News and Features

7th December 2007
Lock it in please!

7th December 2007
Tax deductible home loans?

29th November 2007
Move house but keep your loan

23rd November 2007
How to avoid extra honeymoon rate baggage

2nd November 2007
Swinging singles - Spend up big on the house

2nd November 2007
The Secret - How to boost your borrowing power

26th October 2007
Loans to build your dream

26th October 2007
Top ten ways to beat the rate hike

19th October 2007
How to navigate fee-infested mortgage waters

12th October 2007
Spending the kids' inheritance - Right or wrong?

12th October 2007
Going away on holiday? - Take a mortgage holiday

12th October 2007
How to fit your home loan around your lifestyle

5th October 2007
Money matters - Who can you trust?

5th October 2007
U.S. Mortgage meltdown - What it means for Australia

28th September 2007
In the dark

12th September 2007
Aussies rush to fix mortgage rates

13th September 2007
What caused the sub-prime crisis?

12th September 2007
Crisis proofing your mortgage

12th September 2007
Heads or tails on future rate rises

6th August 2007
Rate Rise Jitters - what to do about them

15th June 2007
Avoid the sting on sunset

14th May 2007
Equity Rich, Cash Poor? - There are ways to overcome this financial obstacle

11th May 2007
Building Your Dream Home? - Think about a construction loan

10th May 2007
The Loan That Never Dies - Don't create a loan that never dies

4th May 2007
Split Mortgages - Up or down? Now could be the right time to hedge your bet and split your home loan.

Hints & Tips

Make sense of it all with these Home Loan hints & tips.

About Home Loans
Fixed or variable rate?

Selecting mortgage features - a few tips
Things to know before visiting your lender
Questions you should ask your lender

Low Doc Loans - do I need one?
Credit-Impaired (non-conforming) loans - do I need one?

What is a Reverse Mortgage - do I need one?
Reverse Mortgage General Tips
What should I ask about Reverse Mortgage products?

About Home Loans

When deciding on a home loan, you have four interest rate options to consider:

introductory or 'honeymoon' rate
variable rate
fixed rate; or
split loans (a mix of fixed and variable rates)

First up, you should clearly understand your needs, as some product features you may want come at a cost. You also need to understand the term of your loan, if the home loan has a redraw or offset facility and, if it does, how much does it cost to use. Another important question to ask is can you make additional repayments without penalty? Lastly, ask whether your home loan give you any other benefits with the bank.

Fixed or variable rate?

Pros - Fixed Mortgage

Fixing your interest rate guarantees your repayments will stay the same for a set period of time and gives you a measure of protection against rate rises. This gives you the ability to budget more accurately over the the term of the loan.

Cons - Fixed Mortgage

If interest rates go down, you're stuck with higher repayments. Fixed loans usually offer less flexibility with their features and have fewer facilities if you wish to make extra repayments and maybe access that money down the track. There are, usually, higher penalties if youo pay out your loan earlier than the fixed period.

Pros - Variable Mortgage

If interest rates go down, you benefit from lower repayments. On average, interest rates are lower with a variable mortgage. The standard variable loan offers more flexibility with features and gives you the facility to make additional repayments and access that money later on. Extra repayments can also be used to reduce the total amount of the interest owed.

Cons - Variable Mortgage

The basic variable loan is less flexible with features and there are fewer facilities to make additional repayments and access that money later on. If interest rates rise, so will your repayments.

Doing your own Mortgage Analysis

When analysing your requirements, remember it all boils down to whether your finances can cope with the variances of interest rate movements during the period of your loan. The main reason you fix your interest is because you are confident the rate will go up in the next few years and, in theory, you should actually save money by committing to the fixed interest. For some borrowers, it is important to know exactly how much of their income they must pay towards their loan. These borrowers don't like 'surprises' such as rate rises that throw their budgets into disarray. On the other hand, a popular way to go is to fix part of the loan and leave the rest as variable. So you get the best of both worlds - a partial hedge against rate rises and a benefit if rates go down. Be mindful that there are usually costs involved with fixing or unfixing the rate of your loan and in switching from one lender to another, so make sure the benefits outweighs the costs.

