Category : Mortgage Solutions

Steps To Buying An Investment Property

Step 1: Speak to Pride Mortgage Services

When considering an investment property, your first port of call should be your finance broker.  We can help you achieve your investment property goals. We will review your assets and liabilities to determine how much you can borrow, which will in turn give you a general idea of your target price range, so you can narrow your property search within your purchase budget.
Step 2: Budgeting

Just like buying your first home, when purchasing an investment property it’s essential to budget. If you’re unsure of the best way to budget for an investment property, speak with us, we can help you to get on the right path.

Step 3: Important conversations

We will discuss your plans and your circumstances with you to determine what you can afford. We will also provide statutory documentation to initiate the lending process and work out for you what loan products will be appropriate in your circumstances.


This is just an abridged guide to help you get started. For more information, contact us today.

When Would I Refinance My Mortgage?

Whenever it makes financial sense to do so.

Heard about mortgage refinancing? In the past, most people who took out a mortgage doggedly continued with it until they had paid it off. These days, people refinance their mortgage much more frequently. The average duration of a home loan in Australia now is just 4-5 years. Here we look at some of the reasons people in Australia refinance their home loan.

Mortgage refinancing reasons: lower rate

The most common reason for people to refinance their mortgage is to get a better deal. But be careful you don’t become interest rate-fixated. When you refinance your home loan, you need to consider fees and charges as well as the interest rate. You often have to pay charges for exiting your current home loan, plus charges for taking out the new mortgage. You need to be sure that in refinancing your home loan that you’ll be better off in the long run after taking into account all costs.

Mortgage refinancing reasons: more flexibility

Many people only discover the full details about their mortgage when it’s too late. They try to do something and get told by their lender that either they can’t do it, or they will incur a hefty charge if they do. An example is a redraw facility – the ability to pay extra money into a mortgage and then redraw it later. This feature is not possible with a basic home loan, so many people refinance their mortgage to give themselves this sort of increased flexibility.

Mortgage refinancing reasons: renovation

If you carry out renovations, it often makes sense to refinance your mortgage and take out a construction loan so you only pay interest as building progresses. Once construction is over, it might make sense to refinance your home loan again so that you consolidate the total amount you owe into a loan that minimises your interest bill, while giving you a degree of liquidity.

Mortgage refinancing reasons: home equity

Over recent years in the property market houses have appreciated at a significant rate. e.g. a home you bought for $300,000 five years ago, might now be worth $500,000. Refinancing your mortgage with a home equity loan might let you tap into that extra $200,000 equity.

Mortgage refinancing reasons: defaulting

Some people find they have borrowed more than they can comfortably repay, and they’re in danger of defaulting. There’s no shame in that. But don’t suffer in silence. If you’re having trouble making your mortgage repayments, talk to us about refinancing your home loan to make it more manageable.

 

If refinancing is something you are considering or if you would like more information, contact us today!

What Type Of Loan Is Right For You?

The array of mortgages available helps a good finance broker to tailor a package to suit your needs. Here are just some of the options.

 

Fixed-rate mortgages
With a fixed-rate loan, you know exactly how much you’ll pay per fortnight or month for the fixed period of the loan (usually one to five years).

 

Variable rate mortgages
Repayments can change during the life of a variable-rate loan, so you may pay more or less as interest rates rise or fall. If you’re fairly sure that rates are set to fall, this is a good option.

 

Principal and interest mortgages
In this mortgage, you are paying the amount lent to you plus the interest.

 

Interest-only mortgages
With interest-only, you are paying just the interest on the loan – you are not paying off any of the original principal.

 

Split home loan (fixed and variable)
You can choose to have part of your loan at a fixed rate and the other part can be at a variable interest rate. If rates do fall, the interest will go down on the variable part of your loan, but you aren’t taking as big a risk should rates rise.

 

Redraw facility
If you have a variable-rate loan and you make extra repayments, then you can withdraw that additional money when you need to (you can’t do this on fixed-rate loans).

