Taking out a mortgage is the largest financial commitment that most Australians will make in their lifetime. If you invest in a property you could be making repayments for the next 30 years. This article will focus on a number of tips that can help you save interest on your mortgage and pay off the debt on your home at a faster rate.

1. Pay large sums into your loan

Rather than spending any large lump sums you receive, pay them straight into your loan. Think of larger windfalls as an excellent opportunity to reduce the overall interest on your loan and therefore the overall cost of your mortgage. Unexpected windfalls can include: ... (read more)

All Mortgage Brokers are not born equal. Like any service business, the quality of brokers’ offerings can vary from company to company and from broker to broker. This article will explore the qualities that you should avoid in a potential mortgage broker. Use this information to find a broker that will take the time to understand your situation and secure a mortgage product that’s right for you. ... (read more)

Whether you are getting set to buy your first home or you are preparing to re-mortgage your home, it is important that you do so with the best deal available. You don’t need to be an expert in using a mortgage repayment calculator before you can find a great deal out there. Instead, you need to understand some of the steps that would help you towards having your home mortgaged at the best rates.

 

In order to avoid being ripped off, you need to take your time and compare mortgages from a few vendors. This needs to be done correctly, if you desire a good result. You should also understand that the type of mortgage you choose will go a long way to determine the rate you pay. Other factors that might impact on rates include your deposit, credit rating, and others. Listed below are some of the steps that would help you engage in successful and great comparison shopping. They are as follows:

 

Understand what you want; Before you take the first step of comparing prices, you should first determine what you actually want. Are you settling for a fixed rate mortgage or do you intend on going for a tracker mortgage? You should understand that since a fixed rate offers more security, the price tends to be higher than a tracker mortgage. It is your decision to make but guidance is available.

Compare related offers: In order to ensure that you get the best rates, whether you are proficient in using a mortgage payoff calculator or not, you should only compare related offers. Don’t compare the price of tracker mortgage from one vendor and go for fixed rate with another vendor. In doing this, you will only end up more confused and struggle to make an informed decision. Instead, make related comparisons. You should also know that even though your qualifications are not altered, different vendors will offer you different prices and terms. This is especially because they use varying business policies and models.

Opt for a Mortgage Broker: Most times, we just have to leave certain things for the professionals, including comparing quotes for a mortgage. With a broker, who is certainly more versatile with utilizing a bank mortgage calculator, you might just be able to land a great deal with a reputable lender. This broker acts like a middleman between you and the lender and depending on what you want, you can be matched with a lender that has loan products that expressly fit your home mortgage needs.

Go for Relevant Rates: One of the deciding factors when you are out there shopping for a residential mortgage is the amount you are able to deposit. This means that the rates you are offered when you are making a 30% deposit will definitely be better than the rates you will be offered when you are making a 10% or lesser deposit. When you understand this, you will surely not waste your time comparing quotes you will definitely not qualify for.

Work out your expenses: When you are comparing quotes for a mortgage, don’t just think about the mortgage deposit. There are other expenses you should be paying attention to as you get ready to use that simple mortgage calculator. Some of these expenses include but are not limited to solicitor’s fees, moving costs, property survey fees, etc. With this, you should be able to work out the level of deposit you can afford to put down.

Work out all costs related to the loan: In order to avoid any last minute surprises, you should take your time to work out every cost related to the mortgage loan. You want to know what you are getting into and as such, you should have a good knowledge of the monthly repayment amount, the interest rate, lender fees, and others.

Wrap it up: After you have made your comparisons, it is time to lock up your rates and get things wrapped up for good. Having made your calculations with the mortgage calculator, the next step is requesting a written “rate lock” from the potential lender. This is a form of written agreement that stipulates the interest rate, the interest price, and period of time it covers. With this lock-in, you are fully protected from any form of rate increase while your application is being processed. While some lenders go ahead and charge fees for the lock-in, others do it without any additional costs. It varies from one lender to the other.

... (read more)

This post is a response to Saundra Latham’s great article about the best home equity loan rates for 2016 (US), posted on the The Simple Dollar.

Paying off a mortgage results in more than just owning a home. The value of your home is a form of savings that provides negotiating power for other loan arrangements or investments. For many people, the downside of making regular mortgage repayments is the lack of ready cash or additional savings potential. A home equity loan can provide the solution, by allowing home owners to borrow money against the value of their home. This money can be used for any number of home improvements or other purposes.

