How to refinance in a falling market?

Discussion in 'Loans & Mortgage Brokers' started by aussieB, 28th Oct, 2019.

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  1. aussieB

    aussieB Well-Known Member

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    How does refinancing in a falling market work if the unit has been losing value consistently?

    Situation : Purchased PPOR unit for $470k with a ~90%LVR in 2015. IO for initial 2 years. Then P&I and want to aggressively pay off mortgage. Make extra repayments. Current mortgage at ~374k. Current variable interest rate at 3.52% Value of unit per CBA Property app 265k. Next door unit sold for 340k a month ago.

    Purpose of refi will be to be able to save on interest and direct that saving towards paying off the mortgage. Do all refinance applications involve a valuation ? If so, then there is no hope for moving to a better vendor ? Would you recommend refinancing at all ?
     
  2. Lindsay_W

    Lindsay_W Well-Known Member

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    The property app probably isn't an accurate reflections of the true value. Although if an exact same unit sold for $340K I'd say there's not much hope with your loan balance at $374K - you're not on the worst rate either.
    Yes all refinances require a valuation to be completed, might not be a full valuation, some desktop or automated vals would be ok if LVR less than 80% which doesn't apply to your situation by the sounds of it.
     
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  3. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

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    Ignore the CBA's online valuation. For some properties these tools can be accurate, for other's they're not even close.

    Speak with a broker, figure out the most appropriate lender for your needs and get them to organise a valuation via that lender. If a desktop doesn't yield a reasonable result, then upgrade to a full valuation.

    If the LVR is above 80%, the interest rate saving will probably not justify the cost of LMI.
     
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  4. Redom

    Redom Mortgage Broker Business Member

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    In general, refinances when there's no equity doesn't work without changing this equation usually via loan pay-downs. Seeing a lot of this in Sydney now too for purchases made a couple years ago and current valuations being near trough (from valuers perspectives).

    The new bank will do a new val, and recalculate the LVR position. E.g. if the value is $350k & your loan amount is at $374k, you'll need to bring the loan amount down to around $280 (80% of 350) before refinancing without repaying LMI.
     
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  5. aussieB

    aussieB Well-Known Member

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    Thanks guys.
     
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