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In a potential win for first home buyers this week, the Senate Economics References Committee has recommended changes aimed at making home ownership more accessible for first-time buyers.
In its final report on Australia’s financial regulatory framework and home ownership, the committee urges the Australian Prudential Regulation Authority (APRA) to revise its 3% serviceability buffer—an issue highlighted as disproportionately affecting first home buyers.
The report proposes allowing a lower serviceability buffer for first-time buyers during suitable economic conditions. Additionally, it will call for first home ownership to become a core objective within APRA’s mandate.
Of course, it remains to be seen whether APRA will agree to the recommendations, given they have recently come out against making any changes to the buffer.
In this week’s newsletter, we take a look at the do’s and don’ts of refinancing.
Why Refinance?
Access Equity or Streamline Finances
Refinancing can let you tap into your home’s equity for investments or to consolidate debt. With mortgage rates typically lower than credit card rates, refinancing can save you on interest and simplify repayments.
Secure a Better Interest Rate
A lower interest rate is the top reason homeowners refinance. Even a small rate reduction can lead to significant savings. For instance, switching from a 6% to 5.75% rate on a $250,000 loan could save up to $11,400 over the loan’s term.
Shorten Your Loan Term
With increased income or reduced expenses, refinancing to a shorter loan term can help you pay off your mortgage faster, saving you years of interest.
Refinancing Dos
Define Your Goals: Understand why you want to refinance, whether it’s for lower rates, reduced fees, or accessing equity.
Review Your Finances: Ensure your financial health is strong—consistent income, good repayment history, and a solid budget improve your approval chances.
Speak to us: As finance brokers, we can guide you to the best product for your needs. We’ll take time to compare lenders and products, and weigh the savings against refinancing costs like discharge fees, application fees, and mortgage registration fees.
Refinancing Don’ts
Ignore Fees: Understand potential costs like Lender’s Mortgage Insurance if you borrow over 80% of the property’s value.
Fall for Promotions: Honeymoon rates may look appealing but could lead to higher costs long-term.
Apply to Multiple Lenders: Each application impacts your credit score. Compare options first, then apply to your chosen lender.
The Bottom Line
Refinancing can be a smart financial move, but it’s not one-size-fits-all. Done right, refinancing can lower your costs, simplify your finances, and help you build long-term wealth. The best way to ascertain if refinancing will be beneficial or even possible is to speak to a mortgage broker.
Variable
The rates below are based on a $500,000 loan, with the borrower making principle and interest payments with a loan term of 30 years. The rates quoted may vary depending on the borrowers LVR.
1 Year Fixed
The rates below are based on a $500,000 loan, with the borrower making principle and interest payments with a loan term of 30 years. The rates quoted may vary depending on the borrowers LVR. At the end of the three year fixed period, the borrowers interest rate will revert to a standard variable rate for the life of the loan.
