Example:Mailing Address
WHAT TO DO BEFORE YOU ACTUALLY BUY YOUR PROPERTY:
It is commonly accepted that you, an intending buyer, should not enter in to any binding contractual agreement to buy a property without having secured a clear and unconditional offer in writing, to loan funds to you for your chosen property, from a bank, lender or finance company.
So, it is recommended that you speak to your Loans Finance Australia Mortgage Broker well before you actually buy a property.
Your Loans Finance Australia broker will:
Meet with at your convenience and get to know you and
Discuss your requirements
Ask for and analyse your income and assess your borrowing capacity and
Then prepare a credit assessment, which will analyse your credit
worthiness and will identify an appropriate level of borrowings based on your income and credit history.
Then, subject to your capacity to borrow having been established,
you will be offered the opportunity to select from a range of suitable lenders ( at least 3) and their respective range of home loan products, which will have been sourced by your Loans Finance Australia Broker and will suit your stated and perceived needs.
Your Loans Finance Australia Broker will assist you be discussing the
points of difference between the various lending products and explain the various features of the options available to you.
Once your have considered the variations in the options presented
you can then choose a lender that suits you.
Spending time with your Loans Finance Australia broker, choosing the right lender and home loan product that suits your circumstances, is something you should do before you buy your property.
In this way you will be sure you’re getting the best value and most appropriate home loan deal for you.
It is widely recognized that the Australian home loan market is very
competitive with local and international banks, building societies, credit unions and all manner of specialist lenders offering a seemingly endless choice of home loan options, including :
Honeymoon Rates,
Introductory Rates,
No deposit Loans and
100% Home Loans,
Standard variable rates,
Fixed rates,
Redraw facilities,
Line of credit loans, and
Professional packages with competitive rates for those borrowing $150,000
+ to name a few.
This variety in the types of loans available to borrowers, have been designed to target different consumer markets.
Money As A Commodity
As a consumer, it is wise to think about money as a commodity. Because money is a commodity it comes with a variable price / cost at different times.
This is despite the fact that money is a serious part of life.
Your Loans Finance Australia broker knows that money is a commodity and that there are loan opportunities, which arise in the market at various times.
Further, your Loans Finance Australia Broker will be able to advise as to
whether some of these may well be the types of loans, which you may be in a position to take advantage.
Your Loans Finance Australia Broker has the knowledge and skills to help you with advice as to if there are such suitable opportunities available.
When looking for a home loan, you are in the market for the best value loan possible.
Such a loan will be structured so that your lifestyle will not be too seriously affected, so that the size of the loan is commensurate with your income, and that the deposit you have is appropriate to the type of property you want to have financed.
Both your Loans Finance Australia Broker and this e-book will help you to get a better understanding of what is available in the Australian market and as such will encourage you to be commercially prudent with your borrowing decisions.
It is wise that you use the services of reputable broker such as your Loans Finance Australia Broker.
Your Loans Finance Australia Broker is best placed to do the research and the loan negotiation on your behalf.
Standard variable interest rates
This loan type is a step up as a variation from the basic variable loan, and is very popular.
As the name indicates, these loans have a variable interest rate, meaning it interest rate can fluctuate up and down. This rate variation is generally in
response to changes to official interest rates as set by the ( RBA ) Reserve Bank of Australia .
However, it should be noted that, in the past, some major banks and lenders have chosen to raise their standard mortgage rates higher than official interest rate rises announced by the RBA. In some instances, this increase has been almost double the official rate rise quoted.
The standard variable loan is a common choice for first home buyers.
This is because its simplicity makes it is easy to compare lenders.
Standard variable rates are also attractive to borrowers as they are
traditionally the most flexible of all the home loans. These rates offer an array of features, which can be used to effectively reduce your mortgage / debt more rapidly.
If you are able to reduce your debt rapidly then this means that you will have paid less interest overall and had a shorter loan term – all good outcomes and a great way to save money.
Popular features of standard variable loans include:
Mortgage Offset Facilities, allows you to have the interest you owe on your
home loan reduced by the interest you earn on your other deposit accounts, without any dilution to tax; and
The option to make extra payments, which can enable you to pay your loan
off faster and reduce overall interest costs.
Another popular feature of most standard variable loans is the ability to
redraw your additional repayments if you wish to.
The main advantage of this mortgage loan type is its flexibility, however, it is important to remember that with variable interest rate loans that interest rates can and do rise, so if you do source this type of feature, you will need to be prepared for this eventuality, which means that you will need more funds to meet increased costs which will arise if interest rates are increased.
Despite all of the above, standard variable rate loans can ultimately be the best choice for all types of borrowers, including owner-occupiers, investors and first home buyers.
The standard variable interest rate quoted by most banks and lenders is the lender’s benchmark rate.
Most of the lender’s customers don’t actually pay that interest rate, but it is the one typically referenced.
