Not long ago, your mortgage was almost as long-term a commitment as your marriage. People would get married, buy their first home, take out a mortgage, and pay it off for the next 25 or 30 years of their lives. Things are quite different today. There are hundreds of lenders in Australia offering a wide range of home loan products. How to choose the loan that is right for you? Here are some tips.
size of your loan
In most cases, your ability to borrow and the size of the loan you may qualify for will be determined by
– your declared income;
– active and passive position;
– deposit available.
The loan affordability calculator used by each lender is different. So, even if you have been turned down by one lender, another lender may be able to approve the exact same finances and loan size.
One thing to consider is whether you think you’ll be able to afford the loan repayments. In today’s interest rate market, it’s important to consider a couple of likely interest rate increases when calculating the affordability of your loan.
There is no use finding a lender who is willing to lend you $500,000 when you yourself do not think you can comfortably repay that amount.
Key Loan Reduction Techniques
There is no magic product that will make your mortgage disappear. In fact, there are only a couple of ways to save money on your home loan:
In other words, if you want to pay off your loan quickly, you need to make larger, more frequent payments, at the lowest possible interest rate.
If finding the required payments on your desired mortgage presents a problem, then the mortgage selection rules change. To pay off that $500,000 mortgage, you may need to start with a honeymoon product and then move to an interest-only loan for a period of time. Perhaps paying more and faster is not the way for you. Again, the rules change depending on your individual circumstances.
Characteristics of the loan
Most lenders offer a variety of loan options. Some allow you to access your money, such as mortgage clearing accounts and redirection facilities. Others allow you to transfer your mortgage to another secured loan.
It’s up to you to decide which features are necessary and which are “nice to have”. As with most things in life, extra features tend to come at a higher cost. Therefore, it is advisable to take and pay only for what you need.
loan fees
You must be aware of all fees and charges associated with your loan. These may not be apparent at first glance, but will be reflected in your loan comparison rate. If you’re looking for the cheapest loan possible, you should factor into your calculation the cost of setup, monthly fees, replenishment fees, as well as potential fees if you refinance or pay off the loan.
honeymoon loans
Honeymoon home loans are great if you want to take advantage of a lower rate in the short term, where your financial circumstances are likely to improve in the future.
If you need the honeymoon rate to pay off the loan, don’t proceed with it.
These loans feature only short-term savings as they revert to a standard variable rate at the end of the honeymoon period.
Fixed or Variable
Many Australians are now looking at rising interest rates and wondering if they should lock in their mortgage rate or leave it variable. There is nothing right or wrong in this decision. A lot depends on where you think rates will go next. While people often choose to lock in order to avoid the damage of future interest rate increases, you should be aware that the market will often build the anticipated direction of future interest rates into your current locked rates. So locking in your rate today doesn’t necessarily mean you’ll pay less in the long run.
Professional Package Offers
It is always worth investigating the Professional Package Loans offered by the lender of your choice. These generally offer a lower interest rate and, despite their name, are also available to “non-professional” applicants.
Low Document Loans
Low Doc loans are great if your tax returns are out of date or your circumstances are a little outside the criteria of traditional lenders. These loans require little paperwork and a lot of flexibility. We have seen many asset rich but cash flow poor applicants do well with such loans. The Low Doc loan market is so competitive that Low Doc mortgages are available from a number of lenders at rates that are not that different from Full Doc loans.
Revolving Line of Credit
A great product where you have already built up some equity in your home and would like to use it for any worthwhile purpose. A line of credit is like a credit card, but the money is available at home loan rates. As long as you are a responsible borrower, this is a great financial product
For more information on Australia’s home loan market, please visit
www.honeyloans.com.au gold
www.webdeal.com.au