A Quick Guide To Home Mortgage Rates

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Home mortgages are loans that are taken to buy a property, for which the property itself is used as collateral. Owning a home is a very big, and usually a one-time investment for many. With increasing real estate prices and decreasing interest rates on loans, many people are using the home mortgage loans to buy property.

Home mortgage rates are the rates of interest that are to be paid along with the capital for taking the mortgage loan. Home mortgage rates do not remain steady over a long period of time. A lower rate means lower monthly payments, leading to lower costs on the property. Depending on the kind of interest rate, there are two kinds of home mortgage loans: Fixed Rate Mortgages (FRMs) and Adjustable Rate Mortgages (ARMs). FRMs are mortgages for which the rate of interest remains the same for the entire period of the loan. These can be for a period of 10, 15, 20 or even 30 years. Adjustable rate mortgages, on the other hand, have fluctuating rates of interest. This is ideal when there is likelihood of the rates to decrease. ARMs are preferred by people who plan for shorter periods. ARMs are offered at lower rates than FRMs to attract customers, but they also contain a certain level of risk. The fixed rate mortgages are a very predictable, safe option.

Mortgage rates fluctuate on the basis of an economic index. The mortgage bond market works according to a process called securitization. This securitization enables creation of more loans and greater mobility of funds by keeping the mortgage rates low and allowing more credit for ideal customers.

The best source for knowing about home mortgage loan rates is the Internet. Most home mortgage loan companies provide information through their websites also. These rates are updated daily. Their sites also have easy-to-use home mortgage calculators that give all information, including payments to be made each month and the tax advantages, with the single click of a button. Most of them also have financial advisors who would provide advice online, or over the phone. A professional mortgage lender would be able to provide accurate information about the mortgage loan rates as and when they are applicable.

The National Australia Bank is keeping its variable mortgage rates on hold despite moves by its big three rivals to hike rates in response to increased funding costs.

NAB’s chief executive, Andrew Thorburn, indicated the bank’s decision was a direct result of an environment in which huge profits and revelations of misconduct aired at the royal commission had damaged the big banks’ public standing.

“We need to rebuild the trust of our customers, and by holding our NAB standard variable rate longer, we help our customers for longer,” Thorburn said.

“By focusing more on our customers, we build trust and advocacy, and this creates a more sustainable business.”

Thorburn said the bank would continue to monitor funding conditions but wouldhold its standard variable rate at 5.24%.

The prime minister, Scott Morrison, reacted to NAB’s decision by tweeting it was a good call: “They seem to get it,” he said.

Westpac, Commonwealth Bank and ANZ have over the past two weeks said they would raise their standard variable rates for owner-occupiers to 5.38, 5.37 and 5.36% respectively.

The out-of-cycle hikes by NAB’s rivals led to economists last week suggesting the Reserve Bank of Australia would keep the cash rate on hold at a record low of 1.5% for even longer than previously thought.

The RBA, which has not moved on rates since August 2016, would be wary of increasing the load on borrowers – and decreasing the amount they can spend elsewhere in the economy – and could even cut the cash rate if the banks hike further, AMP chief economist Shane Oliver said.

 

Many homeowners in Australia are starting to plan for their next move, with more than a third thinking of upsizing or downsizing in the next five years.

This is one of the findings of the latest Westpac Home Ownership Report, which revealed that there was a 29% growth in the number of homeowners who are prioritising buying a new home in the next five years over other housing-related activities like renovating and investing.

In fact, the number of homeowners preferring to renovate has actually decreased by 3%, while those planning to buy an investment property remained the same.

Westpac head of home ownership Lauren Fine said the housing downturn has created opportunities for motivated buyers to consider locations which were previously out of reach. This was borne out by the report, which said that homeowners are over twice as likely to buy a home to live in a more desirable area.

“For example, larger properties in the inner suburbs of major cities have seen declines in value in the later part of 2018, making these popular areas more accessible,” Fine said.

When it comes to relocating, upsizers and downsizes have different priorities. Upsizers tend to consider safety and proximity to work and social hubs as essentials, while downsizes are more likely to have access to public transport and proximity to their family and friends in their checklists.

With regard to financial challenges, upsizers are expected to go through some tougher times ahead when looking for a new home.

“Given the financial challenges upsizers expect to face, this could explain why they are more likely than downsizes to be willing to take fewer holidays in order to achieve their housing priority,” Fine said.

However, this does not mean that downsizes won’t face challenges. They actually face a different hurdle: managing the move and reducing the amount of “stuff” they have.

Either way, Fine said moving out and looking for a new home will come with emotional challenges.

