September 2023: Get your finance ducks in a row!

When people are thinking about buying or selling, what’s going on in the world of finance often dictates their property decisions more than any other industry.

With cost of living pressures and changing interest rates, we thought it timely to talk to a Sunshine Coast finance expert about what they are seeing at the coalface.

Wayne Spindler, a Maroochydore local and Director of The Beach Broker and Layman’s Finance, has kindly answered our questions to help get your finance ducks in a row.

For people considering buying or selling, how soon should they contact their broker?

Short answer is ASAP, so they get an understanding of what’s involved.

Regardless, they should always seek a second opinion. The benefit of using a broker is they have access to a range of lenders offering a variety of loans and products, and can often find better deals or more suitable loans.

The term 'mortgage cliff' is now used frequently by the media. What are your thoughts?

So far, thankfully, it seems not too many people have been seriously impacted, though for many it has been a shock given how quickly rates have increased.

For most it’s about awareness and managing household finances better – with less discretionary spending as people “tighten their belts”. The next six months might give us more of an insight, as new data will become available, especially around hardship requests and mortgage defaults.

What can borrowers do if their fixed rate is expiring soon?

Check what your lender is offering at the end of the fixed rate. They should contact you.

Next, contact a finance broker and discuss your lending options. For example, it can be possible to “reset” a loan back to 20, 25 or 30 years, which can help reduce the repayment. Whilst this is not ideal in terms of paying off the mortgage, it’s better than being in arrears or defaulting on the loan. 

Finally, see if any debts (e.g. personal loans and credit cards) can be consolidated to reduce the total monthly commitment and help make budgeting easier.

Are you seeing any changes in lender timeframes for buyer pre-approvals? 

Some lender timeframes have stretched, often because they have a special offer or are involved in the various Government home buyer schemes.

More lenders are now offering pre-approvals, and some will fully assess these, which means they actually have some merit. Many lenders will also help prioritise loan applications with a finance clause, but are not able to do so with a refinance as no contract is involved. 

Many lenders are moving to digital documents (electronic signing), and in a lot of instances QLD mortgages can be digitally signed, saving time and reducing errors.

What advice would you give to people needing a quick pre-approval?

Get all your ducks in a row! A lender/broker can only work as fast you let them, so if you delay in providing the information, they cannot complete the application.

In fact, as soon as you think you might need finance, talk to a lender/broker and get an indicative idea of capacity, so you know your limits and do not seek properties that you cannot afford. Some lenders can assess an application in 2-3 days if all the required information is made available.

With the cost of living increasing, how can people optimise their personal finances?

Minimise unnecessary debt/expenses by using a good budgeting tool. It’s surprising how many people don’t know their weekly outgoings. 

Also, get savvy with how to spend and save. For example, credit cards can be very effective when you buy/pay for everything with the card, keep your money in an offset account to reduce mortgage interest, and then pay the card in full each month. This way you can get interest free finance from your bank.

Should I choose to re-fix my loan or keep it variable?

Unfortunately nobody has a crystal ball. It depends on whether or not you expect rates to increase over the next 1-2 years, in which case a fixed rate option may be worth it. However, if you do choose a fixed rate, and rates go down, you are either stuck with it until it expires or you may have to pay a “break fee” to get out of it. 

Sometimes, a 50/50 split can work to effectively hedge your bets.

My bank declined my loan application, so why should I consider a broker?

Lenders assess loans in different ways, so just because your bank declined the application, it doesn’t mean that others will. 

People often “self decline” and become pessimistic about getting a loan after being declined. In reality, there are options to suit just about everyone – including those with bad credit, previous defaults, and even those who have been bankrupt. 

The key is to remain positive, see what’s possible and make a plan with your broker. It might be a series of little steps and refinances, but a broker’s job is to help you achieve your goals.

Thanks Wayne!

A big thanks to Wayne for his advice. Please contact Wayne on 0418 954 433 to discuss any help with your personal finances.