Posts Tagged ‘home loan tips’

Tips for budgeting, spending and managing your mortgage

Posted on Friday January 20th, 2012 by Mortgage Choice
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Posted in Home Loans | No Comments »

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.

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Taking an interest in interest-only loans

Posted on Friday July 15th, 2011 by Mortgage Choice
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Posted in Top tips for property & home loans | No Comments »

Ryan Ewart

By Ryan Ewart, Mortgage Choice servicing the NSW Northern Beaches

Taking an interest in interest-only loans

Interest-only loans are a type of home loan that allows you to repay just the interest on the principal loan amount over the life of the loan. No principal repayments are required during the loan term.

They’re a popular loan of choice among all kinds of borrowers. Why? Repayments are lower than what you would pay on a principal and interest (‘P & I’) loan. You can redirect the extra money you would normally put towards paying off the principal into other areas such as home improvements.

What’s a typical loan term for an interest-only loan?

One to five years is a typical loan term for an interest-only loan. At the end of the interest-only period, you must start making principal and interest repayments.

I generally advise customers to ensure they are prepared for their repayments to rise sharply at the end of the interest-only loan term. Lenders assess your ability to repay the interest-only loan on the basis of it being a principal and interest loan, so the shift to principal and interest should be manageable.

Interest-only: a popular option for investors

Interest-only loans are extremely popular among investors. Investors’ interest payments are tax deductible; they can make minimal loan repayments during the loan term and re-sell the property when it appreciates significantly in value.

The pros and cons of interest-only

There are some potential drawbacks to interest-only loans, particularly for people lacking financial discipline. If you’re satisfied with your principal balance staying the same, by all means pay the minimum interest-only loan amount.

I tend to suggest to customers wanting to reduce the principal balance to set up a direct debit for an extra $200-300 a month to be paid into the home loan. Every dollar you pay over and above the interest only repayment will reduce the principal of the loan, therefore making it principal and interest. The extra repayments can be redrawn as needed and in times of emergency. But again, financial discipline is key to reducing the principal amount.

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Which gender is more financially proactive?

Posted on Monday January 24th, 2011 by Mortgage Choice
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Posted in Home Loans | No Comments »

2011 personal finance plans of Australian mortgage holders

It is looking likely that males with home loans will outdo their female counterparts when it comes to re-jigging their personal finances this year, according to Mortgage Choice’s latest annual Consumer Sentiment Survey*.

Despite predicted interest rate rises and increasing living costs, we found more than half the country’s female mortgage holders (51%) had no plans to make changes to their financial situation in 2011 or were unsure if they would*. In comparison, more than three in every five (61%) male mortgage holders plan to make changes.

Everyone with a large debt commitment should review, at the very least, that commitment and their budget every year.

Regularly reviewing and/or making adjustments to suit the ever-changing economic landscape and financial product markets are essential to maintaining a healthy household budget. It will also build your confidence in your ability to manage debt commitments.

Passive borrowers who don’t give their finances a health check at least once a year may be missing out on everyday and home loan savings. This means less cash flow for repaying debt quicker, capitalising on other investment opportunities and treating yourself.

Of the mortgage holders surveyed who were planning personal finance changes in 2011, these were the most popular intentions:

Top 10 personal finance plans for 2011 Females Males
Review my budget 66.2% 71.2%
Review my mortgage/s 60.9% 61.3%
Cut back on my spending 56.4% 49.7%
Pay off my credit card/s 45.1% 41.1%
Refinance my mortgage/s 35.3% 27.0%
Increase my debt repayments 22.1% 18.8%
Take out another mortgage 16.6% 20.3%
Consolidate debts 17.8% 18.8%
Top up my mortgage 19.0% 16.5%
Reduce my debt repayments 19.6% 12.0%

Did you find it interesting/surprising that males tend to be more proactive about their finances? Do you think it’s worthwhile reviewing your home loan arrangement at least once a year? Let us know by leaving a comment below.

If you want to review your home loan arrangement, and are prepared to make changes if need be, we’re here to help. Make an appointment with your local Mortgage Choice broker now. 

*The Mortgage Choice 2010 Consumer Sentiment Survey of 1,061 Australians was commissioned to market research company Ticketek Insights and completed in early November, prior to the cash rate rise. 

Bridging loans for in-between times

Posted on Wednesday January 5th, 2011 by WendyHiggins
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Posted in Home Loans, Refinancing | No Comments »
Wendy Higgins

Wendy Higgins

By Wendy Higgins Mortgage Choice in Glenelg, South Australia

Sometimes your next dream property is in your sights before you’ve sold your existing one, let alone found funds to buy it with. An option for these times could be a bridging loan (or ‘go between’ loan).

In the case of a bridging loan, you borrow 100% of the property purchase price plus fees, pending the sale of your existing home.

