HOME LOANS
The National Consumer Credit Protection Act Legislation (NCCP) introduced by the government strongly advises all mortgage buyers to obtain independent financial advice before signing a bank contract and if you don’t you are doing this at your own risk.
This is known as “Buyer Beware” legislation.
The home mortgage is one of the most crucial piece of the financial puzzle and getting it wrong can mean the difference between success and failure.
Our priority is to achieve a correctly structured, cost-effective finance strategy for you.
This includes sourcing the best available interest rates, low upfront and ongoing costs as well as the correct loan structure to suit your personal and investment situation.
As Mortgage Brokers and qualified Financial Planners (Cert IV Accounting) we can structure your loan to suit the complexities of your lending. The correct structure is critical to your long term goals.
“Structure” will always make the best use of a Product.
As qualified financial advisors and finance specialists we are independent from the major banks.
This means that we are under no obligation or pressured to provide a home loan that does not meet your needs.
There are plenty of great deals around if you know where to look.
We apply a simple philosophy:
Client: FIRST Product: SECOND
As a Mortgage Broker we understand the real estate market, and have access to a range of major banks and secure lenders.
* General Advice Warning – End of Page.
LOAN STRUCTURING
WHAT IS LOAN STRUCTURING?
The correct loan structuring advice can increase the tax effectiveness of your loans, help protect your assets, and can make your loans more functional.
LOAN STRUCTURING TAKES INTO CONSIDERATION
- Loan Types
- Suitability of the Bank
- Ownership of the Asset
- Borrowing Entity
- How Existing Property Equity can be utilised.
THE CORRECT LOAN STRUCTURING ADVICE SHOULD:
- Increase the Tax Effectiveness of Your Loans.
- Help provide additional Asset Protection against potential claims.
- Ensure your personal lending is separate to your Investment lending.
Each situation is different and requires specific structuring for your given scenario.
We will work with our clients and other professionals to determine the best outcome:
- Offering the Right Loan type and features.
- Offering more than one bank to do your lending and banking with.
- Separating your Investment Loans from your Home Loans.
- Determine the purpose of the borrowings.
- Implementing one or a range of Debt Reduction strategies.
- Determining who should own the Security (Property) or who has encumbrance over the property.
OWNERSHIP
Should a borrower be single or partners are involved in high risk industries or professions, then perhaps a specific tax structure should be discussed in conjunction with your solicitor or accountant.
WE CAN HELP WITH
- Home Loans
- Investment Loans
- Commercial Loans
- Debt Reduction
- Asset Finance
* General Advice Warning – End of Page.
INVESTMENT LOAN
An investment loan is a type of home loan that someone takes out to buy an investment property. It is a mortgage solution for those who want to buy a property and rent it out to receive income, but can’t afford to buy the property without a loan.
Other Investment Loan can be:
- Equity Loans
- Commercial Loans
- Business Loans
These loans can be either a Variable or Fixed Rate Loan.
* General Advice Warning – End of Page.
VARIABLE RATE LOANS
What is a ‘Variable Interest Rate’?
A variable interest rate is an interest rate on a loan that fluctuates over time, because it is based on an underlying benchmark (Reserve Bank Rate) interest rate that changes periodically. The obvious advantage of a variable interest rate is that if the underlying interest rate declines, the borrower’s interest payments fall, conversely, if the underlying index rises, interest payments increase.
With options to suit your needs now
- Suitable for personal or investment purposes
- Suitable for construction loans
- Principal and Interest or Interest-only repayment options
- Loan terms from 8 to 30 years
- Choose weekly, fortnightly, or monthly repayments
Getting the most from this home loan
- Make additional repayments without penalty
- Access additional repayments through a Redraw Facility
- Split your loan across fixed and variable rates
- Use our Add Loan feature to increase your borrowings
- Include in our Home Package Plus for more savings & benefits
OFFSET ACCOUNT
A mortgage offset account is a savings or transaction account that can be linked to your home loan. The balance in this account ‘offsets’ daily against the balance of your home loan before interest is calculated. An offset account can help you cut years off your home loan term and save money on interest.
Example:
If you have a home loan balance of $250,000 and have $10,000 in your 100% offset account, you’ll only pay interest on a home loan balance of $240,000. Because your home loan interest is calculated daily, every dollar in your offset account can save you money in interest. That means more of your repayment goes towards paying down the principal, helping you to repay your home loan faster.
Types of Offset Accounts:
- 100% offset account: 100% of the funds in your offset account are applied against your home loan balance before interest is calculated.
- Partial offset account: A partial offset gives youa reduced interest rate on the part of your home loan equal to the balance of your offset account. This can be far less effective than a 100% offset account.
Things to Consider:
- There are many kinds of offset accounts, and the features will differ depending on the loan type and For example, not all offset accounts are 100%, some may only be partial. Fixed rate home loans may only allow 100% offset for a set period, or other conditions may apply.
- You may incur monthly fees for having an offset account. It pays to look at the total charges associated with your home loan package to determine if having this product leaves you better off financially.
- Some lenders may require a minimum balance in the offset account.
- Weigh up the pros and cons carefully to decide if an offset account is the right product for your situation.
* General Advice Warning – End of Page.
