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What kind of home loan repayments are right for you?

For the month of January 2019 alone Australian Bureau of Statistics data shows housing lending in Australia almost topped $65 million. If you’re thinking of getting on that ladder then it’s essential that you plan your loan and repayments in a way most suitable to you and your needs.

We’ve whipped up a quick a summary of the basics when it comes to the options for your mortgage repayments.

Principal and interest: aiming to own

This kind of home loan repayment will necessitate paying off the amount that you have borrowed as well as paying interest. This usually occurs over an agreed term of between 15 and 25 years with the goal of eventually owning the home outright. A Reserve Bank report shows that around 60 per cent of home loans in Australia are principal and interest.

This is the most common loan type in Australia as it is inherently less risky than many other loan types.

Principal and interest: Short term or long term?

When establishing a principal and interest loan it’s essential to give serious consideration to the repayment duration of your mortgage. There are two important things to consider here:

  1. How much can I afford to pay?
  2. How quickly can I pay my loan off?

These are essentially two parts to the same question. When figuring out how much you can repay per month it’s essential that you consider all of the extra costs, and leave wiggle room for the unexpected. If you repay at the very limit of your means, one surprise expense could derail your ability to repay your mortgage. Making extra repayments, when possible, can give you some financial buffer room as well. On the other hand the sooner you repay your mortgage the less interest you’ll pay and the quicker you’ll own your home outright.

To give you an idea of how much your repayment length can affect the amount of interest paid let’s have a look at a loan of $500,000, with a 5 per cent interest rate. Over 20 years this will cost you $291,947 in interest repayments. Extend this to 30 years and you’ll pay $466,279.60. That’s a difference of over $170,000.

Interest only: pay less own less

An interest only loan is exactly what it sounds like. You’ll only make interest repayments (not principal): a strategy that often appeals to investors. Reserve Bank data shows that a shockingly high 40 per cent of loans are structured in this way.

CoreLogic RP Data can help illuminate the motivation behind these loans.

The research company notes that property in the capital cities generally gains value year on year – making property in such areas ripe for investors armed with interest only loans.

Interest only: Negative gearing

By paying interest only, you minimise your immediate expenses while still taking advantage of capital gains. This is where negative gearing comes in. Negative gearing means that you’re making a loss on your property – interest repayments exceed your rental income.

Once again this is a method for investors to take advantage of capital gains. Making a loss on your property also may have several tax benefits that will offset the tax you pay on your income.

There’s certainly a lot to mull over when it comes to how you should repay your loan. What’s right for you will depend on a variety of factors including what you hope to achieve with your home, your resources and even your lifestyle. Speak to us about your options and we’ll be able to tailor a loan and repayment plan to you personally. That way you’ll be happy at home quicker than you can say capital gains.

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3 simple reasons why buying is better than renting

When you’re young, home ownership seems impossible. Between HECS debt, low-paying jobs and the sheer financial wall to climb before you have a deposit, buying property can seem incredibly daunting.

But as you go through life, it becomes more and more of a reality. As you reach the point where buying real estate becomes realistic, you’ll have some big decisions to make. We’ve put together three reasons to take the leap from renting to buying.

Pay yourself not your landlord

Across our eight capitals, CoreLogic RP Data notes that the median rent is $433 per week. Pay that across a calendar year and you’re putting over $22,000 a year in your landlord’s pocket. But what if you could pay it back to yourself? That’s the power of property.

If you can get past the initial expenses such as paying your deposit and securing a home loan, you’ll be increasing your net worth weekly by paying off your mortgage. You can even use the money you’ve paid into the property as equity to buy a second! This shows that although buying a home may be difficult, it’s well worth it as a method of taking control of your financial future.

 Take advantage of the market

Capital gains are a beautiful thing indeed. While they seem to be slowing somewhat in the current market they certainly aren’t stopping as they are sitting at roughly 7 per cent for the year averaged across all five capital cities, according to CoreLogic.

The value price increases have been happening in a similar fashion for the last 30 years as shown by a Reserve Bank report. This suggests that in the long term, property values are likely to trend upwards – meaning that your investment should appreciate over a long period of time.

