Mortgage Tips Updated 30 June 2023

 Because of the trend towards higher interest rates that is anticipated to continue throughout 2023, the market for lending is likely to continue to be competitive for the foreseeable future. Because of this, it is essential that you select a lending solution that meets your requirements. The following are some suggestions that we have prepared for you in order to keep you informed about your house mortgage loan or investment mortgage loan in 2023.

1. Repayments

Borrowers who have loans with variable interest rates won't see the full impact of rate increases in 2022 on their monthly payments until the beginning of 2023. It is prudent to have an idea of the amount of repayment you are anticipating and to make every effort to incorporate it into your budget as soon as possible. For example, if you wish to convert from a mortgage with a fixed rate to one with a variable rate in 2023, you should begin to think about what your monthly payments might be like at that time. You still have time to put this fresh method of budgeting to the test, even if the fixed rate on your loan is about to run out. The interest rates on investment loans and mortgages might be a few points higher than those on residential mortgages, but the greater rental yields that investors might be seeing could make up for the difference. 

2. Values that are Derived from Evaluations

The evaluation rate that is used by banks to determine how much money you are permitted to borrow has grown as a direct result of the rise in the interest rate. The interest rates that a financial institution is now giving do not influence the amount that you are permitted to borrow from that institution. The interest rate that you will pay is increased by a margin of 3% by the bank when they calculate your capability for borrowing money. When mortgage interest rates were only 2%, banks would calculate borrowers' ability to repay loans at a rate of 2% plus 3%, which equalled 5%. This was the standard practise. For instance, if interest rates have risen to 4.75 percent, the assessment rate for banks would be 4.75 percent + three percent, which would be 7.75 percent. It may become more challenging for you to refinance your existing loan or make a significant purchase if interest rates maintain their upward trend. A rise in the assessment rate could lower the amount of money you are allowed to borrow and compel you to submit your application in a rushed manner in order to meet the deadline. Therefore, it is essential that you are aware of the assessment rate before you begin planning the submission of your application.

3. Valuations

According to Corelogic, property values in the majority of Australia's real estate markets have decreased since reaching their peaks in the second half of 2022. This decline has an impact on mortgage loans for both residential and investment properties. If you are in the market to buy, this may be excellent for you; however, if you are planning to sell, refinance, or add on, it may put you in jeopardy if you do anything like this. When you request an increase in your loan amount or refinance your mortgage, the lending institution will take into consideration the current market worth of your property. If the value that the lender places on your house is high enough (referred to as LMI), there is a possibility that you will be required to pay a mortgage insurance premium to the lender. Lenders If the borrower's loan amount is more than 80% of the value of the collateral that is being mortgaged, then the borrower is obligated to pay mortgage insurance premiums. If your loan-to-value ratio (LVR) is more than 80%, you won't be able to refinance your mortgage, but as long as you can keep making payments at your current bank, this shouldn't be a huge problem for you right now.

4. Difficulty in terms of one's finances

In the event that something occurs that puts a strain on your finances, you must contact either your broker or your bank as soon as possible. After suffering a financial setback, you can seek assistance from the banks, who have specialised departments and processes in place to assist you.

5. The remaining balances in debit and credit

If you want to get the most out of your home loan offset account, you need to make sure that each month you contribute the maximum amount that is allowed. If you have one dollar in your offset account, that dollar will not be applied to your loan balance. This will result in a lower total amount of interest paid on the loan. If you have a loan for $500,000 and $20,000 in an offset account, the amount of the loan on which interest is accrued and paid will be $480,000. Because interest is accrued daily but only deducted once a month, using your offset as your primary checking account and having your pay check deposited there can help you save money on interest. This is because interest is accumulated daily but only debited once a month. It is to your advantage to enquire with your mortgage provider about the possibility of opening multiple offset accounts. Doing so enables you to fulfil a wider variety of savings objectives while simultaneously reducing the overall interest rate you are required to pay on your mortgage. This may entail having rental money directly deposited into offset accounts for investors, as well as covering investment property expenses up to the most recent due date. 

6. Assess your existing financial situation by going over your bank statements, credit card statements, and lease agreements.

If you discover any dormant accounts or exorbitant expenditures on the lease, you should report your discovery to the bank or credit card company. In addition, the annual fee for the majority of credit cards is a reoccurring expense, and even dormant transaction accounts may be subject to account management fees. There is a possibility that the interest rates on some automotive loans (leases) are at an all-time high right now. If you want to keep from having to pay these fees or make these additional payments, you can think about closing and consolidating any accounts that you do not need or use anymore, since this can bring the total cost of some leases down. Keep in mind that if you refinance the amounts on your credit cards and auto loan into a mortgage, you will be able to combine all of your other recurring payments into a single manageable installment.

7. Start a contingency savings account.

After paying for the things you intend to buy, you should still have enough money left over for any unanticipated costs that may arise. This ought to be able to help you cover any unexpected costs that may come up, whether they are related to the home you're buying or to your day-to-day living in general. And this is something that is becoming more and more necessary as the cost of living continues to rise. This can also be of assistance for investment homes in the event that there is a period of non-vacancy during which investment mortgages still need to be covered. 

8. Be aware of your current credit rating.

Make on-time payments to your debts and limit the number of times you seek for additional credit. Every time you apply for new credit, whether it be a credit card, a personal loan, a lease, or a mortgage, your credit history will be affected. It is a good idea to update your contact information and set up direct debits with your telecommunications providers, utility companies, and banking institutions if you want to avoid any unpleasant surprises on your credit report. These steps can help you avoid any unpleasant shocks on your credit report.

9. Recognise the purpose of the money you currently owe and the type of debt you have.

It is possible that the form of the loan or the purpose for taking it out will have an impact on the conditions of your loan, including the interest rate and the timetable for making payments. For example, interest-only mortgages end up costing more money over the course of the loan's lifetime compared to conventional mortgages that combine principal and interest payments. If your current and future financial circumstances have changed significantly since you first took out the loan, it is strongly recommended that you reevaluate the terms to see whether or not they continue to serve your best interests.

10. Evaluations of loan conditions and interest rates

Our mortgage brokers at orchardlending.com.au send a friendly reminder email to each and every one of their customers once a year, asking them to check in on their loan rates and terms to ensure that they are still receiving the best possible offer. In addition to this, we have set up notifications that will check in with you a few months before the expiration of any interest-only or fixed-rate periods. In the meanwhile, if you have any questions or concerns regarding your finances in the time between these annual meetings, please contact us at to see how we may be of assistance to you.