“It can be difficult to leave a home to move into the next, particularly for downsizes who may have seen their family grow up in that home. Up sizing can also be tricky, particularly if it requires making certain compromises for more bedrooms,” she said.

However, there are benefits too, particularly for downsizes, given that a small home will require less upkeep and maintenance. On the other hand, upsizers will come to realise that living in a more “breathable” house with enough rooms is worth it, especially with growing families.

There are a few things you should consider when you are looking for an online lender. These tips are things you should look for carefully and completely prior to making any decision to work with a specific online lender. By following these tips, you will help ensure that you are working with a reputable company for all of your lending needs, as well as a company that will work well with your entire situation.

First look at the web design of their entire webpage. This should be just as important to you as it would be if you were to say, walking directly into a store. Things you should look for in their website should include the ability to obtain the needed information without hassle; you should not have to click fifty times to gain the information you need about their company. Additionally, you will want to look at the way the page loads for you fast or slow and take notice of errors. A fast loading website, with no errors, will indicate they have a server that is reliable, therefore showing they are concerned enough about their customers ability to access their site that they have obtained someone reliable.

You will also want to make sure they have a solid, reasonable, easy to read, and easy to access privacy policy. This is extremely important, any website that is trustworthy will have a privacy policy clearly posted that explains what they will do with the information gathered from your online application.

Look for a business with a solid history, each website should contain an about us page. If they do not have one, it is in your best interest to immediately discredit that particular online lender from your list. You will want to look at various thing such as, how many years have they been in operations, what area of the world do they do business from, make sure they have an easy to spot telephone number, address, and emails for the various departments you may need to contact.

Another particular piece of advice that any person looking for an online lender should follow is to find a little bit about their reputation. There are several different ways you can go about this, the first way is by speaking to your family, associates, and friends. Word of mouth is possibly one of the best types of recommendation any type of business can get, particularly online lenders. This will allow you to become confident in their abilities and their services.

IF YOU are looking at property investment or buying a home, always good to use a mortgage broker to help you with your loan.

They do more than half of all Australian mortgages. This is concerning, because mortgage brokers do not exactly come with a good recommendation.

Mortgage brokers have recently been hit with searing criticism from powerful organisations such as the Australian Competition and Consumer Commission (ACCC), the Australian Securities and Investments Commission (ASIC), and the Productivity Commission. Each of them have raised red flags about the way brokers operate.

Mortgage brokers provide their service to us for free. But they do get paid, making money on every loan — often thousands of dollars. The payment comes from the banks who make the loans. So who are their true customers? Who are they really working for? The banks or the borrowers?

ON COMMISSION

When a broker makes a loan, they normally get an upfront payment of just over half a percentage point of the loan amount. If the loan is for $100,000, they get about $500. For a loan of $500,000 they might get about $3000. There are also “trailing commissions” where the broker is paid by the lender every year afterwards, so long as the borrower keeps paying back the loan.

So will the broker get you the best possible deal? You’d hope so, right? But there’s bad news in store.

Let’s ignore the fact that most brokers only deal with a small “panel” of lenders so they can’t actually shop the whole market. Even within their panel they might not screw the price down as much as you want, because it would hurt them to do so.

In a report in 2017 ASIC found that the broker’s commission could be reduced in some cases if the broker negotiated a big discount on the interest rate for the borrower. “This creates a clear conflict of interest,” ASIC said.

CONFLICTED

Brokers have no legal obligation to get you the best possible deal. Their legal obligation is to find you a loan that is “not unsuitable,” whatever that might mean. Given that billions of dollars of upfront commissions and trailing commissions are flowing through the broking industry every year, this conflict of interest is potentially very significant.

Choice, the consumer advocacy organisation, came up with some appalling revelations about mortgage brokers a few years back. They sent mystery shoppers into 15 mortgage brokers to see what happened. They mystery shoppers came back with stories of brokers pushing million-dollar loans onto them, not disclosing commissions, and providing advice that completely failed to meet their needs.

Out of 15 brokers, only one was rated “good”, and seven scored the lowest possible rating, “poor”.

The customers shopped at some of Australia’s biggest mortgage brokers, Aussie Home Loans, Mortgage Choice and Australian Finance Group. It is possible that smaller brokers might be different and it is also possible that mortgage brokers might have improved since the mystery shoppers went in.

BIG FAT MIDDLEMEN

I’m always suspicious of any industry with middlemen. I much prefer to cut out travel agents, for example, and book directly. The mortgage broker is pure middleman and, what’s worse, they’re not even the only middleman. There is usually also another entity, called an “aggregator”, who stands between the broker and the bank. They clip the ticket on the way through as well.