If you choose a variable rate home loan, it would generally be offered to you by the lender with a discount of say 0.3% or 0.5% etc off the standard variable rate, depending on the amount of money you are borrowing and the loan features you choose to utilize.
As a rule of thumb, discounting starts at around $150,000 borrowings and increases proportionately to 0.70% off as you borrow more.
Basic Variable Loans
Basic variable loans are loans with lower interest rates, but with limited features. These loans are typically no frills although these days most have redraw for a fee (usually around $50 each redraw) and a couple of lenders even offer offset accounts at no charge.
Honeymoon and Introductory Loans
Honeymoon and introductory loans are usually variable interest rate loans with a discounted interest rate off the standard variable rate (com- monthly over 1%). They typically last a certain period of time, usually one year, but ranging from six months to three years. After the agreed period, they normally change to a slightly discounted, but higher standard variable rate, although many people are able to negotiate a lower rate. Sometimes, depending on the lender, rates can be fixed or capped during the initial or honeymoon period.
Fixed Rate Loans
Fixed rate loans are where the borrower’s interest rate and repayments are fixed for a set period, usually from one to 10 years, although one to three years is the most common. These loans commonly roll over for another fixed term (at prevailing rates), but some people go to a variable rate loan at the time the fixed-rate period has expired.
Combination Fixed and Variable Loans
Split loans allow borrowers to take part of their loan as a variable rate loan and the other part as a fixed rate loan.
Web link
For more information on home loans visit www.loansfinanceaustralia.com.au
Home loan types – pros & cons
Loan type: Advantages Disadvantages
Variable rate
If interest rates drop, repayments might drop.
Generally extra repayments, reducing the principal, can be made without penalty.
Additional repayments can usually be taken back by you
Usually offers more features
If interest rates rise, repayments might rise along with the amount of interest paid
Generally attract a higher interest rate than basic loans
Basic Variable
Lower interest rate loans (usually around 0.5 – 0.7% less than the standard variable)
If interest rates drop, repayments might drop
Usually not as flexible as higher interest variable loans
Less features (e.g. may charge for redraw)
If interest rates rise, repayments will most probably rise
Honeymoon and introductory
Among the lowest rates available
Any extra repayments made during introductory rates can reduce principal and save significant interest
Repayments increase after the introductory period, since the interest rate normally reverts to the standard variable rate
May have higher early repayment fees (or exit fees)
Fixed Rate
Borrowers have certainty of repayment amounts.
Even if interest rates rise, repayments stay the same, as the interest rate is fixed for the duration of the loan
Allows for precise budgeting Reduced flexibility If variable interest rates fall, repayments will not - picking the right time to fix is tricky
Additional repayments are limited, and exceeding limits may incur break costs/fees Early termination can attract hefty exit fees
Combination/Split, Fixed and Variable Rate
Offers borrowers a chance to hedge their bets in times of rising interest rates and gives a blend of repayment flexibility and interest rate security
Variable portion is still vulnerable to interest rate rises. If interest rates rise, repayments on the variable portion also rise
Line of Credit/Equity
The most flexible product available
Money can be used as needed and paid back without structured monthly minimum repayments.
In most cases the minimum required is the interest on the outstanding principal
Since it is secured by residential property, the interest rate is less than commercial or business loans, credit cards or personal loans
Lines of credit are like giant credit cards and require discipline to ensure that over time the principal/balance of the loan is reduced rather than run at its limit
Interest rates can be slightly higher than for other types of loans Interest rates will rise with the market as they are variable rates
Low documentation / No documentation
Borrower completes a simple income declaration form
Limited or no tax returns required Limited or no financial reports required
Can attract higher interest rate (but increasingly lenders will revert to standard variable rates after consistent, on time repayments).
Regular rates can often be achieved by paying lenders mortgage insurance
LVR (loan value ratio) is typically significantly lower than a full document loan (around 20% lower)
Interest rates are higher than most full document loans With some lenders, more documentation is required than in the past and LVR ratios are dropping
Non-conforming
Non-conforming loans can be fully featured
Great way to rebuild a poor credit rating
Rates are usually around 1.5 – 4% higher than a traditional loan, but rates depend on your level of credit impairment and LVR
You might have to pay a hefty deferred establishment fee if you pay out the loan early
LVR is typically significantly lower than a full document loan (around 20%
lower) Interest rates are higher than most full document loans
No Deposit Loans
You can buy property sooner without waiting until you save a larger deposit Most come with features such as additional repayments and redraw
Stricter lending criteria makes approval more difficult
You are limited to certain types of properties
As you are borrowing more money, you’ll pay more interest in the long term
Mortgage insurance will be higher than deposit based home loan products Interest rates are typically higher
Available from a very limited number of banks and lenders
Reverse Mortgage Loans
For anyone aged 60 or over, a reverse mortgage can free the equity in their property without it being sold.