Owning a home remains an achievable ideal for most Australians. Values have soared, but it’s worth noting that many sought-out neighbourhoods were fairly humble settlements just a couple of decades ago. Interest rates also remain low, often at 4% or less, providing lower repayments and a positive outlook for prospective home buyers.

The initial climb onto the property ladder can be slow, but wages do incrementally rise, and every passing year sees an increasingly large chunk of the outstanding loan principal paid off. During this time, the value of your home (investment) will significantly increase, and maintaining that investment could involve an injection of serious cash. A home equity loan is the answer.

Embed from Getty Images

 

What is a home equity loan?

Firstly, home equity is calculated as the amount you owe subtracted from the value of your home. In other words, if your home is valued at $400,000 and you owe $100,000, your home equity is $300,000. This is potentially the amount you could borrow, taking into consideration your ability to make repayments for the term of the loan.

The rules governing home equity loans in Australia are relatively simple. If you have commenced paying off a mortgage and possess over 20% equity on the property, you have a good chance of a home equity loan approval. The amount you can borrow is also determined by factors such as income and personal finances. Any encumbrances on your property could also affect the application.

 

What is a closed-end home equity loan?

A home equity loan can be either closed-end or open-ended. A closed-end loan is ideal for making a single purchase with a set amount of money. In essence, a closed-end loan is a lump sum payment with similar conditions to your initial mortgage, and is often used for major home renovations. An open-ended home equity line of credit (HELOC) is best if you require ongoing funds that are available to replenish and redraw upon, similar in function to a credit card but with greater borrowing power.

Home equity loan benefits:

Less processing time

The money can be used for almost any purpose

Competitive interest rates

HELOC loans facilitate deposits and withdrawals for ongoing access to funds

... (read more)

Paying off a home loan mortgage takes a dedicated effort over a number of years. During this time your personal circumstances might change, finances could fluctuate, and lenders will vary their interest repayment rates according to financial markets. As a borrower, you may be on the lookout for a better deal, but there are a range of factors to consider before moving ahead and refinancing your loan.

Refinancing your home loan is a strategy that could save you thousands of dollars in the long run. It is a valid and sometimes necessary approach to ensure you are getting the best possible deal, although there are also barriers that could make refinancing your home loan a bad idea.

Refinancing is a good idea in some situations:

Your financial situation changes dramatically

Your lender isn’t offering a good rate compared to competitors

A need to free up some money for other projects or another loan

You need to consolidate debts such as credit cards

It’s a good time to switch to a fixed or variable rate of repayment

... (read more)

For most people, buying a home is the most significant financial investment they will make. A sizeable loan is usually required, and repayments are generally spread out over many years. Therefore, it’s important to also invest a little time into understanding your options and getting a deal that suits you. Let’s begin by learning the basics of how a home loan works.

Before discussing the different types of home loans it will help to understand what all home loans have in common.

The application process: You will need to show your bank manager or lending institution that you are borrowing within your means and can afford to make the repayments.

Your loan is secured by your home: In other words, if for any reason you fall behind on loan repayments, your bank or lender has the legal right to sell your home to cover their investment.

The deposit: A percentage of your new home’s value is usually paid up-front in order to secure the loan.

It’s easy to get excited when inspecting properties, and it’s not uncommon for people to dream beyond their means. You will need to work out how much you can afford to borrow before shopping around for your home. This will give you a realistic picture and help you avoid disappointment later on. Now it’s time to ask yourself the hard questions:

How much deposit do you need?

• By making a larger initial deposit you can borrow less and therefore have lower repayments.

Is it your first home?

If so, you could be eligible for a one-off payment from the First Home Owner Grant scheme. It’s also worth investigating a First Home Saver Account which assists with a combination of government contributions and tax concessions.

... (read more)

Understanding how interest affects your home loan is an important step in the loan process. Even if the interest rate remains relatively low it will still add up to a large portion of your total repayments over the duration of a 25-30 year home loan term.

Understanding interest

Many people misunderstand how interest is calculated. For example, when investigating a $100,000 loan at 10% interest, a novice borrower might think the total amount of interest to be paid will be $10,000. ... (read more)