Banks own some of these brokers and aggregators, and when they do, it can skew where the brokers send their loans. For example, Commonwealth Bank owns Aussie Home Loans, and you’ll never guess which bank nearly 40 per cent of home loans brokered by Aussie Home Loans end up with. (It’s Commonwealth, and that 40 per cent is much higher than Commonwealth’s share of the overall market.)

The average mortgage broker makes $130,000 in revenue a year if they are a sole trader, and $86,000 after costs. (This can include brokers working part time.) The average mortgage broking business makes $357,000 and $120,000 after costs. These figures come from a new report by Deloitte Access Economics.

SO WHY DO WE NEED THEM?

While mortgage brokers look to have some concerning conflicts of interest, they would struggle to survive if they were plain bad value. And we haven’t considered the alternative yet! Imagine if your only option was to deal with the Big Four banks instead. Dealing with 1000 slippery snakes might sound hard until you realise your other option is to be eaten by one of four big tigers.

Sure, the Big Four banks compete with each other, but the ACCC finds they don’t compete all that hard.

“The pricing behaviour of each of the Inquiry Banks appears more consistent with ‘accommodating’ a shared interest in avoiding the disruption of mutually beneficial pricing outcomes, rather than consistently vying for market share by offering the lowest interest rates,” the ACCC said in a recent report.

It’s the lack of competition in mortgage lending that permits the mortgage brokers to pop up. And it is possible they’re not nibbling much out of the buyers’ side of the deal. It’s possible the hot, rich, blood-filled vein into which they’ve stuck their fangs is the banks’, not ours.

Brokers might even be doing us a favour by creating a bit more competition. It is far easier for a small non-bank lender to hook up with a bunch of mortgage brokers than to build their own sales network. The Productivity Commission found that brokers were “clearly beneficial for smaller lenders looking to diversify”.

“On average, we calculate that each would have needed to open 118 new branches to generate the equivalent market shares,” the commission wrote.

That extra competition is a big advantage of the existence of brokers, and you don’t necessarily have to use a broker to appreciate it. But brokers do provide benefits to borrowers as well.

The biggest advantage is for people who don’t have the time to shop around at all. If your plan was to walk into your bank and take the first thing they offer, then a broker will likely help you a lot. They are also good if you are not equipped to fill out all the paperwork. Customers report a 90 per cent satisfaction level with mortgage brokers.

Ultimately, the best people to keep mortgage brokers in line is us, their customers. If we ask no questions and take the first thing we get offered, we probably get what we deserve. But if we shop around, stay sceptical, quiz the bastards hard, and negotiate like our life depends on it, we can make mortgage brokers work for us, not just for the banks.

 

LOCAL REAL ESTATE AGENT

PROFESSIONAL MORTGAGE BROKERS IN PERTH

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Home Mortgage Financing

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Ideally, traditional mortgage lenders want new home buyers to have a 20% down payment when purchasing a new home. Thus, if purchasing a $200,000 home, you should be prepared to have $40,000 as a down payment.

Unfortunately, many people do not have this kind of money lying around. For this matter, Mortgage insurance (MI), known as Lenders Mortgage Insurance ( LMI) was created as a way for mortgage companies to recoup their money if a homeowner defaults on the loan. There are various loans available to assist people with down payments. In some instances, homeowners can obtain 100% financing, and avoid LMI.

What is LENDERS MORTGAGE INSURANCE?

Because Australians are earning less money, and home prices are steadily increasing, the majority of the population is unable to save the recommended down payment of 20%. In order to make owning a home possible, mortgage companies created a particular mortgage insurance, (LMI), for people with less than 20% to put down on a home. This insurance protects the lender if you default on the mortgage.

How to Avoid Paying Lenders Mortgage Insurance?

On average, LMI may increase your mortgage payment by $100 – sometimes less, sometimes more. However, there are ways to avoid paying this additional insurance. The obvious involves having at least 20% as a down payment. If this is not an option, homeowner may agree to a higher interest rate. Another tactic entails getting approved for 100% financing.

How Does 100% Mortgage Financing Work?

100% mortgage financing makes it possible to buy a home with no money down. Also referred to as a piggyback loan or 80/20 mortgage loan, 100% mortgage financing involves obtaining a first mortgage for 80% of the home cost, and a second mortgage, or home equity loan, for 20% of the home cost. Together, the first and second mortgage allows a home purchase with no money down, and no lender mortgage insurance.

A recent report from the International Monetary Fund (IMF) warns of world-wide economic downturn ­– but the Government and two leading property experts weigh in on what waits ahead for the Australian property market – and it seems we may not face the brunt as prices are expected to take a steady ride up.

