Solving the Mortgage Puzzle
Many people choose a home or investment loan for all the wrong reasons. They struggle year after year with results far below their true potential. Throwing money at institutions simply because they have advertised the best rate on the day, or offered discounted establishment fees, more often than not ends in bitter disappointment.
Do you feel youre working too hard to pay off your loan with very little reward?
The team at Home 2 Home Loans have committed thousands of hours, working with home buyers & investors, one on one, developing and enhancing our knowledge of home loans and ultimately assisting them in choosing the most suitable loan solution for their personal circumstances.
By implementing some simple strategies we can help you turn your mortgage into a powerful debt reduction tool.
If you feel your hard work is not producing the results you require, call or fax us on 07 3368 2527 or email firstname.lastname@example.org we will guide you through the Mortgage Puzzle.
A key part of our philosophy is providing results, and in order for this to happen we realise that you need to make the right choice when selecting your home or investment loan. However this isnt always as easy as it sounds, given the range of loan products and lending institutions that are available it is important to be able to look at all the options available to you. Thats where we come in.
To give you a general idea of the different home loan or investment loan options available weve put together a brief description of some of them.
Standard Variable Rate loans
This is a very popular type of loan in Australia. These loans offer a set repayment period usually up to 30 years. Features of a standard variable rate loan vary depending on the lender chosen, but can include an offset account, a redraw facility and no limits on additional repayments. A recent change brought in by the Federal Govt. means that in most cases, there are no longer early payout penalties for these loans.
A key factor in this type of loan is the variable interest rate.This means it is susceptible to any changes in the economic market conditions and is likely to fluctuate over the life of the loan. Therefore rates can rise and fall during the term of the loan which can effect the cost of your repayments. This type of loan can be ideal for borrowers who wish to pay their home off sooner as there are no limitations on the amount you choose to repay.
Similar to the traditional loan, although generally with a lower interest rate, these are often referred to as "No frills"?? an alternative to the standard variable rate loan. This type of loan keeps the rates low by cutting down on extras, providing a very simple option to the budget conscious borrower.
Basic loans offer the ability to make extra repayments and a lower interest rate but generally come without the flexibility and extra features of some other loans.
A bridging loan is designed for borrowers looking to purchase a home now and to be able to sell their existing home at a later date. The interest rate on this type of loan is usually the same as a standard variable rate loan. A bridging loan can ensure that you will not miss out on the property that you want because your current home has not been sold.
Fixed rate loans
A loan that offers security, and structure for many buyers. Fixed rate loans offer a set interest rate for a given period and are generally available from 1-5 years, although longer terms are available. This makes it easier for buyers to budget for their repayments and gives them some peace of mind knowing that their repayments will not increase during the fixed rate period. The down side here is if rates go down you are locked in for the period you have left to run on the fixed rate. Some lenders will charge you break costs to exit the fixed rate should you elect to do so. Some lenders may also charge penalty fees should you wish to make extra payments during the fixed rate term.
A combination loan that offers both fixed rate and variable options. Buyers have the choice of nominating how much of the loan they would like to repay with a fixed interest rate, and how much with a variable rate. This loan is ideal for those who are unsure about interest rates fluctuations and are attracted to features from both loan types. It also allows the flexibility of making extra repayments should you choose to do so on the variable component of the loan.
Lo Doc loans
Low documentation loans are suitable for self employed borrowers, Investors or small Companies that are looking to purchase, renovate or refinance and who are unable to provide financial statements or tax returns. These loans do offer some flexibility to the buyer, they may attract a higher interest rate and higher fees and charges, terms and conditions for this type of loan vary between lenders.
Credit Impaired Loans
These loans are available to borrowers who may have experienced difficulty meeting their loan repayments in the past due to many reasons as an example being out of work, an unexpected business loss or sickness or a dispute with a previous credit provider who may have lodged a payment default on their credit report with a credit recording agency. These type of loans have been designed with these reasons in mind and are specifically aimed to assist borrower's with these circumstances. These loans will usually incur a higher interest rate, fees and changes.
Line of Credit (LOC)
This type of facility provides the borrower with access to the equity in their residential or investment property for any worthwhile purpose. It is similar to an overdraft facility generally with no fixed repayment of principal required and funds can be drawn up to the limit approved by your lender at any time. The facility is generally written on a variable rate basis which fluctuates with the market. The borrower can generally access the facility with a check book, credit card, phone, internet or ATM.
Home Equity Loans
This particular type of loan allows you to unlock the equity in your existing property for other investment opportunities such as buying an Investment property, completing renovations to your existing property or investing in shares.
Interest Only Loans
This type of facility is usually available on Investment loans. The interest is calculated on the daily balance of the amount borrowed and does not require any reductions in the principal during the interest only term. This type of facility is generally utilized by an investor looking to minimize their tax and maximise their negative gearing benefits by just paying interest only.
100% Mortgage Offset Accounts
This type of account can generally provide you with the features of a normal transaction account. Any money held in the offset account earns interest at the home loan rate and the interest earned is offset against the equivalent amount of interest charged against your home loan balance. A great way for the borrower to reduce the interest, that is charged on their home loan.
Equity Funded Mortgage
The Equity Funded Mortgage (EFM) can be useful for borrowers who are either wanting to refinance an existing mortgage so as to significantly reduce their monthly cash costs, or alternatively are wanting to buy a property normally outside their price range, i.e. the monthly payments under a normal mortgage would be too high for them. In some cases monthly payments can be reduced by 20%. The EFM is arranged in concert with a regular (fixed or variable) mortgage and the EFM payment is deferred until the property is sold or refinanced.
The information contained on this page is general in nature only. The financial product information contained here is also general advice only and does not take into account your personal situation, needs or objectives. You should not rely on this information to make a financial decision. You should also consider seeking your own independent taxation and legal advice before making any investment decision.