When should you restructure your home loan?

Sometimes you don't need to change lenders but you do need to be on a better structure with your current lender. UNO explains what options there are and how to navigate this

Your property loan should never be a set-and-forget proposition. Over time, your needs or circumstances might change and so there might be a type of home loan that suits you better than the one you have. As a result, you might want to restructure your loan – that is, change some of its key features to suit you better. Here are four reasons why you would restructure.

Breaking out of a fixed rate loan

If you’re in a fixed rate loan and interest rates have fallen, you might want to consider restructuring your loan to either a new fixed rate or to a floating rate to take advantage of the lower rates in the market. But lenders may charge a break fee if you exit your fixed rate early, so before you do this you should discuss it with your mortgage advisor to see if there is a break fee and if the expense is worthwhile. For instance, imagine you have a $500,000 home loan with a 4% interest rate that you have fixed for three years and you still have 18 months to go. If you moved to your lender’s current variable rate, say 2.35%, you would have to pay a break fee of $12,375. It’s a substantial amount of money, but as UNO mortgage advisor Chris McNaughton explains, there are still reasons why you might do this. You can put the break fee onto your mortgage, so you won’t have to come up with the cash upfront, although it will add to your repayment time. But it would also lower your monthly loan repayments, in this example from close to $2,400 to $1,937 for a saving of close to $500 a month. There are times when you might need this extra cash flow, particularly in the current coronavirus economic crisis, so it’s good that you have that option.

Consolidating credit card debt

If you have let your credit card debts climb to a substantial level, you may be better off adding the debt to your home loan and paying off the credit card bill (particularly if you close the credit card account and get a debit card instead!) Credit card debt is typically charged between 19% to 24% if you only repay the minimum, so adding the debt to your mortgage with a much, much lower interest rate might make good sense. However because the debt is being repaid over a longer period, up to 30 years you may end up paying more total interest. Importantly, though, this can also help you stay on top of your credit card debt and not damage your credit rating. You can read more on debt consolidation here.

Buying an investment property

If an investment purchase is right for you, but you do not have the cash deposit saved you can consider a restructure to your existing mortgage. If you already have a substantial amount of equity in your home – that is, you have paid off quite a bit of your home loan or its value has risen a lot – then you might be able to add to your loan to buy an investment property. You might, for instance, have a $500,000 home which you live in and owe $150,000 on it. You could potentially buy a $500,000 investment property and consolidate the debt with your existing home loan. This would involve using both properties as security for the new loan, and also restructuring your existing loan so it is secured against both properties. You would have a debt of $650,000 on $1 million worth of property, and you may not need to come up with any extra cash for the deposit on your investment property. Although there may be some extra costs to cover including stamp duty and conveyancing. However, if you sell either property you will have to unwind both loans, so you should consider carefully if this option is right for you. It may mean having to sell both properties, particularly if property values fall. It could also mean that both properties would be at risk if you experience financial difficulties in the future.

Restructure, renegotiate or refinance

Often, when you restructure your home loan, it can also entail renegotiating with your existing lender or refinancing with a new lender, because you are also chasing a great deal. You can find more information in another UNO blog here. (LINK to Refinance or Restructure blog) UNO’s Chris McNaughton says it’s always a good idea to go into these discussions with lenders armed with knowledge about what other lenders in the market are offering so you are in a strong position to negotiate. Checking your loanScore is a great first step to knowing how good your rate is and providing you with the easy next steps towards renegotiating your current loan or refinancing with a new lender. Sign up to loanScore here. Or speak to one of our expert mortgage brokers who will be able to advise you on the sorts of deals and loan structures that would suit you best. Book in a quick call with our customer care teamBook a call in with UNO

