With interest rates on the rise, refinancing is a hot topic at the moment. Lenders are offering incentives to attract more customers, such as cashback and more competitive rates. However, as the property market shifts, the way that lenders test your ability to service a mortgage is being calculated at a higher rate – potentially turning you into a mortgage prisoner.

Generally, you may find yourself in mortgage prison due to:

• Not meeting the new provider’s serviceability criteria
• Not having enough equity in the home
• The property falling in value below the mortgage balance

 

Typically, when you apply for a home loan, a lender will test your ability to meet repayments based on their current standard variable rate, plus a buffer of around 2-3% to cover any fluctuations in rates. As rates rise, a lender is assessing your application with harder criteria.

If you are considering refinancing and are already seeing house prices fall in your area or have tested your repayments with a higher buffer rate and it’s close to unserviceable, it could be worth making the switch before interest rates rise further.

Call Interlease today to find a property finance solution tailored to your needs.