Falling house prices can make it challenging to refinance your home loan. Lenders may be less willing to offer competitive rates, and your equity may have reduced, making it difficult to meet loan-to-value ratio (LVR) requirements. However, there are still options available to refinance your home loan, even when house prices are falling.
Review your loan features
Consider reviewing your current home loan features to see if they still meet your needs. If you’re struggling to make repayments or want more flexibility, consider refinancing to a loan with features such as an offset account or redraw facility.
Improve your credit score
A good credit score can increase your chances of refinancing, even when house prices are falling. If your credit score needs improvement, take steps to pay off any debts and ensure your bills are paid on time.
Check your LVR
Your loan-to-value ratio (LVR) is the value of your loan compared to the value of your property. Falling house prices can mean your LVR has increased, making it more difficult to refinance.
You can still refinance your home loan if your equity has dropped, but most lenders will require you to have at least 20% equity in your home.
If you have less than 20% equity, you may need to pay LMI when you refinance. LMI covers the lender in case you default on your home loan.
Let Broker Kit shop around for you
It’s important to compare lenders and their rates when refinancing, especially during times of falling house prices. This is where a mortgage broker at Broker Kit can help. They can check multiple lenders in a fraction of the time it would take you and may find a lender that is more willing to offer a competitive rate, despite the market conditions.
Consider a fixed rate loan
A fixed rate loan can provide stability during times of falling house prices. You’ll know exactly what your repayments will be and won’t be affected by changes in interest rates.
Refinancing during falling house prices can be challenging, but with careful planning and consideration, it can still be possible to achieve your financial goals. Speak to a Broker Kit broker today to discuss your refinancing options.