Archive for the ‘Home Loans’ Category

From our CEO: Are you making the right rate reaction?

Posted on Friday February 17th, 2012 by Mortgage Choice
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Michael Russell, CEO of Mortgage Choice

Michael Russell, CEO of Mortgage Choice

The bold decision this month by some lenders to move their home loan interest rates out of step with the Reserve Bank has signalled to borrowers that home loan interest rates could shift at any time, in any direction and by any amount. Borrowers need to be aware of this changed interest rate environment and should be prepared to switch to a better suited lender and/or loan product. Otherwise, they may risk paying more over the life of their loan.

 

The savings made by reviewing a loan can be significant. An analysis of our recent loan data shows we have saved our refinancing customers on average $10,000 each over five years*. Borrowers who want to investigate any savings that could be made on their own home loan, and who may not have the time or know-how to research the market themselves, can call on a home loan expert.

A professional mortgage broker provides borrowers with the latest home loan information on a wide range of lenders and loan products. It is a broker’s job to be across changes in interest rates, new products and any special discounts that may be available to borrowers. When considering refinancing, our brokers will help borrowers to assess the overall costs versus benefits, taking into consideration not only home loan interest rates but also any upfront, ongoing and exit fees, loan features, lender service and accessibility, etc. 

Now is the time for borrowers to make the right move and develop a much closer relationship with their local mortgage broker who will help them stay on top of the home loan market.

Refinancing resources:

*Average savings from 368 customers who decided to refinance from Aug 2011 – Jan 2012.

Tips for budgeting, spending and managing your mortgage

Posted on Friday January 20th, 2012 by Mortgage Choice
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Becoming a better budgeter, wising up on spending and making the most of any savings can help borrowers master their mortgage and own their home outright sooner. The beginning of the year is an ideal time to set new financial resolutions if your goal is to pay off your mortgage sooner.

Challenge yourself to increase your home loan repayments by readjusting your budget and finding ways to make extra contributions to your mortgage. Well thought-out saving, spending and loan repayment strategies can help put you months or even years closer to living mortgage free. Keep in mind even small financial changes can have a big impact on how much interest you pay over the life of your loan and the length of your loan
term.

Resolution 1.  Become best buddies with your budget
If you don’t already have a budget, the New Year is the ideal time to start one. Ensure it factors in all your regular spending – home and/or other loans, utility bills, medical expenses, memberships, grocery bills, insurance costs, etc. Don’t forget to include funds for socialising treats. Be honest with your budget and refer to it each time you contemplate a new expense.

Resolution 2. Slash your cash limit
Consider ways to cut your daily spend. For instance, a daily caffeine hit at $4 per weekday equates to $80 per month. Did you know by making a coffee an every-second-day spend and contributing $40 extra per month to your mortgage from day one (based on a $300,000 loan over 30 years at 7%) could reduce the total interest owed by over $31,000 and the loan term by almost 2 years?

Resolution 3. Review your home loan with a fine-toothed comb
There could be underutilised loan features costing you money or features worth refinancing for. Get to know your loan’s features. Your mortgage broker can help review your current loan and its features and identify any opportunities to shop around for something better suited to your goals.

Resolution 4. When rates fall, keep repaying more
If your home loan’s interest rate has recently fallen, consider keeping your repayments at the higher, pre-fall rate. For example, take a home loan of $300,000 at 7% over 30 years. If your rate reduces to 6.5% and you keep repaying your loan as if the interest rate was still 7%, you could shave approximately 4 years off your loan term and save over $60,000 in interest owed.

Resolution 5. Make the move from monthly to fortnightly
Switching your monthly repayment to fortnightly may make a significant difference to your loan term and the interest owed. There are 12 months and 26 fortnights in one calendar year; by paying fortnightly, you make the equivalent of 13 monthly repayments. The savings, based on a $300,000 loan at 7% equates to around $103,000 in interest and 6 years and 6 months off the loan term.

Useful Links

Plan your New Year property purchase

Posted on Tuesday January 3rd, 2012 by Mortgage Choice
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Posted in Home Loans, Top tips for property & home loans | No Comments »
Plan your property purchase by speaking to a home loan specialist

Start planning your New Year property purchase

If owing a property is on your checklist for 2012, now’s a good time to start planning. As with any major purchase, the more research and preparation you do, the better chance you have of buying something that’s right for you.

Know your limits
Before setting off to find your dream property, it’s best to get an idea of how much you can afford to borrow and repay – so that you can be realistic in your search and not waste time on properties that could potentially be out of your reach.