 Secure your financial future

Retirement is a costly exercise. According to the Association of Superannuation Funds Australia it’ll set you and your significant other back almost $60,000 a year.

The Australian Bureau of Statistics reports that the average age at which one retires in Australia after 45 is 54 years, while the average life expectancy is 82 years. This means that over 28 years of retirement you’ll require almost $1.7 million to live a comfortable life. Purely relying on savings is unlikely to get you there, but reaping the long term rewards of owning property just might!

First home buyers in Victoria are still eligible for stamp duty exemption on properties under $600,000 – making home ownership more achievable for young Australians. To have a chat about the steps forward towards first home ownership, give us a call on 1300 55 90 84 or contact us.

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It’s possible for everyday Australians to invest in property

Property investment is possible for anyone, not just the mega-rich. Everyday Australians with equity in their homes have already taken the first step, and the next is surprisingly easy despite how it may seem.

Let’s have a look at the simple logistics of taking the first steps towards investment with the goal of making your property aspirations a reality.

Using equity as leverage

If you’ve built up equity in your home, either through capital gains or mortgage repayments, you might have a fairly easy ride to buying your second home. Using this equity to place a deposit on another property is doable, but most banks will require that you still have 20 per cent equity in your original home.

There may be several logistical hoops to jump through, so hiring an experienced mortgage broker can make the entire process less confusing.

 Balancing rental yields and capital gains

When you’ve secured loan pre-approval and are ready to buy your investment property there are two key considerations:

  1. The potential it has for capital gains.
  2. The rental yield of the property.

Maximising these two is ideal, but often investors will settle for one or the other. Smart Property Investment lists NSW suburb Bodalla as one of the most lucrative in Australia, with a median value increase of almost 50 per cent over the last year. Victorian suburb Flinders saw a similarly impressive gain.

The moral of the story here is – open your mind, do your research and buy based on logical decision-making (not emotion) and you may find a capital gains gold mine.

Rental yields are an important consideration for new investors, particularly those paying a mortgage near the edge of their repayment capacity. Find a property with a high yield and you may be able to cover your entire second home loan with rental income, making your mortgage repayments easier to manage.

 Structuring your finances

Getting your second mortgage is a big step so it’s essential that you choose a home loan product that is perfectly suited to your needs. Speak to us today and give yourself the peace of mind knowing that you are getting the right loan, which is suited to your needs right now.

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Will ‘renovesting’ be the 2019 property trend?

With lending tightening up and property prices on a slight decline, could staying put and ‘renovesting’ be the best option for home owners?

 What is ‘renovesting’?

‘Renovesting’ is another way to say, “improve rather than move”. In lieu of selling up, property investors and homeowners may be looking to increase the value of their properties by enhancing what they already have.

By focusing on bettering existing properties, investors are able to boost the value of their current investments without the potential struggle of navigating a difficult property market.

 What kind of renovations are worth doing?

Worthwhile renovations can include remodelling bathrooms, refreshing the house’s facade, or even something as simple as repainting.

Certain renovations are more likely to add value to your home than others. It’s important to consider how much you’ll have to spend on renovations and what sort of returns you can reasonably expect.

 How can I fund my ‘renovesting’?

Renovations often require immediate access to stacks of cash you simply might not have. Fortunately, there are a number of options available to make your renovesting dreams a reality, including:

  • Apply for a personal loan – a personal loan can finance small renovations with a fixed rate for the entire duration.
  • Use the equity in your home – borrowing against your home will likely get you a more competitive interest rate but will set you back in your mortgage repayments.
  • Refinance your mortgage – reviewing your mortgage and securing a lower interest rate can save you thousands of dollars which can instead go towards renovations.

 How our team of loan specialists can help you

If you are thinking of renovesting then talk to one of our team today to work out which finance option is right for you.

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How to get your finances back on track in 2019

Setting your New Year’s resolutions is the easy part. It’s actually following through on those goals that tends to be where a lot of us slip up. Now that we are in April here are three helpful tips for taking control of your financial situation this year.

