Two years ago, Luisa embarked on the exciting journey of homeownership, acquiring a modern two-bedroom apartment in Granville. Her first home purchase was made possible through the First Home Loan Deposit Scheme (FHLDS), enabling her to secure the property with just a 5% deposit, all without the burden of Lender’s Mortgage Insurance (LMI).
Opting for a 2-year fixed-rate loan at a competitive 1.98%, Luisa soon found herself in a dilemma as the fixed term approached its end. A visit to her bank revealed an imminent transition to a variable-rate loan, with an offered rate of 6.30%. This prompted her to explore refinancing options, a decision that would prove to be a clever financial strategy.
With a reduced loan balance of $520,000 and a property valuation of $580,000, Luisa’s loan-to-value ratio dropped from the original 95% down to 90%. Refinancing would typically trigger a new LMI payment, a challenge that appeared daunting.
However, Luisa’s profession as a registered nurse opened a gateway to a tailored solution. Westpac and St. George had introduced the medico policy extending favourable terms to registered nurses, allowing them to borrow up to 90% of the property value without incurring LMI. Meeting the prerequisites of a minimum income of $90,000 and possessing AHPRA certification, Luisa found herself eligible for this enticing offer.
Westpac enhanced the deal with a substantial 3.04% discount for the entirety of the loan, resulting in a new interest rate of 5.84%. Not only was this 0.46% lower than her current bank’s offering, but it translated into an annual saving of $1,824.
While the prospect of lower interest rates was appealing, we advised of the associated refinancing costs. These included a discharge fee of $350, a transfer fee of $147.70, and a registration fee of $147.70. Despite these fees, the substantial annual savings justified the decision to refinance.
For Luisa, opting to refinance with another bank means paying another LMI payment due to her 90% Loan-to-Value Ratio (LVR). The elevated LVR is a barrier to securing a more favourable rate elsewhere. However, her profession, deemed low-risk by Westpac, allows her to qualify for an LMI waiver, providing a fortunate advantage.
You don’t have to be a mortgage prisoner trapped in a high-interest-rate loan. If you are unhappy with the interest rate that your current bank is giving you, speak to a mortgage broker to discuss your options. Don’t let high-interest rates hold you captive. Take the proactive step Luisa did, and discover how refinancing could unlock substantial savings while aligning with your financial goals.
Maria Papa is a senior property and finance expert specializing in home loans, investment loans, self-employed loans, alt doc loans, car loans, personal loans, and loan protection. She has offices in Sydney, Melbourne, and Manila. If you have questions, you can call Maria at 0430 144 008 or email her at mpapa@maverickfinance.com.au
Disclaimer: Your full financial situation will need to be reviewed prior to acceptance of any offer or product.