TOP 10 MORTGAGE TIPS FOR YOU IN 2024
Higher interest rates in 2024, mean it’s going to stay tough for a little while, so it's important to ensure your lending solution is in your best interests and is meeting your specific requirements.
Here are our top tips to keep you on top of your mortgage matters in 2024.
1. Repayments
After a slew of rate rises in 2023, it is important to understand what your current and future repayments will be and try to start budgeting for these. In particular, if you’re rolling from a fixed rate to a variable rate in 2024, try working out what your future repayments may look like and start either comparing a few scenarios or making a budget for this. You could even try this new and upcoming budget prior to your fixed rate ending, to get used to it. Here’s our repayment tool to help you with this:
2. Assessment Rates
As rates have risen, so too has the assessment rate the banks apply when assessing the amount you can borrow. The banks don’t work out what you can afford based on the current advertised rates. The banks add a 3 per cent buffer to the interest rate you will pay when assessing your borrowing capacity. Previously when home loan rates were as low as 2 per cent the bank would assess your ability to make repayments at 2 + 3 = 5 per cent. Now that rates are higher at say 6.2 per cent, the banks assessment rate is 6.2 + 3 = 9.2 per cent. This, therefore, impacts your borrowing capacity and may make it harder to refinance or purchase, especially if rates rise a few more times. There are some banks assessing loans for refinances at only 1 per cent above the actual rate which may mean that you are eligible to refinance, versus if you would be applying under the traditional 3 per cent buffer rule. So it’s important to know which banks are in your best interest here.
3. Valuations
According to data from Corelogic, the property market has seen demand meet the additional supply in 2024 and depending on which state you’re in, values may have changed. When refinancing or requesting a top up, the bank will re-assess the value of your property in today’s market. Depending on that valuation amount on your report, it may mean you will have to pay a lenders mortgage insurance fee (LMI). If your loan to valuation ratio (LVR) is above 80 per cent, which means your loan amount is more than 80 per cent of your property value, then you will need to pay a Lenders Mortgage Insurance fee. If your LVR was already above 80 per cent in the last couple of years you may enter a stage of negative equity where your property is worth a little less than your loan amount – in this instance you won’t be able to refinance but provided you can continue making your repayments at your current bank this won’t be a problem for now.
4. Hardship
In the instance something happens where you are experiencing financial hardship make sure to contact your broker or your bank as soon as possible. The banks have dedicated teams and processes in place for this to help you get back on your feet.
5. Offset Accounts
If you have an offset account linked to your home loan ensure to maximise the use of this. Every dollar that sits in your offset reduces the balance of your loan which interest is accruing on. For example, if you have $20,000 in your offset account and a $500,000 loan, you will only be accruing and paying interest on $480,000. Given interest accrues daily but is charged monthly, using your offset as your everyday banking account, and having your salary deposited directly into this account can help reduce the interest you pay over the life of your loan. Some lenders offer multiple offset accounts which can be great, helping you manage your different saving requirements and at the same time, reducing the interest being charged on your home loan.
6. Review your existing bank accounts, leases and credit cards
Take note of any unused bank accounts or credit cards, or ridiculous amounts being charged on the lease. Transactional accounts can sometimes attract ongoing account management fees if not used regularly and most credit cards also have an ongoing annual fee. Certain car loans (leases) would be charging radically high rates at the moment. It’s important to consider closing and consolidating any accounts you no longer need or use, or can reduce the overall cost of certain leases, to save on these unnecessary fees or extra repayments. Note, you can refinance your car loans and credit card balances, into a home loan.
Closing or cancelling these types of debts, can help you borrow more money too.
7. Have a cash buffer
If looking to buy it is important to make sure you still have a cash buffer in place after completing the purchase, after all costs associated have been considered. This should help you to meet any unforeseen expenses that may arise either with the property being purchased, or life related. Especially as the cost of living continues to rise.
8. Be aware of your credit score
Ensure you are punctually making repayments to any existing debt and be aware of the number of credit enquiries you are making. Each time you enquire about termed facility, like a credit card, a personal loan, a lease or a home loan, this will leave a mark on your credit score. Making sure your contact details and direct debits are setup with your Telcos, Utilities and financial institutions will also help in making sure there are no surprises of unpaid debts appearing on your credit score.
9. Understand your existing loan structure & purpose
Your loan structure or purpose, could determine what interest rate and repayment you are eligible for. For example, home loans with interest only repayments, are more expensive than home loans with principal and interest repayments. It's important to ensure that when you take out a loan that the structure is best suited to you at that point in time however if things have changed since then it may be worthwhile reviewing this to ensure it is still in your best interests.
10. Rate Reviews
We have annual reminders for all of our clients here at Black and White Finance to review your current interest rates and loan structure to make sure you are on the best rate possible. We also have reminders in place to touch base with you a couple of months prior to any interest only or fixed rates ending. If you need or want to discuss anything finance related between these annual reviews though, please reach out to one of us here at to see how we can help you.
The team here at Black & White Finance has worked very hard to create long-lasting, fostered relationships with all the 30 plus lenders on our panel, to ensure all our borrowers are on the best terms available. Our finance strategies now more so than ever, need to be smart and in our best interests, to tackle this high interest rate, economic landscape.
If you want to know more about different rates, terms, or bank specials on offer at the moment or just have a general question, please send a note to peter@blackandwhitefinance.com.au or click the start today button a little lower. With the help of our amazing Mortgage Broker Sydney – Black and White Finance team, we will be able to support you.
Reach out to us today
0448 890 186
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