Whilst widespread debt, trade wars and economic dips in parts of Europe are listed as major factors at play for the IMF diminishing economic growth forecasts, locally felt struggles in Australia have come about from the drought, housing market decline and credit crackdown.

However, the IMF report and national shadows have not shaken the Federal Government, encapsulated in a speech delivered by Treasurer Josh Frydenberg, which assured Aussies they will not bear the brunt.

“Our economic plan with its focus on growth, productivity, and aspiration and budget repair, takes on an even greater significance as we navigate the currents ahead,” the Treasurer said, also stressing that if the Australian economy was to continue in strength, confidence had to be returned to the housing market.

But where do such hopes leave the housing market amidst dropping property values and tightened lending laws? Despite growing concerns, industry experts say it’s going to be on the up.

‘After a tumultuous 12 months for Australia’s property markets, 2019 looks likely to be a year of greater stability,’ says Domain economist Trent Wiltshire in a recent report – in which he reveals the market will continue to experience a softened dip over the next six months, before gearing up again ‘into another moderate growth phase’.

‘Solid population growth, low unemployment and low interest rates will underpin Australian property price growth in the medium term. More restrictive lending conditions will continue to weigh on prices in the immediate future. But eventually, borrowers will begin to adjust to this new normal,’ the Domain economist says.

A norm that sees Aussies adjusting to, and better understanding how much they are entitled to borrow and the length of time it can take to get a loan, both of which Wiltshire believes will lead to an increase in borrowing  – also ‘at a modest pace’.

When broken down in Wiltshire’s report, combined Australian house prices, which sat at an estimated -6% in 2018, are predicted to climb to 1% this year, before reaching 4% in 2020.

Even more growth is expected to occur with unit prices across the country, forecast to climb from -3% to 2%, then 3% in 2020. Property prices have been on a decline since 2017, and although having snowballed, stricter lending laws should be accounted for but a fraction of the cause.

‘Falling sentiment has a reinforcing effect on prices: as prices fall, buyers become more hesitant, further pushing down prices … Another factor at play is that lots of new housing hit the market after a high rate of new construction in the previous couple of years,’ Wiltshire says.

He also invites us to reflect on the upcoming Federal election, which could harm property prices, especially if the Labor party is to be voted into power. Wiltshire expresses concern over the party reducing the capital gains tax discount from 50% to 25% if they pull through, likely to be enforced by 2020 – leading to fewer investors being inclined to put their capitals into the property playfield. A leading real estate CEO weighs in on similar sentiments.

“Uncertainty about changes in policy, such as Labor’s proposal to limit negative gearing tax breaks to new investments, and halve the capital gains tax, will cause an extended period of stagnation,” says CEO of Starr Partners Douglas Driscoll in his market forecast for the year ahead.

In referring to the Federal Government’s challenges to adhere to the banking royal commission’s recommendations as a “balancing act” – for Government still also needs to “ensure that people are able to easily access credit” –  Driscoll warns that careful attention needs to be paid to the banks for their potential to “low ball buyers on valuations”.

“Anyone who is struggling to secure lending should contest the valuation. It is possible to request a second opinion, or alternatively, provide extensive comparative evidence for similar properties that have sold in the area,” he advises. Driscoll also delivers good news to property owners.

Those paying down mortgages should take advantage of Australia’s record low interest rates, which Driscoll says will continue to remain low into the first part of this year, and thus be of advantage to mortgage holders in the long run especially if they are willing to dig into their disposable incomes.

“It is advisable that homeowners pay down as much debt as they can while we have this advantageous environment,” Driscoll says. “Paying an additional $150 a month on a $600,000 loan could save a homeowner more than $10,000.”

Auctions have never been an Aussie’s favourite thing to do on a weekend, and according to Driscoll, many will be “too embarrassed” to put their properties under the hammer, largely due to auction clearance rates sitting at around the 50% mark. But he has faith, reminding sellers they “need to trust the auction process and know that several properties also sell before and after the actual auction day”.

Getting a house of your own is a lifetime achievement and a home mortgage helps you in achieving this milestone much earlier than it would otherwise have been possible. In fact, the first home mortgage is also filled with a lot of emotion. A home mortgage is really something that makes dreams come true.

So let us start with understanding what a home mortgage actually is?

