.

Some score a discount, others don’t

To be fair, many home owners have been on the front foot this year.

According to Canstar, 1 in 5 home owners with a mortgage have negotiated a better rate with their current lender – which is great news.

Having a chat with your bank can be a fuss-free way to save, especially if they come to the party with a rate discount.

A further 14% of home owners say they have tried to switch to another lender but weren’t able to do so because they didn’t have enough equity, or didn’t meet the new lender’s requirements.

That’s why it pays to speak with us before talking to a lender.

We have in-depth knowledge of different banks’ lending criteria, so we know which lenders are likely to give you the green light for a better deal.

Too many borrowers wearing higher rates

The thing is, there are plenty of home owners who have just copped rising rates without taking action.

As Canstar puts it: “Too many borrowers remain complacent even in the face of rising repayment costs”.

The scary thing is, half (49%) of Australia’s home owners with a mortgage don’t intend to change lenders at all.

Some believe they have a good interest rate. But as many as 1 in 5 think refinancing is too hard.

Busting the myths

Let’s sort some facts from fiction.

First up, it’s great if you think you are paying a competitive interest rate. The key is to know for sure.

Right now, variable home loan rates are anywhere from 5.69% (very rare) through to 9%-plus.

With that sort of range, there’s plenty of scope to save, especially as lenders often make lower rates available to new customers.

There is an easy way to know if you’ve got a good rate: pick up the phone and call us.

And if you’re worried that refinancing is hard work, rest assured that we’ll do the bulk of the leg work for you.

We’ll sort through hundreds of home loan options to find the loan that’s right for your needs. We’ll also make the paperwork easy, liaise with your old lender, and your new bank. Simple.

So if you’re keen to find out if you can do better with your home loan these summer holidays, give us a call and we’ll help you put your best foot forward going into 2024.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.