There are plenty of online calculators that can help work out your borrowing capacity and repayments. However do keep in mind they provide an estimate only, so be conservative and leave yourself some financial buffers when using these tools. Remember to factor in other expenses as well, such as stamp duties and legal fees which could make a sizable dent in your deposit.

Be thorough when doing the property inspection
Attending open homes can be a hectic and stressful experience. Once you’ve managed to navigate to the six different properties (that all decided to open within the same 2-hour period on a Saturday morning), you then have about 10 minutes to look around before rushing off to your next destination. Amidst the chaos you might have overlooked some flaws or forgotton to check certain features, which could mean a second visit if you’re really keen on the place – provided it doesn’t get sold before that.

This is when it helps to have a property inspection checklist in hand, to make sure you look out for important features and flaws (e.g. smoke alarms, crakes / stains, fans / air conditioning etc); as well as to prompt yourself to ask the agent for some critical information about the property which may not be included in the brochure (e.g. rent and lease expiry date (if applicable), rates, security, insulation etc).

Shop around for the best home loan deal
There are many factors to consider when choosing a home loan. For example your borrowing limit may vary significantly between lenders which could be the difference between getting your dream home or settling for something less; also, some loans may have great interest rates but the features offered by another loan with higher rates might end up saving you more in the long run.

While it’s important to shop around, it’s also critical that you know what to look out for. Consulting a home loan specialist such as a mortgage broker is a stress-free (and cost-free) way to go about this.

Get your home loan pre-approved
A loan pre-approval provides a conditional approval of a loan amount, which can help you shop with confidence when negotiating on a property purchase or bidding at auctions.

Genuine loan pre-approvals follow a similar process to a full loan application whereby borrowers will be assessed on their individual circumstances and needs and are required to verify their identity and ability to repay the loan. Other conditions usually need to be met to move to full finance approval, such as a suitable property valuation.

Keep in mind loan pre-approval is usually a limited time offer, for a period of three to six months.

Here are 5 benefits of a home loan pre-approval:

  1. It prompts you to begin thoroughly exploring your loan options at the beginning of the property purchase process.
  2. Saves time (and lessens possible disappointment) by concentrating the property search in a feasible price range.
  3. Enables real estate/buyers agents to see you as a serious property buyer.
  4. Helps you gain confidence for bidding at auction or negotiating a purchase.
  5. Quickens the settlement process as the loan is already part of the way approved.

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Two consecutive rate cuts and what it means for you

Posted on Thursday December 8th, 2011 by Mortgage Choice
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Current mortgage holders

The RBA’s December rate cut of 25 basis points is the first consecutive rate cut since 2009. If you have a home loan, keep a close eye on you lender to see if they pass on the reduction.

While the November rate cut was passed on quickly by the big four banks, this time around we’ve yet to hear any rate movements from the majors [this is true at the time of publication (11AM AEST Dec 8 2011). Major lenders have since then announced rate cuts].

Some smaller lenders have promptly passed on the cut in full, but it’s important to look at how the final interest rate compares (some of these lenders may have a higher rate to start with).

The important thing is to keep an open mind and be prepared to explore your options if you’re not happy with your lender’s decision. A qualified mortgage broker can help you compare different loan products from their panel of lenders – not just the major banks but smaller lenders as well.

With further possible rate cuts forecasted for 2012, this may be a great opportunity to pay off your mortgage sooner by using the savings from the reduced interest rates as additional loan repayments, without making significant changes to your current budget and level of spending.

For example, on a $300,000 loan with a 30-year term, maintaining the same level of repayment after the rate has been cut form 7.25% to 7% means you repay an extra $50 per month – saving you $38,000 in interest and 2 years off your mortgage in the long term.

Prospective buyers

If you’ve been waiting on the sidelines, now might be a good time to enter the property market, as interest rates and property prices are both down.

And when it comes to finding a suitable home loan, it may be worthwhile looking beyond the big four banks and take the smaller lenders into account as well. It’s worth noting that while the banks dominate the home loan market, the growth rate of mutuals are higher than those of the big four banks due to their lower variable rates and benefits such as nil ongoing monthly fees . Customer satisfaction surveys also reveal that mutuals score highly due to their smaller customer base.

Useful Links:
Extra repayments calculator:
http://www.mortgagechoice.com.au/calculators/extra-repayments-calculator.aspx

Boosting your chances of a home loan approval

Posted on Monday December 5th, 2011 by Mortgage Choice
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Saved a deposit for a property? Before applying for a home loan make sure your paperwork is organised and ensure your finances have a clean bill of health.

To assess your borrow power, lenders will require information about your financial history and current financial position. Documents required include evidence of consistent employment with documentation detailing your income, living expenses, assets and liabilities, such as credit card debt and other loans.

