Loan Basics

110 Understanding which home loan features are right for you

Understanding Which Home Loan Features Are Right For You

Buying a home is probably one of life’s most important milestones, so getting the right home loan tailored to your specific needs and circumstances is essential. When it comes to home loans, there are many factors to consider besides interest rates. Choosing the right home loan could not only provide flexibility as your financial situation changes but could also save you some money down the track. Here is an explanatory guide to some of the more common home loan features and, importantly, how they work. Redraw facility A redraw facility allows you to dip into any extra funds you have put towards your home loan, providing you are ahead of your repayments. While drawing on these funds will reduce the benefit of your additional
108 Four things to Consider before Buying Off-The-Plan

Four Things To Consider Before Buying Off-The-Plan

Buying a property that is yet to be built is a popular strategy, particularly for first-time homebuyers. It offers the potential for stamp-duty savings, time to save more for the deposit, and, of course, the opportunity to move into a brand-new home. While the glossy brochures and artists’ impressions can be appealing, purchasing property off-the-plan is not without risks, particularly in a falling market. Here we outline the four key considerations to be aware of before you sign on the dotted line. Research the market An oversupply of stock in the market can also substantially affect the value of property. Despite approvals for new projects falling sharply, CoreLogic data1 says 252,000 new apartments will hit the market between 2018 and 2020. Both the Sydney
104 A simple guide to small business loans

A Simple Guide To Small Business loans

Most small businesses use finance when they’re starting out. Access to finance can also help you manage your cash flow, cover unexpected expenses and purchase the equipment you need to grow. Different loans are designed for different circumstances so it’s important to find one that meets your needs in a cost-effective way. To help you get started, we’ve taken a look at the pros and cons of some of the most popular options. An overdraft or line of credit How they work Both an overdraft and a line of credit can provide access to revolving credit, which means the money you repay is available for you to use again as you need it. An overdraft allows you to overdraw on your business bank account
103 Tips for Paying Off your Home Loan Faster this Financial year

Tips For Paying Off Your Home Loan Faster This Financial Year

A new financial year can be a great time to set money goals, such as paying down a home loan. Paying off a mortgage early can save on interest, free up cashflow each month and help you enjoy all the benefits of a debt-free lifestyle. If reducing your mortgage debt is a key financial goal for FY20, here we provide some tips to kick-start your plan. Make fortnightly payments Instead of making one monthly payment, you can instead opt to make a half-sized payment every two weeks. Because there are 26 fortnights in the year, this strategy will result in you making an extra monthly payment every year. Let’s look at some real-life numbers. If you had taken out a 30-year loan of $400,000
90. explainer how redraw and offset accounts can save you money

Explainer: how redraw and offset accounts can save you money

Offset accounts and redraw facilities work in similar ways; they both allow you to reduce the balance of your home loan, and therefore the interest charged, by applying extra money to your debt. Redraw facilities allow you to deposit spare income into your home loan account, allowing you to redraw a sum equal to the extra repayment amounts in future. In the meantime, the extra money paid will lower the amount of interest charged while still giving you access to your money. However, there may be restrictions on how much money can be withdrawn and when. For redraw, it depends on whether the facility applies to a fixed-rate or variable loan. Most institutions only allow redraw from a variable-rate loan, or fixed-rate loan but
87. explainer home loan pre-approval

Explainer: Home loan pre-approval

For those getting ready to stride into the world of home ownership, the uncertainties of pre-approval can cast a shadow of doubt over an otherwise exciting time. When is it necessary? How long does it last? And what does it involve, exactly? Pre-approval is a lender’s assessment of your likelihood of being approved for an otherwise suitable loan. The appraisal is made on the basis of your ability to service a loan by looking into your living expenses and liabilities, your credit history, your employment circumstances and how often you have moved home or employment in the recent past. As it is performed prior to a property being found and chosen, it does not take into account the particulars of a specific property and
86. exit costs when refinancing

Exit costs when refinancing

Refinancing can be a great way to save money if you believe you are paying too much for your loan, but there is more to it than just finding a loan with a lower interest rate and making the change. Before making the switch, ensure the savings you could make outweigh the fees involved. Here are the different exit costs to consider: Exit fee Although loans taken out after 1 July 2011 are not subject to deferred establishment, or exit, fees, those taken out prior may still be. Also known as ‘early termination’ or ‘early discharge’ fees, they can sometimes be paid by your new lender but are normally applied to an early contract exit. Establishment fee Also known as ‘application’, ‘up-front’ or ‘set-up’
85. explainer fixed rate loans

Explainer: fixed-rate loans

With interest rates at an all-time low, taking the option of locking in an interest rate on your home loan to guard against possible future fluctuation may be attractive. However, it pays to know the ins and outs of fixed-rate loans before committing to one. When purchasing a property, borrowers can decide between fixed-interest loans that maintain the same interest rate over a specific period of time, or variable-rate loans that charge interest according to market rate fluctuations. Fixed-rate loans usually come with a few provisos: borrowers may be restricted to maximum payments during the fixed term and can face hefty break fees for paying off the loan early. However, locking in the interest rate on your home loan can offer stability. For those
84. how to pay off your home loan faster and save big bucks

How to pay off your home loan faster and save big bucks

Reducing the life of your loan isn’t difficult; there are many simple things you can do to cut years off your mortgage. Here are some tips that will help you be mortgage-free sooner than planned. Small extra repayments One of the most obvious ways to pay off your home loan quicker is to make extra repayments. Depositing lump sums, such as a tax return or work bonus, will always be beneficial, however it doesn’t always take large amounts or windfalls to make a substantial difference – planning for regular, small cash injections can have a great impact over the life of a loan. Let’s say we give an extra $50 a fortnight on a $500,000 loan, that saves you $32,000 of interest over the
79. what comes first the property or the loan

What comes first: the property or the loan?

It’s easy to get carried away with the fun part of buying a property – looking at houses – but delaying the less compelling task of arranging finance will weaken your negotiating position on both the property and the loan. Looking for a property to purchase is an exciting time. Choices regarding location, size, number of rooms and local amenities often see house hunters carried away in a deluge of daydreams and anticipation. But, before you get carried away, it’s important to check off the essentials first. Although organising your finances may seem drab in comparison to perusing sales listings, gaining pre-approval with a lender will give you confidence about how much you can afford to borrow. First and foremost you need to determine
77. how to speed up your home loan approval

How to speed up your home loan approval

Asking how long it takes to get a loan approved is like asking how long a piece of string is. Every application is unique, so the time between your first contact with your bank or broker and approval can never be predetermined. There are, however, some things you can do to help hurry your application along. Although very rare, same-day loan approvals are possible depending on the lender’s criteria, the complexity of the deal and turnaround time. In my experience, this has been possible when the client’s lending position is fairly straightforward in terms of employment, asset and liability position. Also, if a valuation wasn’t required due to a low LVR and both parties were happy with the contract price. If you’re not prepared,
75. top ways to cut your expenses and increase your savings

Top ways to cut your expenses and increase your savings

Is the key to saving a home deposit as simple as giving up smashed avo toast for breakfast?  Well not quite, but spending less does make a difference. On top of a budget, a savings plan and strategies such as a high-interest savings account, an effective way to save is to reduce or eliminate expenses.   Start by understanding your spend  It can be easy to lose track of how you’re spending money, especially due to cashless payments and credit cards. Many online banking systems include tools to categorise debits and make a budget – take advantage of them. Or download an app that helps you track your personal expenses on the go, like ASIC’s TrackMySPEND. Find savings in the essentials Some costs can’t be

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