When you started thinking about owning your own home, you made the decision to go with Keystart with our low deposit requirement – and you probably didn't want to pay lender's mortgage insurance. Well done – that decision got you started on your home ownership journey.
Like many big decisions in life, your home loan finance needs a wellbeing check-in every now and then. You might find it helpful to track how your home loan is going – and to make a plan for the next five to ten years.
Taking control of your home loan can feel good, whether you're working on building your equity or considering refinancing - making a plan can clarify where you're going.
We know this sounds strange, but as a transitional lender, we're happy for you to move on to a new lender when you're ready to do so. We're here to help you get started. Then, when you're ready, we encourage our customers to leave us. Unlike other lenders,
you're encouraged to consider refinancing. How do you build a plan? Let's start with understanding equity.
Equity is the difference between the value of your home and the amount you owe on it.
For example, Brett had his home valued and it is currently worth $400,000. He has had his home loan for ten years and has an amount owing of $300,000. Brett's equity is $100,000.
If you have enough equity in your home, you may be able to refinance, and you might be able to get lower interest rates and other benefits with a new lender.
Equity becomes very important if you are considering refinancing your loan. The amount of equity you have in your home will affect your options.
The amount of equity you have in your home will give lenders an indicative loan to value ratio (LVR). Your LVR is the amount of your loan, divided by the value of your home, expressed as a percentage.
Looking at Brett's example again, his LVR is $300,000 divided by $400,000, which gives an LVR of 75%. Brett has 25% equity in his home.
You can get an idea of your LVR by doing some simple calculations.
Some home loan products are only available if your LVR is below a certain percentage, for example, you may see loan products available for 80 LVR. This means the loan product is available if your loan is less than 80% of the value of your home.
If your LVR is less than 80% you may want to consider refinancing. If your LVR is more than 80%, you may have fewer options available to you. But you can increase your equity over time.
There are two ways to build equity in your home. Your equity increases:
While you can't impact the property market, you can take steps to be aware of the value of your home. You can keep an eye on real estate websites or ask for a real estate valuation from a real estate agent to keep across any increase in value in your home.
You can make a plan to pay off more of your loan by paying more than your minimum repayments, changing the frequency of your payments, or making additional one-off payments – there are lots of options here.
Find out how big an impact these options will have on your loan with our home loan repayment calculator.
Get in touch if you want to increase your direct debit payments via email firstname.lastname@example.org or call us on 1300 578 278.
It may take several years to build up enough equity to refinance. Making a plan to work towards a realistic timeframe puts you in control of your home loan.
If you want to refinance to another lender, you'll need to pick the lender and loan product that is right for you. We can't help you select another lender but there is a lot of help out there.
Did you know some lenders have refinancing offers available for Keystart customers? You may find it helpful to contact a broker to look into your options.
We've put together a guide to refinancing to support you through the process.
Keystart recommends that you seek your own independent financial advice prior to making any decisions about your financial needs.
This post is general information only and does not take into account your objectives, financial situation or needs. You should consider whether the information is suitable for you and your personal circumstances. Keystart recommends that you seek your own independent financial advice prior to making any decisions about your financial needs. Any examples given in this post are provided for illustrative purposes.
Find your financial feet with our Financial Wellbeing Guide to Interest Rates. We've compiled some useful tips and resources on interest rates and your home loan. Read the next steps below - or head back to the guide.
Interest rates vary a lot between lenders, and between different home loan products. It's important to do some research so you can weigh up your options carefully.
A look at how interest rates in Australia have tracked over the last 30 years