  • Healthy credit file? If you have blemishes in your credit history (such as unpaid bills and rejected loan applications), do your best to resolve them with the relevant credit provider before you apply for a home loan.
  • Clean bank statements? Evidence should be provided to support your loan application if there are unusual withdrawals or transfers, such as the transfer of large sums of money to/from your account/s.
  • Reduce existing debt: Try to reduce your level of debt, such as car and other personal loans, credit and store cards, HECS and so on. Did you know that a $10,000 credit card debt can lower your borrowing capacity on a home loan by around $40,000?
  • Consistent employment and evidence of savings: Lenders want to see a consistent employment record and evidence of genuine savings for a period of three months, and in some cases up to six months. Some lenders take into consideration regular rental repayments as evidence of savings. However, every lender’s requirements are different, so a qualified mortgage broker can provide you with the timeliest information.

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Rent or Buy

Posted on Wednesday November 23rd, 2011 by Mortgage Choice
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Owning your own home

Although renting is often a cheaper option, in the long run, the money you pay on a mortgage goes towards your own financial benefit, not someone else’s. There are also many other good reasons to get into the property market:

  • A buyer’s market: The RBA’s recent 0.25 per cent interest rate cut, rising rents and more sellers than buyers in the market certainly paints a picture that now is a good time to buy.
  • Falling property prices: RP Data-Rismark (provider of property data and analytics) released figures in October revealing that property prices across the board have fallen for nine months in a row in 2011. In September, prices fell by 0.2 per cent after falling 0.4 per cent in August. This presents good opportunities for potential buyers.
  • Lower deposit required: The 5 per cent deposit home loan is back. After the Global Financial Crisis, most lenders tightened their belts and stopped offering potential homeowners the chance to get into the market with a smaller deposit. But now that the economy is cautiously heading toward recovery mode, many lending institutions are once again offering home loans that require a lower deposit. Some lenders also now accept 6 months of rental receipts as proof of a valid savings history. Online calculators can also help you determine your borrowing power based on your current rental payments.
  • Rising rent: An undersupply of dwellings means that rents nationwide are rising as vacancy rates remain low. This is good news for investment property owners and bad news for renters. The Select Committee on Housing Affordability in Australia report estimates there is currently an annual shortfall in housing supply – relative to underlying (population-based) demand – of 30,000 dwellings.
  • Stability: Owning your home can offer greater long term stability in where you wish to live. Renters are often at the mercy of landlords in terms of how long they can stay at a property, and you may be forced to move regularly. This can be particularly unsettling for people planning on having children.

The main benefit of owning your own home, aside from a sense of stability, is that it opens up possibilities for future wealth creation.

Not only do properties offer great potential for capital gain, any money you spend on renovations may increase your property’s value. Once you have built up some equity, you may also be able to use it as a springboard to other investment opportunities. 

And, you’ll never have to ask a landlord if you can hang a picture or get a pet! 

Renting a property 

Housing affordability in Australia is at an all-time low, which means many young Australians believe that owning their own home is a pipe dream. Given the huge lifelong expense of buying a house, some financial pundits argue that there is greater financial gain in renting:

  • Easier to move around: Renting means you are free to move wherever and whenever you want; a lease is easy to break if you are willing to pay advertising costs for the owner to find a new tenant.

In comparison, selling your own home means you can expect to pay around 4 per cent of the sale price in agents’ fees and advertising. When you’re buying, expensive stamp duty fees can be prohibitive. While stamp duty varies from state to state, you can expect to pay anywhere between 3.5 to 6 per cent of the purchase price, which means on a home worth $500,000 you’re up for around $20,000.

  • No additional costs: The cost of renting is quite straight forward – there’s the bond plus the rent. In contrast, buying a home involves the extra costs of government charges, legal contracts, property title checks, credit checks, loan establishment fees and so on.
  • Renting is cheaper than owning: Your monthly rental payments are often cheaper than a mortgage and interest payments on a similar dwelling, especially in inner city areas.
  • Better location: You’re more likely to be able to afford to rent rather than buy near metropolitan areas or public transport – saving you money on transportation time and costs.
  • Free up cash: Some people prefer to invest the money they would pay on a home deposit, fees and interest in other wealth creation solutions and assets.
  • No need to pay for upkeep: Renting also means that you’re not held responsible for maintenance issues, such as plumbing, electrical faults and other general household problems. The landlord is responsible for handling these issues and its associated costs.

It’s your choice

When making the decision to buy or rent, take into account all of the mentioned cost and benefits in order to make a decision that best suits your current financial position and future plans.