 

Land loan
A land loan lets you buy a block of land without the pressure to build on it as soon as possible. Land loans are usually variable interest for up to 30 years.

 

Construction loan
For buying land, building or renovating your home, a 12-month construction loan can be the best way to go. Usually, up to 90 per cent of the property value can be borrowed.

 

Non-PAYG loans
For self-employed people, a home loan can still be arranged using differing supporting documentation that shows your ability to service a loan and might include BAS and bank statements. You self-certify your income, which will need verification. You may be able to borrow up to 80 per cent of the property’s value.

 

Equity release
This loan type allows you to convert a portion of your residential property ‘asset’ into cash or an income stream while still allowing you to continue to live in your home.

What Is A Low Doc Home Loan?

A mortgage created for the self-employed.

If you’re self-employed, you may have found it difficult to get a traditional mortgage. Don’t despair. The low doc home loan has been designed specifically for the self-employed.

The dilemma of the self-employed

If you’re self-employed, the goal of your accountant is to minimise your taxable income. Unfortunately, while this means you pay less tax, it creates problems when you try to borrow. While you might know that you can service a loan, your books don’t back you up, or your paperwork may not be up-to-date. As a consequence, the self-employed often find it frustrating to obtain a Home Loan.

Consider the low doc home loan (or lo doc home loan)

While the self-employed often can’t satisfy traditional lending criteria, they can be perfectly capable of servicing a loan. As a consequence, the low doc or lo doc loan was born. Low doc loans don’t require the same level of “documentation” as normal loans. If you have difficulty documenting your financial position with regular pay slips, tax returns or business financials etc, a low doc mortgage could be a good solution.

If you would like to know more or you think this might be an option for you, talk to us today!

When Was Your Last Home Loan Health Check?

Circumstances can change, leaving your home loan less suitable than it was originally. A home loan health check can reveal if you’re paying too much.

What’s involved?

We can do a full home loan health check for you either in person or over the phone. We will check if your loan is still competitive and still suited to your individual needs.

Having an expert do this for you can also take the stress out of the process for you. It is advisable to get this check done at least once a year, or if your circumstances change.

Questions to ask

Be aware of what you want checked. Think about the following when you speak to your adviser:

  • Am I paying an unreasonably high interest rate?
  • Am I paying high fees?
  • Am I happy with the service I receive?
  • Does my loan give me the features I need?
  • Am I paying for features I don’t use?
  • Have my financial circumstances changed

Benefits

A home-loan health check will generally cost you nothing and could save you thousands. Your home loan features could be improved or you could find yourself with a lower interest rate. A better payment structure could also be introduced, making your repayments more manageable.

Checking the state of your current loan could uncover the possibility of taking out additional finance, which can consolidate any other debt you may have or help you purchase an investment property

 

We give all our clients an Annual Mortgage Health Check to ensure they are still getting the best deal suited to them. If you would like a Mortgage Health Check done now, contact us today!

What’s The Secret To Buying Your First Home?

Saving for it.

Saving for a home loan or mortgage isn’t glamorous but it has to be done. So here are some savings tips for first home buyers to help get you into the property market.

How much should You be saving?

One of the first rules of saving is to set a goal. But what should that goal be? Different people have different needs, but a rough guide is that you should be saving 10% of your pre-tax income. Not saving anything like that? Read on.

What are you spending?

To help with saving, you need to know what you’re currently spending. And not just on the big items like rent, utilities and groceries. Get yourself a notebook and every time you spend money, write it down. Everything. For at least a month but preferably longer. You’ll be surprised where your money goes.

What do you really need to spend?

If you’re a typical first home buyer, you probably haven’t been exercising a lot of financial restraint to this point. Invited out to dinner? You go. See shoes you like? You buy. Take lunch to work? Are you kidding? There’s nothing wrong with that, but if you really want a home, you’re probably going to have to start making some sacrifices. Look through your spending record and decide what you’re willing to give up. You might decide, for example, that life would still go on if you didn’t spend $1500 a year on coffee.

