How reservicing your loan could be key in this climate

Mortgage prison doesn’t have to be a financial sentence, according to one mortgage broker.

Eva Loisance from Finni Mortgages concedes there’s a lot of people “struggling to find a way to get back to interest only, or to a better rate”.

But rather than despairing, she notes “there are options out there”.

“It’s just a matter to find them.”

Ms Loisance was speaking on a recent episode of The Smart Property Investment Show, hosted by Phil Tarrant, when they both agreed that refinancing is another investment solution that might be taken when caught in a financial rut.

And while it can be done through a bank, Mr Tarrant advised that using a mortgage broker “will give you a lot more options than directly transacting with a bank”.

Ms Loisance refers to one of her clients who was facing $2 million worth of debt across several properties and saw repayments hike from $4,500 to $14,000 a month due to the recent Reserve Bank of Australia cash rate hikes.

The broker said she was able to achieve revised rates of 6.19 per cent for the home loan with a saving of $700 a month, and 6.62 per cent for the investment properties with a saving of $2,500 a month.

“They tried with all the lenders (including the big four) to get better rates and go back on interest only. It didn’t work out,” she shared, pointing out that they had also tried to refinance them on the assessment rate and saw no luck.

Instead, what did work was use of the 1 per cent servicing buffer. She said it was a “miracle which passed by a few dollars. But it works”.

“We organised to refinance all the loans and set it back to interest only, for every loan except for the unoccupied property,” she added.

As a result of this, the clients were able to keep all their home and their investment properties.

But, Ms Loisance said it did come with a caveat; a criterion needed for the process to be successful is having a good credit score.

Mr Tarrant noted that when people are in this situation, the common reaction is to “sell everything” so they “don’t have the headache and the burden”.

That’s “not always the right thing to do”, Mr Tarrant remarked.

For those who do find themselves in that situation, Mr Tarrant cautioned that it’s best to seek out financial advice, as “there are ways you can minimise your finances”.

But he did warn “you need to have an appetite for a lot of hard work, if you are going to do refinancing”.

Listen to the full conversation here.

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