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Is refinancing a viable proposition for you?

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Is it really worth my time, effort and above all, money to refinance my home loan?

The home loan repayment usually represents most people’s single largest monthly expense, so it makes good sense for borrowers to do their “home loan health check” and consider a refinance of their home loan as their mortgage progresses. Many lenders continuously improve their mortgage products and offer plenty of refinance options depending on the customer demand. A home loan ‘health check’ is generally a comprehensive analysis of your current home loan and comparison to a range of other mortgage products offered by the lender. The analysis takes into account interest rates, fees, loan structures, loan term as well as additional features including internet banking, credit card and cheque book facilities.

Depending on your situation, a refinance can be a very effective financial move that can save you a substantial amount of money in interest charges and shave years off your loan. Initially, you may have to outlay some refinance costs such as home loan set up fees, valuation cost, government charges and legal fees, however if the interest rate on your new home loan is substantially lower than the rate applicable to your existing account, you’ll break-even within only a few months after the settlement.

On the other hand, if your existing home loan offers an unbeatable interest rate and a competitive fee structure, you may find that a refinance may not be as cost effective during the fixed rate period. Mortgage consultants have to act in your best interest so if a refinance of your home loan seems like a very costly exercise, their recommendation to you should be to continue with your existing set-up for a few more years and suggest another review in a few years time.

In reality, the only initial cost you’re looking to outlay when shopping around and comparing your home loan to other similar products is your time. Gone are the times when the only available option was to walk down to the local bank apply for a home loan and pay it off without having the option to shop around for a better deal. The extensive mortgage industry consists of bank as well as non-bank lenders offering differently priced mortgages for home buyers, refinance packages for home owners and investor packs for people wanting to invest in real estate, shares or businesses.

So in conclusion, yes, you should find the time to compare your home loan to other products as often as possible. It is physically impossible for lenders to review your loan structure and home loan product every couple of years simply due to the large number of customers they service. If you decide to refinance your home loan after your research, the time you invest in your research could save you hundreds or even thousands of Dollars in interest and help you pay off your home loan faster. If you don’t decide to refinance your home loan, you can consider the time you spent on research to be an investment in your knowledge about the home loan products available in the market.

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Austral is a member of the Mortgage & Finance Association of Australia (formerly MIAA), the professional body for the mortgage industry.

PH: 02 9299 1833 / FAX: 02 9299 1874

TODAY: Saturday, 4th July, 2009

Private Ruling Authorisation Number 81797 - APRIL 2008
April 2008 Private Ruling Authorisation Number 81797 http://www.ato.gov.au/rba/content.asp?doc=/rba/content/81797.htm Facts: The taxpayer sought to claim as a deduction the capitalised interest on additional borrowings used to meet the shortfall between the rental income on his investment property and the interest, rates and maintenance costs he paid in relation to the property. The taxpayer advised the ATO that he did not want to use his personal income to repay his private home loan debt or reinvest in other income-producing assests.

PUBLIC TAX DETERMINATION DT2008/27
DECEMBER 2008 Public Tax Determination TD2008/27 http://law.ato.gov.au/atolaw/view.htm?locid=TXD (then follow the prompts) TD 2008/27 has now clarified the position for the public generally. The factors that will determine the deductibility of interest are:

My Choice
Austral has recently expanded its product offering through its My Choice loan initiative. My Choice provides borrowers with access to a wide range of lenders and loan products for residential, commercial and equipment finance, so no matter what your need our friendly and experienced staff can assist you.

NAB BOSS TO IGNORE RATE CUTS - APRIL 2009
RESERVE Bank interest rate cuts will no longer have any significant influence on home mortgage rates, a bank chief said yesterday.

WEALTH MAXIMISER - INVESTOR ASSIST UPDATE - JUNE 2008
The ATO has recently published an edited version of a Private Ruling on its website: http://www.ato.gov.au/rba/content.asp?doc=/rba/content/81797.htm A taxpayer and client of Austral Mortgage, applied for the private ruling to seek confirmation from the ATO that if there was a shortfall between his investment income and his investment outgoings then that shortfall could be capitalised under the home and investment loan & line of credit structure noted in his application.

WEALTH MAXIMISER UPDATE - MAY 2008
Ever since the High Court decision in Hart's case, taxpayers have been seeking clarity from the ATO on the deductibility of capitalised interest in certain loan structures. On 16th April 2008 a favourable Private Ruling issued to an Austral client that provides insight into the ATO's current thinking on the subject.

WEALTH MAXIMISER UPDATE - FEBRUARY 2008
Wealth Maximiser Update 12th February 2008 - We have advice from the ATO that it is well advanced on a binding Tax Determination regarding the deductibility of capitalised interest on a line of credit facility. Borrowers with both a home loan and an investment loan should consider including a capitalising line of credit within their loan structure or at least ascertaining from their lender that they could access such a facility by way of a simple variation of their existing mortgage.

Trans Tasman Finance
Did you know that Austral has a wholly owned subsidiary, Gem Home Loans Limited, in Auckland NZ - we are able to assist with organising mortgage finance for you should you be considering buying property in NZ.

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