The equity in a home builds up over time and once it has accrued there are options to draw this money by refinancing or extending the home loan or mortgage. In doing this borrowers are able to either remain with their current lender, or move to another lender.

The refinance of a mortgage or home loan

When borrowers refinance their loan to access the equity or a better interest rate, the home might be revalued so that the equity in the property can be used, or the borrower may simply shift the remainder of the loan to another lender.  If opting to refinance a property, the borrower may be able to shift to a lender with a smaller interest rate, opt for a smaller monthly payment over a longer period of time, or even increase their borrowing capacity. The individual should assess which of these options is most advantageous depending on their financial needs and monetary situation.

Managing a car loan, loan or credit card

In the present economic climate people are using the equity in their homes to look at consolidating debt and eliminate high interest rates on credit cards, car loans and other loans. If considering refinance or drawing equity from a mortgage or home loan – there are several aspects to consider. Firstly, if interest on the loan, car loan or credit card is low, then it may be better to continue paying this over a longer period by combining with your home loan.

Secondly, the borrower should be realistic about their ability to meet the debts and keep their credit card or other borrowing down. If the borrower refinances their home loan and then runs up a large credit card debt again straight away – the value of the refinance of the mortgage is lost. They may well end up with an unmanageable amount of debt and even put their home at risk!

Credit and credit rating

Managing credit and the credit rating is important at every stage – but even more so in these current difficult economic times.  One effective way to manage the credit rating is for the borrower to make payments consistently and ensure that they meet the minimum requirements each month. This can be on either a credit card or any other loan that they may have. Consistent repayments are a sure way to manage credit rating and keep a good rating, or even improve a poor credit rating.

Choosing the right mortgage is almost as important as choosing the right home. These days there are so many different types of mortgages available it’s hard to know which one is right for your situation.

One the other hand, just walking into your local bank branch and asking for a mortgage might not be the right choice either. Bank staff are trained to sell only mortgages available from their own bank, so how can you know they’re offering you the best available?

A qualified mortgage broker is continually trained and updated by each individual bank about their policies and lending products. This means your mortgage broker is able to compare what different banks are offering and then source the ideal home loan to suit your budget and your personal circumstances.

What Does a Mortgage Broker Do?

A professional mortgage broker will listen to your needs and spend time with you learning about your budget and your home loan requirements. Once he or she has a grasp on your financial situation they will identify the right mortgage – and the right lender – to suit you and your goals.

Your mortgage broker will then act as an intermediary to the bank, preparing your application for you and presenting all documentation to the bank on your behalf.

Mortgage brokers are specialists in their field of expertise. It’s their job to navigate through the confusing bank jargon, find those hidden fees and explain them to you so you understand the terms of the home loan you’re entering into.

Will a Mortgage Broker Know Which Bank is the Best?

Mortgage brokers are given access to all the rates and loan-types offered by the banks and lenders. This means they can quickly compare variable rates against fixed rate mortgages and show you the differences between them.

The truth is the ‘best’ bank out there is the one that best suits your situation, your budget and your requirements.

Your own situation might be better suited to a fixed rate. Some people are more suited to variable rates. Some investors don’t even want to pay off their mortgages, opting for ‘interest only’ payments. Everyone’s situation is different.

This is where mortgage brokers are important as it’s their job to know how to identify what solutions could work for you.

How Do I Choose a Mortgage Broker?

There are many mortgage companies in Australia to choose from. You should be careful to choose your mortgage company based on their industry accreditations and professional memberships.

Most banks require parent mortgage companies to be members of industry regulatory bodies, such as the MFAA or FBAA. Don’t be afraid to ask your mortgage broker for their qualifications and evidence of MFAA or FBAA membership.

How Much Does a Mortgage Broker Charge Me?

A good mortgage broker shouldn’t charge you anything for their services. They’re paid a commission by whichever bank they introduce you to. This means their service to you should be free of charge, while they charge the banks their upfront commission rate.