A home mortgage is something that allows you to buy a house even if you do not have enough money to pay for it right away. This is made possible by borrowing money from someone and paying it back in monthly instalments. The person who lends you money is called the home mortgage lender. The home mortgage lender lends you money for a specific period (up to 30 years) during which you are expected to pay back the money in monthly instalments. There are certain terms and conditions associated with the home mortgage agreement and these terms and conditions govern the home mortgage throughout its tenure. Among others, the most important thing is the interest rate that the home mortgage lender charges you. Interest charges are the means through which the mortgage lenders earns on this financial transaction called home mortgage. Most home mortgage lenders offer various home mortgage schemes/options. The most important variation in these schemes is in terms of the interest rate and the calculations related to it. In fact, most home mortgage options are named after the type of interest rate used for that option. Broadly speaking, there are two types of home mortgage interest rates – FRM (fixed rate mortgage) and ARM (adjustable rate mortgage). For FRM, the interest rate is fixed for the entire tenure of the home mortgage loan. For ARM, as the name suggests the home mortgage rate changes or adjusts throughout the tenure of the home mortgage. This change or adjustment of mortgage rates is based on a pre-selected financial index like treasury security (and on the terms and conditions agreed between you and the mortgage lender). That is how mortgage works.

No matter what type of home mortgage you go for, you always need to pay back the entire home mortgage loan (with interest) to the mortgage lender. Failing to pay back the mortgage lender can result in foreclosure on your home and the mortgage lender can even auction it off to recover the remaining debt.

Therefore, home mortgage is a wonderful means of getting into your dream home much earlier in your life. Without this concept, you would have to wait for a long time for getting into that dream home. Really, a home mortgage is one of the best concepts from the world of finance.

If there is anything that can prove the impact of stricter lending rules by lenders in Australia, it would be the latest data on home-loan rejections.

According to Digital Finance Analytics (DFA), 40% of home-loan applications were rejected in December due to non-compliance with existing lending standards.

While this is a drop from the previous month’s 48% rejection rate, it is still significantly higher than last year’s 8%. It is important to note that the volume of applications across all segments leading up to the holiday season has decreased and that many households have filed multiple home-loan applications.

“The fall in investor applications is significant, as appetite for investment property eases. The relative volume of refinance applications remained quite high, as people are seeking to reduce their monthly repayments,” DFA principal Martin North said.

Compared to authorised deposit-taking institutions (ADIs), non-banks recorded lower rejection rates at 20%.

North expects the number of rejections to remain prominent this month as the number of loan applications continues to grow.

For investors, he suggested watching the availability of credit, as moderation of loan offerings could result in a price decline of up to 30%.

“As credit drives home prices higher, so the reduced availability of credit drives prices lower. Our own view is a fall of 20%-30% peak-to-trough over the next two to three years,” North said, adding that the fall could worsen if global uncertainties are factored in.

Finance can be the most important thing for anyone with dreams to fly in his eyes. Today our world runs on finance. The forms may be different but the purpose is the same, to cater to our needs. When we fail to cater our needs due to lack of enough funds within our resources, we look outside for them in form of loans. One such way of funding our desires is secured home loans.

A secured home loan is secured by your home as security. These loan are like any secured loan and can be used for any of you personal purpose. The advantages of such loans are following:

• Interest rate is low as the loan amount is secured.
• Repayment is spread over a longer periods resulting in smaller monthly payments.
• Flexible terms and conditions for loans.
• Higher rate of approval of loans ensure you that you will be getting the loan approved easily.
• Online option is there to choose and apply easily
• Reduced paper work
• Faster approval once your property is valued.
• Multipurpose loans (can be used for debt consolidation, medical expenses, education, buying a car, boat, vacation, home improvement etc)
• People with bad credit history can also apply.
• You can borrow up to 125% of your collateral value.

Secured home loans come in various flavors to choose from:

• Fixed loans – the interest rate will remain fixed under this for the whole repayment term.
• Variable loans – rate of interest will fluctuate according to interest rates in the market.
• Capped loans – a limit is set up to which your interest rate can rise with rise in interest rate in the market.

You can decide among these according to which rate suits you the best.

A secured home loan allows you to borrow amount ranging between $30,000 to $100,000 on the basis of equity in your home. Equity is the market value of your home less any debts taken against it.

Shopping for a right loan lender is one thing which every borrower must do before applying. There are lot many lenders in the market with different rates and terms.

It happens may time that you came to know about a low rate package after you have already applied for the loan. So to avoid this do proper research, visit lenders offices and study their quotes. Your hard work can help you find out the best secured loan out of the rest.