Get rid of credit card debt

You probably used to pay your credit card off every month. But then one month you couldn’t quite manage it and things snowballed from there. That credit card debt is killing you. It is expensive money and you need to eliminate it. Consider transferring the debt to a new card that gives you an interest-free grace period, and save like mad to get your balance down to zero as soon as possible. Then consider the old trick of keeping your credit card in a cup of water in the freezer.

A savings history

If you’ve spent everything you’ve earned – and then some – don’t be surprised if the mortgage market doesn’t put out the welcome mat. lenders like to see proof that you can save. So start putting something aside every month and you’ll be surprised how quickly it adds up – and how much more popular you’ll be among the lenders.

Want more savings tips? Talk to us today!

Explainer: How RBA Rate Changes Affect Your Interest Rate

With the RBA setting the official cash rate at all-time lows, it’s a good time to work out how this impacts the interest rate on your home loan and whether you are getting a good deal or not.

When the interest rate on your home loan fluctuates, it can feel as though you don’t have control of your debt. Despite being frustrating, interest rate changes are a part of every loan’s lifespan and warrant your consideration.

The interest rates that banks charge on their home loans are influenced by the Reserve Bank of Australia’s (RBA) cash rate.

The cash rate is reviewed by the RBA on a monthly basis in order to safeguard Australia’s economic stability. The cash rate is the rate charged on loans made between the RBA and your lender. This, in turn, has a very strong impact on the interest rates your lender charges you.

“The RBA supports the banks with liquidity facility,” explains Advantedge General Manager Brett Halliwell. “The RBA is a bank to the banks. The cash rate is effectively the rate at which the RBA will lend to the banks, and what the banks effectively use as a reference rate for other things.”

When the cash rate is changed by the RBA, lenders decide whether or not to mirror the new rate in the interest they charge their mortgagees.

This is entirely up to the lender in question and depends on the market and how the lender is performing at the time of the cash rate change.

“If you look at the mortgage market, specifically by itself, it is very competitive,” Halliwell says. “It is about the lender trying to get the right outcome on the deposit side of the balance sheet within the context of a very, very competitive marketplace, but recognising that a reference rate has changed and, therefore, looking at where they stand.”

Some lenders choose to shift their interest rate changes higher than the RBA’s cash rate change and, in these instances, other lenders may be offering lower interest rates than the one you currently have.

Keeping track of how your lender manages cash rate changes and where that leaves you as the person paying the interest can be time consuming, and is made more difficult by fees, charges and the flexibility offered by different loan products, which all need to be weighed alongside the interest rate.

A simple way to regain control of your interest rate is to lock it in for a period, if you believe rates are not likely to fall further. Fixed rates offer less flexibility, but more certainty.

We are familiar with the different lenders and their responses to cash rate changes, and can track interest rate fluctuations across a panel of lenders to ensure you’re getting a great deal.

Should I Have Fixed Rate, Variable Rate Or Split Rate?

That depends on who ‘you’ are.

When you take out a mortgage or home loan, you can choose to have an interest rate this is fixed, variable, or split (a combination of the two). There is no right or wrong option – it all depends on your circumstances.

Fixed rate home loans

With the fixed rate home loan, the interest rate on your mortgage doesn’t change for an agreed period (usually 1-5 years) – no matter what happens to official interest rates.

Variable rate home loans

With the variable rate home loan, the interest rate on your mortgage can change. If official interest rates go down, your interest rates go down too. However, if the Reserve Bank increases interest rates, your home loan rate will probably rise too.

Split rate home loans

A split rate mortgage combines elements of the fixed rate and variable rate options. e.g. You can have 80% of your home loan at a fixed rate , while the remaining 20% is at an interest rate that varies with the market.

Which home loan interest rate option is best?

Because it is absolutely predictable, the fixed rate home loan can give you greater confidence that you can meet your mortgage repayments regardless of changing economic conditions. The disadvantage is that it generally lacks flexibility.

If official interest rates fall, the variable rate home loan can save you money, but you need to consider the risk that your mortgage payments could rise in the future. If you are contemplating a low introductory or honeymoon rate for an initial period you will save initially, but you must find out what the rate will be when the ‘honeymoon’ is over. The lowest initial interest rate doesn’t always mean the better deal.