This kind of loan isn’t for everyone, however. It suits people with plenty of equity in their existing property. I’m finding that many of my customers are using bridging finance when they’re downsizing and they’ve found their next home but haven’t sold the first.

They are also an option for people who may have sold a property and bought another one, but the settlement dates don’t match up.

Lending criteria for bridging loans

Bridging loans represent a small part of the market – they make up roughly 1% of loans issued. Lending criteria for this type of loan is increasingly stringent. Some lenders assess serviceability based on the ‘peak debt’, meaning the purchase price plus fees, plus any outstanding loan you have against your existing property and they then allow for 6 months’ interest on that debt.

More generous lenders assess affordability based on the ‘end debt’, meaning they take into account the estimated sale price, less selling fees – but still allow 6 months’ interest in their calculations.

Be mindful of the higher costs

I generally recommend that people sell their existing home before buying their next one because the costs associated with bridging loans can add up. If you have a bridging loan for 6 months, be mindful that you will be borrowing 100% of the purchase price of the new property, plus fees and six months’ worth of capitalised interest.

The interest rate and fees payable are typically higher than when taking out a normal loan. This can add an extra 0.7% to the interest rate and application fees will be substantially larger. You may also have to pay for bank valuations.

Research other home loan options

Borrowers considering a bridging loan should carefully assess whether it’s the most suitable for their needs. There may be more suitable options available. It’s a good idea to consult home loan experts, such as a credible mortgage broker.

I hope this information is useful to you, if you’d like further information about bridging loans, please feel free to contact me or your local Mortgage Choice broker.

Have you taken out a bridging loan before? I’d love to hear about your experience, please share it by leaving a comment below.

 

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More information on bridging loans

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Questions to ask a mortgage broker before signing up for a home loan

Posted on Tuesday November 23rd, 2010 by Ian Robinson
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Posted in Mortgage Brokers, Top tips for property & home loans | No Comments »
Ian Robinson

Ian Robinson

When people ask us about choosing home loans, many questions tend to pop up. To lend a hand, here are the answers to some of the most commonly asked questions – as well as a few of the others.

How do you decide which home loan is suited to me over others?
Mortgage Choice brokers use Loan Qualifier software that enables us to determine which home loan is suitable for your needs.

With the help of this sophisticated software, we can show you:

  • How much you can borrow and at what rate
  • Who is going to lend you the money
  • What your repayments would be

This way you know exactly what you’re signing up for. When you leave a Mortgage Choice broker we will give you a Loan Product Eligibility and Selection Record to show the reasons why we put forward one loan option over another.

What happens if I get a home loan approval and decide not to proceed?

We understand that plans and circumstances change when buying a property. Our service is a no-cost service, so we do not charge you – ever!

Some lenders may pass on any out-of-pocket expenses if they have undertaken valuations or legal work. We can sift through who does and who doesn’t for you.

Are your home loans the same as those I could get from a branch at a bank?

They are the same home loans you’ll find at a bank or branch. However, our close relationship with each lender on our panel means that if we can do more for you, we certainly will!

There are many lenders who, from time to time, offer “broker specials” and we can also apply for concessions on interest rates or fees on your behalf under some circumstances. Either way, it’s our job to get you the best possible home loan.

What happens if my personal financial circumstances change in a year or two?  What happens to my mortgage then?

We always encourage people to get in touch with us as soon as their circumstances change (e.g. marriage, having children, change in employment situation).
We offer all our clients a “Home Loan Health Check” to check in with you to ensure your mortgage is still meeting your  lifestyle needs – now and for the future and that the home loan still accommodates those needs.

What exactly am I signed up for?

Get the mortgage broker to explain what you’re signing for, including the home loan amount, loan term, the interest rate, any fees (one-off or ongoing), what the loan features are (e.g. offset account), whether you will be penalised for paying out the loan early, and whether your mortgage is a Principal and Interest or Interest Only loan.

All this information should be given to you in writing by your broker and is covered under the Finance Broking Agreement.

How much deposit will I need? Does it vary from loan to loan?

You will require a minimum 5% deposit and you need to show evidence of savings acquired over a three-month period. If you don’t have the minimum 5% deposit saved, don’t worry. Start your savings strategy and remember to stay in touch with us.

If you need help with budgeting and saving, we can help you with your strategy.

What other services do you offer?

We also help source personal loans, commercial loans, asset finance, deposit bonds and risk and general insurances.

What about privacy concerns? How do I know my personal information will be treated with confidentiality?

We fully disclose our service, our payment model, our privacy policy and complaints procedure in our Customer Charter.
What information can you help me with if I want to find out more?
We offer a range of great information resources including:

I hope this information has helped you out, if you have any further queries please either contact me or your local broker. Goodl uck with the rest of your research!

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Contact Ian Robinson
Find your local mortgage broker
Why does it take so long for loan approval?

