Taking a look at how your loan is performing from time to time can see you placing more back into your pocket. But what should you be aware of before you consider refinancing?
Signing into a competitive investment loan rate from the very beginning can have you starting the property ladder-climb with a lighter foot. But real estate is under constant change, some big, some small, and some that see newer, more opportune loan products hitting the lending market at any given time.
In a new video, Nancy Youssef, founder of Classic Finance, offers expert guidance on when investors should consider refinancing their loan, and the benefits of doing so.
“Typically, we see people looking to refinance mainly to get cheaper interest rates, which will in turn lower their repayments,” Youssef shares with Your Investment Property magazine editor, Sarah Megginson.
“Another common reason we see people refinancing is that their property values have gone up so they look at tapping into some of the equity and we call that cash out and that money that they tap into can be used towards other investment purchases or other personal reasons that they need the equity.”
However, while there are clear cash saving benefits on offer, Youssef says that investors, especially those who are tending to other loans, need to ensure that they are lodging timely repayments.
“As an investor, you already have some repayment history and lenders typically will ask for statements to confirm what your conduct has been like on some of your existing loans, so ensuring that your repayments are up-to-date and made on time does build your credit worthiness to a bank,” Youssef explains.
Youssef also delves into how first-time investors can present an approval-worthy loan application to a lender, and in what areas lenders will be wanting to see financial stability.
“Most banks are still offering up to 90% loan to value ratio for investors. That will attract mortgage insurance. So, the bigger the deposit, the more choice you have with which banks to apply to,” she explains.
“Once you go to 80% loan to value ratio, it does start to limit which banks you can go to and the fees do get more expensive as do the interest rates.”
To find out more about how you can best approach refinancing a loan – including the underlying costs to be aware of and the value of meeting with a qualified and professional mortgage broker – watch Nancy Youssef’s full interview here.