Depending on their age, applicants can borrow up to 45 per cent of the value of their home with funds advanced in one payment on settlement, or as needed.
No repayments are required over the life of the loan.
Interest fees and charges are capitalised to the loan and repayment is deferred until the property is sold, the borrowers are no longer living in the house, or the borrowers are deceased.
Lenders apply strict conditions to reverse mortgages. For instance, before funding can take place, all applicants are required to seek independent financial and legal advice.
Aged Care Accommodation Bond Finance
An Aged Care Accommodation Bond loan provides a flexible solution for senior clients who wish to retain the benefits of owning their own home and at the same time secure a place in a residential aged care facility of their choice.
An Aged Care Accommodation Bond enables you to continue to own your own home, whilst renting it out to generate additional income, allow family
members to move in, or simply arrange a more orderly sale of the property. It also enables you to retain your Centrelink entitlements for longer.
Split Loans
If you are attracted by the certainty of a fixed rate, but would like some flexibility, then you might consider a split loan. You can choose which
proportion of your loan you would like at a fixed rate and which you would like at a variable rate. You benefit from the lower rates and flexibility of a variable loan, but also give yourself some protection against potential rate increases.
Professional Packages
Professional packages can offer substantial discounts and special benefits, but are only available to those who satisfy specific criteria. The key criteria for most professional packages are that the home loan be in excess of $150,000, and that you earn more than $50,000 per annum. You do not actually need to be a white collar ‘professional’ to qualify. The benefits vary between lenders, but in general can include interest rate discounts of between 0.50 and 0.75 per cent for the life of the loan, lower fees and discounts on other bank
products. These are generally great products and well worth considering if you qualify.
Redraw facility
Loans with a redraw facility allow you to put extra money into your loan. You can take the money back out again when you need it. Over time these
payments can significantly reduce your interest payments and the life of your loan. If you think that you might be able to pay a little bit extra into your mortgage, either regularly or intermittently, then this type of loan might work well for you. Some lenders charge a fee to activate this feature, and/or a fee each time you redraw, so you need to take these costs into consideration.
Home Loan Features & Options
Choosing the right home loan features, along with a good interest rate, will help you save money and pay off your mortgage quickly.
Typically, the more flexible the loan, the more interest you’ll pay.
For instance, a variable loan, which allows you to re-draw against extra repayments or offset savings without charge or conditions against the mortgage, will generally have a higher rate than a basic loan.
But it may be that this kind of loan is far better for you if you need the flexibility. Additional repayments If you are likely to have extra cash at any time, make sure your home loan has additional repayment features that allow you to use that cash to re- duce the outstanding principal and interest.
Don’t leave dollars sitting in a savings account when every dollar you pay off your home loan is working much harder than a dollar saved in the bank
(roughly, you may get 3-4% interest on savings, but a loan is costing you 4-6%).
It may not sound like a lot of money, but over time, small amounts turn into thousands of dollars. If you are concerned about being able to access the extra funds you pay into your loan, don’t be.
Most variable loans allow you to take back those extra payments via redraw facilities if needed. Portable loan Home loan portability allows you to take an existing loan to another property without having to refinance, i.e. pay out the old loan and take out a new one.
This can save application and legal fees.
Be aware that portability does not allow you to take your loan from one lender to another.
Home Loan Based Redraw Facility
A redraw facility allows you to access additional repayments you have made.
The money can be used for pretty much whatever you like without having to explain or apply for it. Many lenders have a minimum redraw amount and a fee every time you use it.
Repayment holiday
Many lenders now offer either full or partial repayment holidays for periods of time. They can be useful if, for instance, you find yourself taking time off work in a career change or building a family.
Using Salary Credit (Direct)
This feature allows you to pay your salary directly into your home loan account. With interest calculated daily, this effectively reduces the principal amount owing for the time your salary is in the account, thereby reducing the amount of interest paid.
Many couples use this facility with second salaries.
Switching (to fixed rate)
Switching allows you to switch from a variable to a fixed rate. This can be a good option if, for instance, you are not sure what rates are going to do.
Professional Packages
Professional packages are available from most lenders and offer discounts on interest rates, fees and other products in exchange for an annual fee which usually ranges from $300 to $400 per annum.
Most packages have a minimum requirement of $150,000 in borrowings and offer discounts of up to 0.7% off the lender’s standard variable rate,
dependent upon how much you borrow.
They often also include no application fees and no ongoing fees on any loans, fee free transactional banking, and waivers of annual credit fees. Some lenders will also offer you financial planners and discounts on home and contents insurance, discounts on financial planning and reduced rates on margin lending products.
Interest Only Loans
Interest only loans pay interest during the term of the loan and all the principal remains outstanding at the end.
These loans are usually for a short term of one to five years.
Interest only loans are often used by investors for tax management purposes.
Loan features should be considered in the context of both your personality and your life over at least the next five years.
Loan features should be considered in the context of both your personality and your life over at least the next five years.