EOFY last-minute tax planning tactics for individuals


Before thee Reserve Bank decided to leave the cash rate unchanged at its May meeting, researchers at RateCity suggested home loan interest rates could reach as low as 3.19% in coming months. This was based on the lowest lender in the market passing on any rate cut in full.

RateCity research director Sally Tindall says banks have been hiking rates since 2017, due to the high cost of funding, but this pressure has dissipated “so the next RBA cut should, in theory, be passed on in full”.

If the theory is correct, a 3.19% home loan rate is an attractive offer and might well present the right opportunity for people to consider refinancing. Reducing your monthly rate from 4% to 3.75% on a $400,000 loan over 30 years can save you more than $20,000.

Securing a better interest rate is regarded as one of the top reasons to refinance a mortgage, as is greater access to home equity (possibly to renovate or invest), consolidating debt or securing better terms and features.

A good starting point for refinancing is to play with some numbers on ASIC’s online mortgage switching calculator. Here you can set some realistic expectations about what interest rates and repayments would be workable over a certain time period.

It’s also a good ead to extend this online research by accessing any of the numerous comparison websites to guide you on some of the best loans in the market. Finally, you might also consider meeting with your mortgage broker or financial adviser to discuss your options.

When conducting your research there are several points to keep in mind, including: upfront costs, ongoing fees, whether the lower interest rate will increase after an initial period, whether bonus features will be useful and whether you can make additional repayments or factor in interest rate rises.

Once you have decided refinancing is the right option, it’s best to then be prepared for the application process, which can take more than a week. Whether you’re choosing a new lender or staying with the current one, the application will most likely need the same collection of documents you had for the original loan – think identification, proof of income, etc.

Following the pre-approval, the lender will also carry out a valuation on your property. Once this is complete, repayment details are organised and the contract is sent, signed and settled. From here your old loan is paid off and your new loan begins.

Souce: Money June 2019

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