Selecting Mortgage Features - a Few Tips

Features cost money and you may well find a cheaper product with less features will do the job for you. Check the CANSTAR CANNEX mortgage star ratings report for a true idea of value for money. The star ratings researches more than 200 product features and using it can save you a lot of time, while arming you with valuable information.

If you expect some lump sum payment in the future and are planning to deposit this into your mortgage, check if a fee applies when the lump sum exceeds a specified amount. A full offset account can be a useful feature. Later on, when you have built up some equity in your home, you may want to access funds for renovation, etc and this could be the perfect way to do it.

Check mortgage portability, another useful feature if you plan to sell the house and buy another of equivalent value. You can use the same mortgage for the new home, cutting out the extra time and expense involved in arranging a new mortgage.

Things to know before visiting your lender

Understand what offers are out there and the common terminology used in mortgage products - see our JargonBuster section for help. Lastly, be very clear on your need (e.g. must have a redraw and split options) before you talk to any lender.

Questions you should ask your lender

Is there any ongoing fees on the product?
Any restrictions in paying your loan earlier? (check deferred establishment fees and early repayment penalty)
Can the loan be taken as part of a package?
Ask the comparison rate of the loan (check AAPR).
Make sure examples highlighted by your lender actually apply to you. For example, in order to save, will you really have $5,000 in your full offset account for the life of you loan?

Low Doc loans - Do I need one?

The answer is yes if you are self-employed with limited financials (2 years), or you receive fluctuating incomes from a variety of sources. A low-doc path is also wise if you choose not to fully disclose your financial situation when applying for a home loan.

Credit-Impaired (non-conforming) loans - do I need one?

You do if your past includes being declared bankrupt, having unpaid bills/invoices or missed mortgage payments on your financial record.

What is a Reverse Mortgage - do I need one?

Although the concept of a reverse mortgage can be appealing, it may not be the best option for everyone who is asset rich but cash poor. As the name indicates, a reverse mortgage works the opposite way to a standard mortgage. Instead of you repaying a lender, the lenderwill give you money from your equity in the property. Thus, you are not building equity, but reducing it.

To obtain a reverse mortgage, borrowers need to own their property outright. For a property to be considered eligible for use as an asset for a reverse mortgage, there must be no other outstanding claim to ownership. If a retiree is only looking for a short-term loan (e.g. $5,000), they would be better off taking out a personal loan from a relative or financial institution.

For larger amounts, the borrower might even still be better off selling their property and purchasing a cheaper one. If, however, you've decided you would still like to remain in your property for an extended period and don;t mind the property being sold once you leave the premises for good, then a reverse mortgage might be ideal for you.

A reverse mortgage or an equity release product enables retirees to convert part of the equity in their homes into stream of incomes or lump sum payment without having to sell the home, give up title, or take on a new monthly mortgage payment.

Instead of making repayments into the mortgage, borrowers will have options to receive regular payments or a lump sum payment from lender as part of releasing equity from their house.

It is designed for retirees who do not have a regular stream of income, equity rich and need cash to cover their retirement lifestyle.

Reverse Mortgage General Tips

Decide whether you need to release your equities from your property as a lump sum payment, instalments or as a combination of lump sum and instalments.
Ask your lender whether they have a "no negative equity guarantee", which ensure that they can't ask you to leave your house when your debt is greater than the value of your property.
Interest rate options: other than standard variables and fixed rate loans, some providers offer a fixed rate for the life of the loan, or a variable with a capped rate.
Ask whether you can make a repayment to reduce your debt.
Compare minimum draw down amounts. Maybe you would prefer to withdraw $100 a month rather than $50,000 in one hit.

What should I ask about Reverse Mortgage products?

Will equity release payments affect the social security benefits and income tax position of my partner and I?
How much can I borrow now and as I get older?
How much will upfront and ongoing fees cost me over time?
Under what conditions will my loan become due?
Is the interest rate variable, fixed for a period or the life of the loan, or can it be split between variable and fixed?
Can my partner still reside in the property if I, the primary loan applicant, die?
Are there any penalties if I decide to repay the loan earlier than expected?
Are there any other obligations such as home maintenance, property taxes and insurance that I should be aware of?

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