FIXED RATE LOANS
A fixed interest rate loan is a loan where the interest rate doesn’t fluctuate during the fixed rate period of the loan. This period will range from 1 to 10 years. This allows the borrower to accurately predict their future payments.
KEY FEATURES
- Fixed interest rate and repayments
- At expiry of the fixed term, the loan will automatically revert to the Standard Variable rate
- Option to refix the interest rate at expiry of initial fixed term for a further fixed period at current prevailing fixed rates
- Option to lock in a rate at the time of application
- Suitable for personal or investment purposes
- Choice of fixed terms from 1,2, 3, or 5 year fixed terms
- Principal and Interest or Interest Only repayment options
- Loan terms from 8 to 30 years
ADVANTAGES
- Makes budgeting easier –– You know exactly what you’re repaying. Whereas with a variable rate loan your repayments can ‘vary’ as rates change.
- Rate rises don’t matter –– If interest rates rise above your fixed rate, you will be happy knowing you are paying less than the variable rate.
DISADVANTAGES
Here are the disadvantages of fixing your home loan:
- Rate drops will annoy you – – If rates go down below your fixed rate you will be repaying more than the variable rate and you won’t benefit from the rate drop.
- Can you make extra repayments? – Extra loan repayments are often not allowed if you have a fixed rate, or may only be allowed with a fee. Variable rate loans usually allow you to make extra repayments at no cost.
- Break fees – Fixed rate loans may also have a break fee if you change or pay off your loan within the set period e.g. if you sell your home
LOAN SPLITTING – VARIABLE & FIXED
Another option is to hedge your bet and divide your total lending into two loans, one FIXED and the other VARIABLE.
BREAKING A FIXED RATE HOME LOAN CONTRACT
A guide to the costs and fees associated with breaking a fixed rate home loan contract.
A fixed rate home loan is a legal contract guaranteeing that you’ll repay a fixed amount of interest on a loan for a specified time period. If you decide to break that contract by switching, your existing lender must be compensated for any loss they incur. Breaking a home loan during a fixed interest period can be expensive, which is why it’s always worth getting a quote from your lender before breaking a fixed interest rate home loan. It’s worth thinking sensibly about the flexibility you’ll need in future with your home loan before locking in a fixed interest rate to avoid having to pay break costs.
HOW IS THE EARLY REPAYMENT COST CALCULATED?
Lenders will typically finance your home loan on the wholesale market with a fixed maturity date. At the time you switch loans or repay your loan early, the bank will use the Bank Bill Swap Rate (BBSR) or BBSW to calculate your early repayment cost. Current BBSRs are displayed on the homepage of the Australian Financial Markets Association website.
* General Advice Warning – End of Page.
DEBT REDUCTION
There are numerous strategies that are quite effective in reducing debt and pay off your loan faster, slash years off your loan term, and save many thousands of dollars in interest.
The secret to most of these strategies are simply “pay a little more”, and the trick lies in the how compound interest is calculated.
Others are more complexed and involved budget restraints can be utilised along with the separation of Investment and Home loans is where we can help.
HERE ARE SOME OPTIONS FOR VARIABLE RATE LOAN:
INCREASE YOUR HOME LOAN REPAYMENTS
Increasing monthly repayments on your home loan by the smallest amount can take years off the life of a mortgage. Combining this with fortnightly payments can have a surprising affect on the principal of your mortgage over a short period of time.
MAKE EXTRA HOME LOAN REPAYMENTS EARLY
Any extra mortgage payments that you make from the very beginning, such as making your first repayment on your settlement date, all goes towards reducing the principal on your home loan and minimising interest payments.
REDUCE YOUR MORTGAGE INTEREST RATE
One of the biggest opportunities to pay off your mortgage faster is to find a cheaper interest rate from the start. The key is to find a home loan that offers a cheap interest rate with lower fees and most importantly, a flexible home loan, we can help.
FORTNIGHTLY REPAYMENTS
Where possible, choose a home loan that allows you to make weekly or fortnightly repayments rather than monthly.
LUMP SUM DEPOSITS
Should you have any windfalls such as Lotto winnings, bonus income from your employer, tax refunds, or even an inheritance, consider depositing it to the loan rather than just spending it. A small deposit now will pay off with long term compounded savings in interest!
SET UP AN OFFSET BANK ACCOUNT
An Offset Bank Account helps reduce interest costs on a home loan by linking the loan to a separate savings account. The balance in this account ‘offsets’ the home loan principal. Interest is then calculated on the home loan principal minus the balance in the offset account.
REVIEW AND NEGOTIATE
Over the life of your home loan, there will be numerous changes both in the home loan market and to your personal financial situation. Make sure you regularly review your loan and lender. You may be able to negotiate a better deal on rates or fees that will again make a huge difference over the course of the loan.
MAINTAIN HIGHER REPAYMENTS
Should interest rates reduce don’t reduce your current repayments, maintain your repayments at the higher level.
Contact us to make the change!
General Warning Advice:
The information contained in this website is for general information purposes only. The information is provided by BDM Mortgages and while we endeavor to keep the information up to date and correct, we make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability or availability with respect to the website or the information, products, services, or related graphics contained on the website for any purpose. Any reliance you place on such information is therefore strictly at your own risk.