Financial Tip #1 – Cut back on unnecessary spending

In the interest of saving money, many Australians are planning to limit their spending on frivolous purchases. Galaxy’s research found that 47 per cent of Australian millennials were planning to save money by spending less on eating out or buying takeaways. Meanwhile, 32 per cent of all Australians intend to reduce bills by minimising energy consumption, and a savvy 23 per cent intend to switch to cheaper providers or seek loyalty discounts.

Financial Tip #2 – Consolidate your credit card debt to a streamlined product

If you have stacks of credit card debt making it difficult to see the path towards financial freedom, you might want to consider consolidating into a single personal loan.

This works by taking out a single loan in order to pay off your various cards. Your finances are then simplified to a single product, making it easier for you to keep track of things and helping you to save money on interest.

For this to be worthwhile, the new loan should have a lower interest rate than that of your existing debt. Talk to our team of loan specialists to work out which personal loan is right for you.

Financial Tip #3 – Review your home loan structure

Believe it or not, your savings goals can become a reality in the long-run by spending more now. Say you’ve borrowed $300,000 at a fixed interest rate of 3.99 per cent — to pay this off over 30 years, you would need to pay the lender $1,430.52 each month and, if the same rate applied for that whole period, by the end you’d have paid $514,986.08, according to our mortgage repayment calculator.

By increasing your monthly repayment, you can reduce the length of your loan and thereby save on interest. For example, using the same loan as above, if you were to pay an extra $100 each month after the first year, the loan could be paid off in 26 years and 8 months and you would save over $25,000 in interest. You can also save on interest by switching to a variable loan while rates are low.

The Galaxy research poll revealed that 82% of Aussies didn’t know their current home loan rate, this valuable information could save you thousands of dollars by simply understanding where the best offers are and refinancing. Peninsula Home Loans offers we offer fee-free refinancing to ensure our clients get the best deal possible. To find out more visit https://peninsulahomeloans.com.au/free-refinancing/ or contact us.

 

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Is it time to review your interest rate?

Being aware of your interest rate can save you money in the long term. As the official cash rate and other financial conditions change, it’s possible that your interest rate is no longer the best it could be. Therefore, it’s important to regularly review your mortgage.

So, when exactly should you reconsider your interest rate?

 At the end of your fixed or introductory period

If you have a fixed loan, your rate will revert to variable at the end of the set period. This could be a good thing – variable rates have the potential to be much lower than a fixed rate. However, they can also be higher. When your fixed period is about to expire, it’s important to ask your mortgage broker if you should refinance to a better rate.

 You need tighter control over your finances

Conversely, a variable loan may be causing too many fluctuations in your finances. This may be especially problematic when you have more urgent debts to pay off.

Switching to a fixed rate loan may or may not save you money – that simply depends on how the current variable rates compare to your fixed rate. What is guaranteed with a fixed rate, however, is stability. Budgeting around other debts or loss of income is easier when you know exactly what you’ll be paying month to month.

It’s been some time since you last reviewed

We highly recommend assessing your mortgage at least every 2 years. Leaving it any later may mean that you end up losing significant amounts of money to lenders.

Find out if you’re getting your ideal rate

Peninsula Home Loans offers we offer fee-free refinancing to ensure our clients get the best deal possible. To find out more visit https://peninsulahomeloans.com.au/free-refinancing/ or contact us.For help in finding your ideal interest rate and loan structure for your situation, get in touch with our team of loan specialists today.

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Cash rate remains at historic low

The Reserve Bank of Australia (RBA) has announced that it will leave the cash rate on hold at 1.50% for another month. Governor Philip Lowe had this to say in his official statement: “Conditions in the housing market vary considerably around the country. Prices have been rising briskly in some markets, although there are some signs that these conditions are starting to ease. In other markets, prices are declining. In the eastern capital cities, a considerable additional supply of apartments is scheduled to come on stream over the next couple of years. Rent increases are the slowest for two decades. Growth in housing debt has outpaced the slow growth in household incomes. The recent supervisory measures should help address the risks associated with high and rising levels of indebtedness. Lenders have also announced increases in mortgage rates, particularly those paid by investors and on interest-only loans.” So, what does all this mean for you? As mentioned in the statement by the Governor of the RBA, there have been a number of lenders, including the Big 4, who have recently changed their interest rates at their own discretion. Keep a close eye on any rate movement, and consider whether your current loan is the right one for you, right now.

