In an era where interest rates seem to be rising every month, rate lock has never been more important for those applying for a home loan or refinancing.
Given how fast interest rates are rising, those looking to refinance their existing mortgage are increasingly carrying out much of their research online by comparing home loans to review what the market has to offer. After all, it’s fair to say that nobody wants to pay more on interest than they absolutely have to, especially when every other aspect of the cost of living seems to be going up as well.
In addition, it’s also making life difficult for first home buyers attempting to crunch the numbers on how much they should expect to pay each month for a potential mortgage. For anyone trying to secure a fixed interest rate before they inevitably go up again, there’s nothing quite as frustrating as having the terms change before you get a chance to submit the paperwork.
Thankfully, rate lock provides a unique window of opportunity to secure a favourable interest rate while still having some peace of mind – but what is it, and how exactly does this process work?
Understanding How Rate Lock Works
If you’re one of the thousands of Australians currently in the process of buying property, it’s likely that you’re on the hunt for a fixed rate home loan package that protects you against further interest rate rises that are all but promised to eventuate.
As a means to protect themselves from further interest rate rises, more people than ever before are opting to fix their interest rates. The price of this commodity is unlikely to go down anytime soon, especially since both the Federal Government and the Reserve Bank Of Australia have indicated that interest rates must continue to rise in order to bring inflation back under control. Essentially, opting for a variable interest rate right now is too much of a gamble than most people are willing to make.
Despite doing the due diligence and finally agreeing on a particular loan product, in the event that your lending provider raises their interest rate between the time that your home loan application is processed and the time your purchase of the home settles, then homeowners are forced to go along with the new rate.
Considering that interest rates are rising at almost monthly intervals right now, the extra pressure is not helpful as some people sit on a pre-approval for months at a time before finding the perfect property.
Thankfully, a rate lock can be applied before a fixed rate home loan settles, as processing any home loan application does indeed take some time. Depending on the lending provider and the rate lock options available, once you ‘lock’ in the interest rate with them, the rate you apply for will be secured and confirmed for up to ninety days before your loan settles.
One major point to mull over in regards to your options for rate lock is that this service is rarely ever free. Some lenders have fixed fees such as $750 for loans up to $1,000,000, while others charge a percentage such as 0.15% of the loan amount.
Depending on your personal circumstances and type of loan product, rate lock can be an incredibly effective tool to protect yourself against significant changes to interest rates. Given the ever changing landscape we’re seeing with interest rates, having a conversation with your mortgage broker about whether rate lock is right for you or not is always a good idea – but where do you find one?
Your Guide For Navigating The World Of Home Loans
With a background in banking, finance, business development and project management, there’s no better advocate to have on your team than Nikki Berzin. As a fully qualified mortgage broker and director of Cherry Lending & Finance, Nikki is passionate about all things finance, and empowering her clients with the tools to hit their property goals is what she does best.
If you’re looking to get into your first home, purchase an investment property or even want to look at your options for refinancing, the first step is starting the conversation. Get in touch with Nikki today, or call her directly on 0427 374 155 to bring your mortgage dreams to life.
Disclaimer: We recommend that you seek independent financial and taxation advice before acting on any information in this newsletter. It contains general information only and has been prepared without taking into account your objectives, financial situation or needs. We recommend that you consider whether it is appropriate for your circumstances. Your full financial situation will need to be reviewed prior to acceptance of any offer or product. Interest rates are subject to change without notice. Lenders terms, conditions, fees & charges apply.
Credit Representative 499652 is authorised under Australian Credit Licence 389328.