 

TRUSTED MORTGAGE BROKER AUSTRALIA

PROFESSIONAL REAL ESTATE AGENTS KENWICK

PREMIER CLEANING COMPANY IN PERTH

Finding Re-Finance Information

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Homeowners who are considering re-financing but are not knowledgeable about the subject have a number of options available to them for finding more accurate information regarding the types of re-financing options available as well as the ways to obtain the best available rates and tips for finding a reputable lender. This information can be obtained through a number of resources including published books, Internet websites and conversations with experts in the financial industry who specialize in the area of re-financing. All of these sources can be very helpful but there are also precautions homeowners must take when using each information source. Taking these precautions will help to ensure the homeowner is receiving accurate information.

Using Books for Research

Published books are often considered to be one of the most reliable resources for researching re-financing options. However, not all books on the subject are created useful. Readers may find some books provide a great deal of useful, current information while others books are filled with outdated information and information which is not 100% accurate.

The best way to select a book or books when researching the subject of re-financing is to start the search with books that were only recently published. This is important because the financial industry is continually evolving and as a result books which were published only a few years ago may already be considered out of date.

Homeowners should also seek out independent reviews when considering books on the subject of re-financing. This is important because books which consistently receive solid reviews from consumers are likely to be worthwhile. Conversely books which consistently receive negative reviews are likely to not be worthwhile. Homeowners should seek out highly recommended books while avoiding those that are not highly recommended. This may prevent the homeowner from wasting time reading books which are not informative and may even be inaccurate.

Using the Internet for Research

The Internet is another resource which can be very valuable for homeowners who are considering re-financing their home. The Internet is filled with valuable information but there is also a great deal of misinformation floating around on the Internet. Homeowners who are completely uninformed about the re-financing process may not be able to distinguish between the useful information and the misinformation. As a result these homeowners may be led astray by inaccurate information on the Internet. Homeowners who wish to avoid the potential for this problem should consider verifying the information they find online through an outside source such as a published book from a renowned author or by conferring with an expert in the subject of re-financing.

Homeowners should also do the majority of their research on well established websites. This includes websites owned and operated by major lenders which have been in business for years. The information on these websites is likely to be much more up to date and accurate than websites which are created for profit by website owners.

Consulting with Re-Financing Experts

Finally, consulting with financial experts who specializes in re-financing can be very helpful for homeowners who are considering re-financing. This might be the most expensive option as many of these experts will likely charge a fee for their services but it can also be the most reliable source of information.

There are a number of advantages to consulting with an industry professional as opposed to researching the subject independently through published resources. The most significant advantage is the ability to ask questions throughout the re-financing process. This will help to ensure the homeowner fully understands the available options. It will also help to ensure the homeowner receives the best possible re-financing option for his specific needs. The re-financing process works best when the homeowner offers their input about the type of re-financing they are seeking as well as the benefits they hope to obtain through re-financing. The re-financing expert can than make a better recommendation which will suit the homeowner’s needs.

Whatever your reason for thinking about refinancing your home loan, your ability to do so will depend on a variety of factors, with your amount of available equity being one of the most important.

What is equity, and how much do you have?

Equity is essentially the difference between the current value of your property and the amount you owe on your mortgage principal. To put it another way, the equity in your home is how much of your property that you own for yourself, and not your mortgage lender.

You can find your level of equity using the following basic formula:

Equity = property value – amount owing on your mortgage principal

Keep in mind that your property value isn’t just the price you paid when you bought the place – it also includes any capital gains from making improvements to the property, or from increased demand in your local area.

How can you use your equity to refinance?

There are a few ways that your equity can be used, depending on your refinancing goal. Generally, your equity will play a similar role to that of your deposit when you first took out your home loan – providing security and reducing the lender’s financial risk.

If you’re refinancing your existing loan to lower your interest rate, whether so you can enjoy more affordable mortgage repayments, or so you can pay back your loan’s principal more quickly, the more equity you have available in your mortgage, the more security you’ll offer your lender, and the lower an interest rate you’re likely to receive. You may also qualify for loans with access to useful features such as offset accounts and redraw facilities, which can provide further flexibility and options for managing your finances.

Example:

Jacob considers refinancing his home loan by switching to another lender with a lower interest rate. Because he has more than $120,000 in equity available (the minimum 20% deposit required to avoid paying Lender’s Mortgage Insurance), he qualifies for one of his new lender’s low-interest loans with an offset account and a redraw facility, so he can enjoy greater flexibility from his personal finances.

If you’re refinancing in order to borrow more money, such as when you want to upgrade to a bigger house, the equity in your current home loan can serve as the deposit on a new home loan, with all of the same requirements.

Keep in mind that a new home loan comes with new fees, charges and expenses such as stamp duty, which often average to around 5% of the purchase price. Take this into account when estimating what you may be able to afford.