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We Come To You

“As a mobile mortgage brokerage service, I mean people are always welcome to come and visit us but generally we will go out and see clients, we will do that out of business hours, we understand that people are working. We visit clients in Melbourne during their lunch hour to put loans together and we’ll go and see people in their homes in an evening to put an application together.”

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Banks vs Mortgage Brokers

Well first home owners are a good example of why you should use a mortgage broker over going into a branch, examples of a young couple who had saved a small deposit to buy a property, they went into one main lender off the high street, that lenders they had not fitted within that lenders policy because they would only lend 90% unless they was an existing customer, so they had been told no, they’ve walked away thinking that they can’t get a home loan, then a friend of them have said why don’t you call a mortgage broker we’ve gone round and yes they couldn’t fit within that banks’ lending policy but being accredited with around 30 lenders we managed to place them with another lender who is lending policy was a little bit more were you have to declare that and the client signs to accept that they’ve been shown that all banks pay us a commission.

The Commission’s vary from lender to lender but we would consider never enough for us to put you with the wrong lender, they will have a selection of products to offer you but only their products, they will never offer you something else, so they will offer you the most suitable product that they have, and that’s all they required to do, yet you come to a mortgage broker and we will offer you we will look at all the lenders and we will find the most suitable product for you across all the lenders, it costs you nothing, we pay a commission by the banks that is how we get paid.

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First Time Mortgage

the big thing to know for the first time owners in Victoria they no longer get the first time home owners grant unless they are building a new property, and they do still get a fifty percent reduction in stamp duty, so with first home owners the biggest thing is deposit, because banks require you to have a minimum of five percent deposit plus costs for your First home owner normally it’s around about 3% issue costs, so what we normally say to a first home buyer is you need to have about eight % of what your buying, so with first home buyers I mean currently with spring 2016 if you wanted to buy, for a first time buyer normal buying a unit or a small house in lest say the Frankston area they will be spending about 400,000, for them the 8% deposit really means that they’ll need roughly around about $32,000 that’s the minimum the bank are going to need to see for them to be able to get in on a home.

Another question that comes up a lot with first-home buyers is you know the whole process what do they have to do and again this is what we speak to them about, the free conveyancing and how we handle it and make it all a little bit less stressful for them and sort of take the process away from them, so pretty much they pay the money and the deposit and they move into a house stress-free hopefully, so for your first time home buyer who’s looking to get into the housing market we will always advise them whether they feel they’re ready or not, speak to a mortgage broker, we will you go out and visit lots of people and we won’t do a loan for them for maybe two years that’s fine it’s part of our job, we will come out give you some independent advice as too whether you can ( A) get a loan, you have enough deposit you know for the area that you want to buy in.

If you’re there then obviously we will step through the home loan process and we would always advise first time buyers to get a pre-approval with the lenders, most lenders will write you a pre-approval they will assess you for lending, so what pre-approval means is that we will take an application from you but just without you finding a property, so they’ll assess your income your savings and your credit history, we will present that to the bankers on application, they’ll assess you as a person as to whether they’re willing to lend you that money when you find a property to live in, they will then issue you with a pre-approval which generally lasts three months with most lenders some will extend that to six months, so what that means is that you can then go out go to a home open or even go to an auction knowing that you’re good for that money from that lender, subject its always subject to the property being acceptable.

And there are exceptions to some banks will not lend on certain properties but generally in the metropolitan area and on Mornington peninsula there isn’t any of them around, so then you’re open to go and make an offer, once you’ve made an offer that you will be issued with contract by the real estate agent which is called a section 32 we then provide that to the lender for you and then your loan becomes unconditional, they send out a loan contract to you, you sign and then you wait, if you want to start the home loan process we always say to people what’s good to get together is your last couple of pay slips hopefully your last pay as you go summary that you received from your employer at the end of the year, it tells you what you earned and then pick up the phone give us a call we’ll come out and see you and we will take you through the home loan process step-by-step and any additional information that we need you to get we will let you know what it is

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