Refinancing a home loan has long been a popular choice for homeowners seeking to lower their interest rates and reduce monthly repayments. However, the ever-changing housing landscape can present challenges that make refinancing less viable. One such challenge is high interest rates, which can affect serviceability requirements and hinder borrowers from qualifying for refinancing.
Meet James Smith, a homeowner who, like many others, embarked on his home ownership journey a few years ago. While he desires to refinance his home loan to lower his interest rates, the increased serviceability requirements due to rising rates present a daunting obstacle. Despite his stable income, James is unable to qualify for refinancing, leaving him in search of viable alternatives. If you are looking at alternative refinancing options like James, then this article is for you.
Negotiate With Your Current Lender
The first thing you want to do before looking for other options is reach out to your lender and explain your situation. They may be willing to work with you to modify your loan terms, such as extending the loan duration or reducing your monthly repayments. This could provide some temporary relief until interest rates become more favourable. If you are facing difficulty in meeting monthly repayments, you can also request a repayment holiday from your lender, specifying the length of the holiday period required. Lenders can provide you a pause of up to 12 months.
Do you want to beat the banks and get a cheaper interest rate? Learn these tips for negotiating.
Look For Repricing
Repricing is when a borrower negotiates a new interest rate with their current lender without changing the loan itself. The aim is to save money in interest payments over the life of the loan. This will also reduce monthly repayments and improve cashflow, which can be particularly helpful during financial hardships. It is necessary to initiate negotiations with your current lender to pursue the repricing of your interest rates.
We Are Here To Help!
Home Loan Experts mortgage broker Ajar Rajbhandari shares some tips for borrowers:
“The alternatives to refinancing vary depending on your specific goals. If you aim to secure lower interest rates, the best option is to negotiate with the existing lender. Lenders can offer pricing reviews depending on the scenario and needs of clients. At Home Loan Experts, we have a dedicated team that regularly reviews the rates for our existing clients and assists with their refinancing process, even if they don’t meet the standard eligibility criteria.”
At Home Loan Experts, our mortgage brokers can help you negotiate a better deal with your existing lender and reprice your home loan at a lower rate. Call us on 1300 889 743 or fill in our online assessment form for free.
Explore Loan Modification Options
Loan modification is a process through which the terms of an existing home loan are modified or adjusted to make it more affordable for homeowners who are facing financial difficulties. Homeowners often seek loan modification when they need help meeting serviceability requirements due to factors such as higher interest rates or changes in income. The modifications can include these changes:
- Reducing the interest
- Switching the loan from a variable into a fixed rate
- Extending the loan term
- Changing the frequency of repayments
- Decreasing the principal amount of the loan
- Switching to interest-only repayment
Loan modifications are subject to the lender’s approval after assessing your financial distress. To pursue a loan modification, homeowners typically require proof of income, bank statements, tax returns, and a hardship letter explaining the circumstances that have led to the need for modification.
Explore Lenders That Provide Refinance Alternate Assessment
To assist borrowers who do not meet the standard serviceability criteria of a buffer set three percentage points above the interest rate, certain lenders provide alternate refinance assessments. For instance, the Commonwealth Bank of Australia incorporates a refinance alternate assessment feature where applicants’ eligibility is evaluated using a buffer just one point above the interest rate, or the Assessment Floor Rate (currently set at 5.4%), whichever is higher.
Note, however, that only a limited number of lenders offer this feature; therefore, it is crucial to keep an eye out to explore the refinancing alternatives lenders provide.
How are Home Loan Experts mortgage brokers helping clients who are unable to refinance?
Let’s hear from our experts:
If clients are unable to refinance, for any reason, we suggest they:
- Negotiate rates with current lenders and reduce repayment amounts if possible
- Check if they can pass the streamlined refinance with Westpac Group or Resimac
- Check if any other lender provides cheaper rates
- Check if the loan term can be increased
- Check if they can reduce their liabilities, like credit cards or personal loans
- See if they can reduce their owner-occupier debts instead of reducing investment loans for tax purposes
- Get the property revalued and check if the LVR is now improved so they can get better pricing
- Get their loan fixed if the rate is rising every month or just wait for a few months until the situation improves.
Unlock Your Refinancing Potential With Home Loan Experts!
Consult with mortgage brokers who specialise in mortgage assistance. They can provide personalised guidance based on your specific circumstances and help you explore alternative options or resources that may be available to you. Our dedicated team of expert mortgage brokers is ready to rescue you and help you explore the options. Call us on 1300 889 743 or complete our free online assessment form today.