Example:

Jacob considers selling his current place and buying a new one in a better area, which will require refinancing his mortgage and borrowing more money.

With $300,000 in equity available, and assuming that his new loan will require a minimum 20% deposit to avoid Lender’s Mortgage Insurance (LMI), Jacob could theoretically buy a place worth up to $1.5 million… assuming he can afford the repayments and the costs of refinancing!

To hopefully keep his finances more manageable, Jacob instead looks at homes worth up to $1.2 million, using $240,000 of his equity as a deposit and keeping the remaining $60,000 available to cover the other costs.

It’s also possible to keep your current home loan and property, and to use your equity to fund the purchase an investment property. However, in this case, you likely won’t be able to put all of the equity in your current loan towards taking out a new one – many lenders require you to maintain a minimum Loan to Value Ratio (LVR) in your mortgage to help limit the financial risk involved. You’ll need to take LVR into consideration when determining the amount of usable equity in your home.

Example:

Another option for Jacob is to use the equity in his home to take out a second mortgage to purchase an investment property. Because Jacob’s lender requires that he maintains a minimum LVR of 80%, his property value for determining his usable equity effectively becomes $480,000 ($600,000 – 20%). This in turn means that Jacob’s usable equity is only $180,000, rather than the original $300,000 figure.

Assuming Jacob’s second mortgage requires a 20% deposit to avoid LMI, he could potentially buy an investment property valued at up to $900,000, but it may be more affordable to look at $720,000 properties, using $144,000 as the deposit and keeping $36,000 to cover the other expenses involved.

Another option is to take out a home equity loan, also known as a line of credit, where you borrow money from your lender using the equity in your home loan as collateral. This line of credit could be used to finance a home renovation, to buy a new car, or to pay for a dream holiday.

Much like the previous investment property example, you may be limited on how much you can borrow in a home equity loan, as your lender may require you to keep a certain percentage of your home’s value invested in the property in order to secure the mortgage.

Example:

Another option for Jacob is to use his equity to pay for that big round-the-world trip he’s always wanted to go on. As previously determined, he has $300,000 of equity in his home loan, but only $180,000 of this is usable equity.

By approaching his lender and organising a home equity line of credit, Jacob can set off on his trip, armed with what is effectively a credit card with a $180,000 limit.

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A Quick Guide To Mortgage And Re Mortgage

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Buying a dream home is one of the major milestones of any individual’s life. The price of real estate is increasing day by day. The designer and flashy homes, which appeal us the most, are beyond the financial capabilities of a lot of individuals. However, this fact should not deter us from fulfilling such a dream. With widely available low interest mortgages, now even a common man can own the residence of his choice.

Starting with the basics, mortgage is a type of loan that any individual can take, in order to buy a home or a property. The property being bought is used as collateral to the loan, this often means that if the repayments schedule of the mortgage is not complied with fully, the lender can take the possession of your property, and sell it to recover his amount.

Any mortgage deal whether it is the first one, or a remortgaging effort, requires a lot of hard work. The best advice given by any lender is cleverly disguised to suit his interest the most. So, the first thing that any borrower should do is to take a closer look at any lender’s advice and compare it with other offers floating in the market.

Choosing the mortgage that is right for you and getting the best deal, involves taking a lot of decisions. The two main things that require the greatest attention are the interest rates charged for the mortgage and the repayment method of the mortgage.

The rate of interest to be paid for mortgages are determined by the base rates prevailing in the loan market. A borrower should go for a low interest mortgage, since the lower the interest rate; the lower will be the monthly repayment. At any given point of time the borrower might get hundreds of offer for mortgage. Each lender has different conditions and charges.  The borrower is advised not to succumb to any offer with cheap initial interest rates; instead he or she should look at all the features of mortgage before accepting any deal.

As for the repayment method the borrower has two options – a repayment mortgage or an interest only mortgage. In a repayment mortgage, the borrower has to pay off the amount in equally spaced instalments. The instalments gradually recover the principal amount coupled with the interest from the borrower. Thus, the mortgage is fully paid by the end of agreed term.

In an interest only mortgage only the interest is charged in the instalments. The principal amount is not included in the monthly repayments. The arrangement to repay the principal amount is made by other means, usually at the end of the mortgage term or as agreed between the two parties. The mortgage amount is guaranteed by some investment in shares, or stock. The borrower has to make sure that his investment grows, so as to pay the mortgage by the end of agreed term.

Most lenders will offer mortgage up to 95% of the property’s value under consideration, but the borrower might have to pay a higher lending charge if he borrows more than 75% of his property value. There are other costs also, which are essentially involved with a mortgage. The lender might ask you to deposit an amount up to 3-10% of the asking price of the property. Valuation fees, solicitor’s fees and higher lending charges also escalate the price of mortgage.

