How to get a mortgage refinancing across the line

Hi Nicole, I’m getting really worried about all the talk of more official interest rate rises when so many of our other household costs are going up. Our lender has passed on the entire increase to our mortgage, lifting the rate by 0.25 percentage points, and it now stands at 3.21 per cent. We have a loan of $480,000, taken out when we bought our first home four years ago. I’d be very grateful for any information about how we can protect ourselves. We want soon to both move to reduced hours, to share care for our hoped-for little one. Many thanks, Sheree

First up, you can do far better than a 3.21 per cent mortgage. That you are on such a rate is a reflection of the fact you have had the mortgage for four years.

However, the pandemic-induced mortgage rate war has seen far sharper deals come into the market; therefore it’s time to refinance – if you can. It would instantly put more cash in your pocket to help with the rising cost of living.

It is good for your mortgage that you have not yet reduced your work hours, as it will make it easier to get your loan approval over the line. What does are two regular, reliable incomes.

The flipside of that is your expenses.

The so-called “Netflix test” is an in-depth investigation of everything you spend in the three months before you apply for a loan. So, it is best to be economically prudent during this time, to show a lender you have plenty of capacity to make mortgage repayments.

The lender will probe your spend on more than a dozen common categories, including groceries and other household expenses, clothing and personal care, utilities and rates, insurances, transport costs, phone, internet and other media (pay-TV, streaming services etc), medical and health, education, recreation, sports and entertainment, and childcare.

Your baby plans, though exciting, are expensive… so I would keep them quiet!

There is also an amount it is assumed it costs you to live, in your particular circumstances. This is called the household expenditure measure. There is no point getting your expenses below this, however, as a lender would use the higher of the two figures.