The split rate home loan gives you some of the benefits of both fixed rate and variable rate loans. You won’t save as much as a full variable rate loan if interest rates fall, but neither will you be as exposed if interest rates rise.

Home loan interest rates: you need to know more

To understand more about which home loan interest rate option is appropriate for you, talk to us today!

Loan Protection: Borrow Confidently.

Everyday life events can and may impact on your ability to meet your loan repayments. Making you aware of loan protection is my moral responsibility so you can make and informed decision. Its about making sure you can service your loan.

Protect what matters most to you

You owe it to yourself and your family to think about how you can protect your mortgage and your lifestyle. A Loan Protection Plan might be a good place to start if you’re worried about any of the following:

  • how you would repay your mortgage if you were to fall seriously ill or have an injury
  • what would happen to your family if you were seriously ill (or worse)
  • how much cover you might have elsewhere
  • you think you might be covered by your super (It’s estimated that life cover within super is on average only 20% of what is needed. The average insurance amount payable from super is $70,000 – for those who take the default level of cover)

Illness doesn’t discriminate

Here are some of the people that have been helped

Gender Age Reason for Claim Benefit Type Claim  Amount
Female 27 Cancer Living Benefit $102,465
Male 37 Heart Attack Living Benefit $66,836
Male 47 Cancer Terminal Illness $183,584
Female 59 Cancer Death and Terminal Illness $341,136

 

Once you have a home or a investment property, it may be one of your biggest financial assets. You’ve worked so hard to secure it, so it’s worth protecting.

 

If you would like to find out more or get a Loan Protection Plan put in place today and enjoy the first 30 days of cover for free, contact us now!

 

How To Pay Off Your Mortgage Faster

When was the last time you looked closely at your loan, the progress you are making on paying it off and how it compares to others in the market? Analysing your mortgage could mean savings for you, as well as the opportunity to pay it off more quickly, invest in other assets or reach financial freedom sooner.

Make smaller payments, more often

To cut the size of your payments, make more of them. This could even see you pay off your loan faster, and therefore pay less interest overall.

If you pay your mortgage monthly, consider changing to fortnightly repayments. For example, if your mortgage equates to $2400 a month, cut this in half and pay $1200 each fortnight. As well as having more manageable payments to make, by the end of the year you will have paid off $31,200 rather than $28,800.

Pay just a little bit extra

A minimum repayment is just that – for most loans there is no reason you can’t pay more, whether here and there or regularly.

By rounding up to a full number or contributing an extra $100 or even $10, you’ll significantly reduce your mortgage. It may also be worth considering putting all bonuses, tax returns and gifts into your mortgage.

Don’t decrease repayments when interest rates fall

Even if your repayments are lowered when fees and interest rates decrease, it doesn’t mean that’s all you have to pay and, by keeping your repayments at the same level when interest rates are lower, you will pay down more of the principle with each payment and make speedy progress on your loan.

Offset it

If you can, use an offset account. A mortgage offset account is linked to your loan and the interest payable on the loan from month to month is calculated by deducting what is in your offset account from your current loan. For example, if your mortgage is $500,000 and your offset account has $10,000 in it, you will only pay interest on the remaining $490,000.

An offset account will save interest while still giving you access to your savings. It also means investors can preserve the tax deductibility of the mortgage.

Find a better deal

Ultimately, your mortgage needs to suit you and your circumstances, or you will wind up paying too much. If you think your current loan no longer matches your situation, speak to us. We will be able to find the right product for you, as well as negotiating appropriate rates on it.

Of course, it is important to make sure that your lender doesn’t charge fees for extra repayments, refinancing, or any other steps you take in an attempt to save on your loan. We will be able to provide details and make sure you have a loan that lets you pay down your balance sooner.

If you want to pay off your mortgage faster, have a chat with us now, we have the expertise to make sure you aren’t paying too much and are in a loan that suits you.