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John Cahill
March 7, 2024
Scott Wilkinson was my broker last year when I sought finance for a new property investment and refinance for my property port folio. He was an absolute delight to work with. He was always professional, on time and always available to talk at a moment's notice to discuss my credit options and give well considered advice; usually this was very much after-hours due to my work commitments during the day. He was always happy to talk. I had not used a mortgage broker in a long time opting to do the re-financing myself. This was primarily due to disappointing experiences I'd had with mortgage brokers in the past. However with the increasing complex nature of dealing with credit providers, I could see that I needed a good advocate to act on my behalf for this particular refinance. In all honesty I did not hold much hope that in the current credit environment I would be able to secure the finance I required for the new property investment I was wishing to secure. Scott found a way however and was able to secure the finance along with the refinance of my portfolio. I have since referred friends to Scott and I know they have been very happy with his work. He is ideal for property investors who have busy day-jobs and need someone who understands property investment strategy and is able to tailor credit advice and options to their needs. Scott provides this advice and information in a way that is clear and concise. He kept me up to date continually during the application process. He made what could have been a very stressful and frustrating process easy and straightforward. I could not recommend Scott and the team at UNO Home Loans more highly. They are all a delight.
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Sally Mackenzie
February 19, 2024
We chose Uno Home Loans from their impressive web site knowing we were going to find it hard, on many fronts, to qualify for a home loan. We were incredibly fortunate to be assigned Mike Parsons as right from the get-go, despite the complexities, he hit the ground running for us. He was incredibly knowledgeable, with years of experience but what was immediately apparent and impressive was that he was totally invested in getting us over the line, doing absolutely everything possible, including working around the clock. Despite it being a relatively small loan in the order of things, Mike never missed a beat, getting docs ready, following up and answering every request from the proposed funder immediately. He kept us informed on progress the minute anything happened, and again if anything needed to be done, he was right on it. In short, we highly recommend Uno, and Mike, knowing what a remarkable job he did, over many weeks, to get us our loan. He got us a great deal, with far better rates than we expected, so we couldn't be happier. In fact, without doubt, you'd be hard pressed to find a more personable, sharp, hard working, dedicated professional who clearly prides himself on getting his customers standout results.
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Rod
February 13, 2024
Scott and his team were just A-mazing. We felt supported through the whole process with the greatest quality and care. Every question answered right in time, or even before we asked. The process was smooth and we got the best outcomes we could have wished for.
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Angela Biddle
February 6, 2024
Our mortgage recently came up for renewal, and with interest rates skyrocketing we were looking for ways to minimise the impact. Michael and his team were proactive and attentive. Michael spent time with us to understand our circumstances. He found mortgage options that worked with our current financial situation and longer investment plans. He presented clear options, providing guidance where needed. He and his team were helpful and responsive - streamlining the process and keeping us updated through the negotiations. In the end, Uno did the heavy lifting and secured a significantly better rate than our current bank offered, all with friendly, personal service. We would highly recommend UNO Home Loans.
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Fotis Bikas
January 15, 2024
I cannot help but congratulate Scott Wilkinson of UNO Home Loans for being an absolute credit to both his company and the entire loans industry. Scott is a truly rare gem of a broker in that he will not only go the extra mile to achieve for each customer the very best deal, but his knowledge of all and sundry within the industry is unsurpassed (you will see what I mean if you speak to him). Additionally, Scott has a clear passion for imparting his wealth of information with each customer, whereas the conversation with most other brokers would simply be over if they could not get you the best deal. For me, Scott Wilkinson of UNO Home Loans stands head and shoulders above the competition and I feel privileged to benefit both from his expertise and professionalism whenever it is time for a refinance or new loan.
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Tomoharu Matsui
January 11, 2024
Michael Parsons helped me a lot when it's difficult to establish my capabilities in loan.
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Gillian Kearon
January 9, 2024
I highly recommend Mike Parsons as a mortgage broker. I couldn't fault the service provided by UNO. Thanks Mike!
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Taner T
December 20, 2023
Thank you Eren Tan for the amazing service and support. Our Loan was a little tricky and complex for other lenders but Eren managed to get it over the line in record time. His professionalism and dedication to our needs was exceptional. If you need a Loan no matter how complex your situation, make sure you contact Eren at UNO Home Loans.
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Karaipu Brown
December 20, 2023
Buying & selling a house at the same time is very stressful but Scott Wilkinson from UNO home loans made sure we knew what was happening & took most of the stress away. He always kept us up to date and if we had a concern or wanted clarification on something we were able to call him, if he didn’t know the answer straight away he will find out and contact us back.. now we are enjoying our new house and turning it into a home :)
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Chris Anderson
December 18, 2023
Just completed my first loan with UNO which was so much easier than with other other brokers I have used in the past. Our broker MIKE PARSONS always had time for me and broke things down for me in the simplest of terms and was very patient with my silly questions and my constant changing of plans. I wish I had used them in the past as I wouldn't be in the situation I'm in now. Can't recommend them highly enough. Thanks UNO and Thanks MIKE 😊
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Stephen Broomfield
December 11, 2023
To be able to recommend Scott Wilkinson for your mortgage broker was a privilege. We had deals fall through but Scott supported, guided and stuck with us, proper partnership. The whole team at UNO helped us and supported us right through to after settlement. Made sure everything was correct and how we are progressing. Communication was amazing and straightforward and easy to understand. Transparent. We can not Recommend Scott and the team as Uno high enough. Use UNO with confidence.
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Tarek Hussain
December 6, 2023
Can't thank Amy enough for her hard work, dedication and determination on getting multiple loans completed for me. I wouldn't hesitate in recommending Amy and the Uno team to any of my associates. Will definitely be back in the near future!
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