Useful Links

5 spring tips for home buyers

Posted on Monday October 24th, 2011 by Mortgage Choice
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5 tips for home buyers

- Written by Antonia Magee, author of The Property Diaries and Living Thin.

As this year’s spring auction season passes its halfway mark, many first home buyers will still be left wondering when their own house number will come up. For those of you who are yet to dip your toe into the market, here are five simple, yet essential, tips you’ll need before you sign on the dotted line and are given the keys to your new home. 

 

  1. Get pre-approval: Not only will a pre-approved home loan give you the peace of mind of knowing a bank will lend you the money for the property you have set your sights on, it will also let you know exactly how much you can spend. So you won’t have to worry on auction day when you are the last man or woman standing.
  2. Do your research: A quick glance at a house online is rarely going to find anyone the right home. Get yourself off to inspections and auctions, and have a good sticky beak at the property that has caught your eye. It might look great online, but the reality is often a different story. The more houses and apartments you see in the mortar, the more likely you are to find the right place for you.
  3. Budget for the extras: Have you done a realistic home buying budget? Have you factored in the stamp duty, lenders’ mortgage insurance and conveyancing costs? It’s not just the deposit or the mortgage that you need to worry about. Sit down and work out exactly how much money you are going to need to spend to buy a home and whether you are going to be able to afford it once the deed is done. Use a mortgage calculator or talk to an expert if you are unsure.
  4. Avoid rushing into things: This is one piece of advice your parents passed onto you that translates perfectly into house hunting. Like a bad relationship, the emotional house purchase can also end in tears. Be certain the house you are going to buy is the right one for you and not one that is beyond your means or needs more work than your budget can ever expect to squeeze in.
  5. Have a bidding plan: Putting your hand up to bid at an auction is one of the most adrenalin pumping moments of an adult’s life and many people do not have a clue of what to do. There are several ways to get the know-how to be the final bidder. Get along to auctions and watch what other people do, ask your family and friends for tips or get expert advice. And if you really don’t think your nerve will hold to the last bid, first home buyers often have someone they trust bidding for them.

 Useful links:

Budgeting with a home loan in mind

Posted on Friday October 21st, 2011 by Mortgage Choice
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Budget with home loan in mindBudgeting might not sound like much fun but once set in place it has the ability to lighten the load by freeing up your money and time, for the important things in life.

No matter what your goals are, saving for your first home, meeting your mortgage repayments or building the best financial situation for an investment property purchase, you can find a budgeting strategy that is right for you. And it’s never too late to start.

 

First step to a successful budget is setting solid short and long goals and prioritising what is most important by distinguishing between your ‘needs’ and ‘wants’.

Then, create a detailed budget based on the living, entertainment, insurance, debt & mortgage repayment, etc, costs you encounter during each pay period. If a cost comes in, say, only once every six months then divide that figure by six to save 1/6 of the total cost each month.

Be sure to revisit existing loans (personal, property or other) and consider ways to manage them better using your budget. Ideally, clear your debts before acquiring new ones – a clean slate and a good credit history are a great starting point when you are looking to take out, switch or top up a home loan.

If you have a new mortgage, trying to budget for extra repayments from the start will help reduce your loan term and reduce the interest accrued on your home loan while helping prepare you for any possible changes in your financial circumstances.

If you are considering growing your property portfolio take note there is a wide range of home loans and lenders available to you, whether you are looking to renovate, upgrade, downsize, invest or purchase your very first home.

Remember, visiting a reputable, professional and experienced mortgage broker can help you determine your options, make an informed decision and put you steps closer to achieving your financial goals.

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Chance to WIN a $250 Bunnings gift card for your property needs! Get social with us…

Posted on Wednesday September 21st, 2011 by Mortgage Choice
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In keeping with our mission to help Australians achieve their property dreams, we’re giving our Facebook and Twitter followers the chance to win one of six $250 Bunnings Warehouse gift cards. Three gift cards are allocated to each social media channel.

Those who want to enter via Facebook can do so by watching our latest TV commercial and completing the entry form at www.Facebook.com/MortgageChoice, answering this question: where do you think the couple’s new property should be & why? 
Those who want to enter via Twitter can do so by watching the ad at www.YouTube.com/MortgageChoice and tweeting their answer to @MortgageChoice.

The competition runs until 16 October 2011, with winners announced on 21 October 2011. Terms and conditions are available here.

 
This is our first foray into running a competition via social media so please contact us via Facebook or Twitter if you have any feedback or suggestions for future comps and/or other ways we can interact with you via these channels.

Thanks for your time and good luck!

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