Time to connect with like-minded property buyers

Posted on Thursday October 21st, 2010 by Mortgage Choice
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Posted in Co ownership, Compare Home Loans, First Home Buyers, Home Loan Calculators, Home Loans, Top tips for property & home loans | No Comments »

Your invitation to join the Home Loan Coach social networking group

Connecting with and getting inspiration from like-minded property buyers at a time and a place that suits you is often difficult to schedule.

What if you could attend an informal catch up with experts in the know and people asking similar property related questions, all at a popular Sydney venue?

Mortgage Choice is running a series of free monthly Sydney-based events designed to explore the property and mortgage markets in an accessible and relaxed setting.

Each event will focus on a different topic of interest. A topic expert will be in attendance to help kick start the conversation and to remain on hand to answer questions.

When and where?

  • Wednesday 27 October
  • from 6pm
  • Arthouse Hotel, 275 Pitt Street, Sydney

The first Home Loan Coach networking event provides a great opportunity to meet people looking to buy, especially those considering co-ownership.

Joining the group to lead the discussion will be co-ownership expert and director of PodProperty, Jeremy Levitt.

Entering the property market can be daunting, even for an experienced buyer. The free Home Loan Coach Networking events aim to get people together to share their highs and lows as they learn the ins and outs of purchasing property.

Buying with a friend or family member

Many buyers find joint ownership is a solution to meeting lending criteria and as a means to get into the property market sooner. According to the Mortgage Choice 2010 Recent First Home Owners Survey, 63% of respondents bought with a partner, friend, colleague or family member.

Hosting the Home Loan Coach Networking event after hours provides busy buyers with a social setting to share their journey with people going through the same experience, asking the same questions and aiming for similar goals. Also, in this instance it helps potential buyers meet potential co-owners.

Over the coming months the Home Loan Coach event series will cover a range of popular discussion topics all related to the property buying or borrowing process.

Register now to attend the Home Loan Coach Networking event. Stay tuned for more updates!

Connect with Home Loan Coach:

Twitter: www.twitter.com/HomeLoanCoach
Facebook: www.facebook.com/HomeLoanCoach

Tips for planning a property strategy for the new financial year (Part 2)

Posted on Monday July 19th, 2010 by Mortgage Choice
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Posted in Compare Home Loans, First Home Buyers, Home Loans, interest rates, Property Investment, Top tips for property & home loans | No Comments »

Mortgage tipsIn part 2 of our post, we share some additional  tips for planning a property strategy for the new financial year.

Tip #3: Cash up to cash in

Saving your tax return or bonus, forgoing luxuries and/or selling assets with a high monetary value can help you achieve your goals sooner. Contribute this money into your savings account to increase your deposit for a first, next or investment property purchase. Or, create a financial buffer by depositing it into your home loan account, which takes time off your home loan term and reduces the total interest owed.

Tip #4: Interest in advance

Investors with healthy cash flow and good savings habits might consider the tax advantages of an interest in advance home loan. These let you to pay, in advance, up to a year’s worth of interest, allowing you to claim the tax deduction in the current financial year.

There are limitations to consider:

  • At the end of the interest in advance term the home loan may need to be renegotiated or switched to another type, often at your expense.
  • Also, because these are fixed rate loans, they are usually not as flexible as variable rate loans.

Tip # 5: Fixed repayments are luring

Some lenders have started to reduce their fixed interest rates. However, Mortgage Choice’s May home loan approval data showed just 3% of new borrowers chose to take a fixed rate home loan. These home loans can provide peace of mind, keeping repayments stable over a fixed term. However, there may be fewer features on offer and you may incur significant costs to break and switch from the home loan. Variable rate mortgages tend to be more flexible with features and the interest rate, but you must be prepared for rate rises. If you want to hedge your bets and take advantage of pros from each rate type consider splitting your home loan between fixed and variable.

Tip #6: Think outside the cheapest interest rate

Choosing the mortgage with the cheapest interest rate is not always the best option. You have to take into account your current circumstances and any changes to these in the future. For example, if you plan to renovate your property in the future and the RBA was to raise interest rates and you suddenly needed to refinance your home loan would you have the ability to do so with your home loan plan? Certain home loan features can come at an extra cost but having a flexible home loan could pay off in the long run.

Tip # 7: Match the type of home loan to your goals

Think carefully about interest only versus principal and interest home loans. Although paying only the interest will not reduce the home loan amount, it will result in smaller monthly repayments, allowing you to make greater contributions to your principal place of residence or to invest in another asset, while the property grows in value through capital gains. In comparison, principle and interest home loans help you repay your debt sooner as repayments cover all the interest plus some of the actual loan amount.

Check out Reserve Bank’s accurate decision to keeps cash rate at 4.5% for the recent decision to leave cash rates on hold. Also, have a look at part 1 of tips for planning a property strategy for the new financial year.

If you would like to contribute to the tips then leave us your comments below.