After deciding on a mortgage, the borrower has to apply formally to the lender. He should take care to fill in all the details carefully. If he feels confused at any stage he should take the help of a financial adviser, instead of making wrong assumptions.  If everything goes smoothly the borrower will soon receive a mortgage offer.

Remortgaging means that we are taking a new mortgage to repay an existing one.

As time passes, the appreciation in property rates raises the home equity available at the disposal of the homeowner. Remortgaging utilises this increase in property valuation to get a better deal on debt, or some extra money. Remortgaging does not involve selling or changing homes, but the debt may be transferred from one lender to another.

There are instances, when we require funds for some new construction, such as an extra bathroom, new kitchen, additional bedroom etc. Many times we find that some of our existing borrowings, charge higher rates of interest than those charged by our mortgage lender.  In such cases, we can use the additional home equity available with us to provide funds and ease the repayment burden by remortgaging.

Australia, in recent times has seen a sharp decline in mortgage rates. Therefore, more and more homeowners having existing mortgages are applying for a remortgage to take advantages of the lower rates. Remortgage has become an easy process due to the increasing use of information technology in the lending process. People can now apply online for a remortgage right from the comfort of their home or office.  This has significantly reduced the time and effort for getting a property remortgaged.

Considering the reduced interest rates and easier repayment options, the homeowners often see remortgaging as good source for generating capital. Changing high interest debts into low interest remortgage with easy repayment terms is often, quite lucrative for the debtors. By changing their debt type they can significantly reduce the repayment burden.

There are many lenders in the Australian market, which provide competitive remortgage offers. Since, remortgages are used to move debts; it should be seriously considered that the cost of moving debts should not offset the savings in any such process.

The redemption fees, is the biggest cost to be incurred while taking a remortgage. A redemption fee is what a person has to pay when he ends an existing mortgage contract and applies for a remortgage. There are early redemption penalties, which escalate the overall costs of remortgage. These penalties are the largest when the debt is still new. Generally, remortgaging is not advised when such penalties are very high, but if you have a particularly good offer, which offsets the loss due to the early redemption penalty, you should consider it.

In addition to the redemption fee, there are many other costs involved with remortgaging. Some of which are discussed below:

  • The new lender who will provide the debt will like to reassess the value of your property to make sure that it is not a risky deal for him. So, he might charge some valuation fees for this process.
  • The entire remortgaging process has a legal angle attached to it. This might involve legal consultation fees. In addition to these, the lender might include the conveyance and other office charges.

The debtor should consider these fees while remortgaging. Options are available, where the lender might refund all or a part of the valuation, legal and office charges to the debtors, if the repayment schedule is exceptional. Be sure to ask your lender about such an option.

Remortgaging does provide funds with low interest and easy repayment options, but there are many drawbacks associated with it.

The debt repayment process again starts from the scratch. Short term savings might lead to a long term financial liability. The interests although relatively lower now must be paid over a longer period of time, and again the fact to be kept in mind is that any serious default in payments might lead to repossession.

 

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Credit Card Reward Cards

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No matter where you look, there is always a credit card company that is offering reward programs with their credit cards. New ones pop up all the time, making it sound too good to turn down. Even though they may sound great, you may wonder if the rewards are truly worth it. In some cases they are, although in others they may not be quite as good as you would like.

Although having more than one reward card is something many people instantly think about, you should always keep in mind that not all of them are worth having. Even though using your credit card is always good, you can sometimes end up paying quite a bit if you don’t pay attention to what you are buying. When it comes down to credit card reward cards, you should use caution – with a dash of common sense.

Any reward cards that come with high interest rates should always be avoided. With most reward cards, you’ll find that they include higher rates of interest than standard cards. This higher interest rate can quickly and easily offset any type of reward. To be on the safe side, you should always look at the interest rates and determine if the reward is indeed worth it. If you pay off your entire balance at the end of every month – then this won’t be a concern at all for you.

You should also keep your eyes peeled for reward cards that offer a high annual fee. These cards can be very tough to keep a grasp of, and they can also interfere with any type of reward you may think your getting. If you look at the fine print before you get choose your reward credit card, you can help to eliminate problems.

Cash back is a type of reward card that is becoming very popular. A lot of the top credit card companies and banks offer cash back programs that are normally around 1% for every purchase that you make. Before you rush out and get a reward card, you should always make sure that you read the fine print and see if there is a maximum limit on the card.

Another type of popular reward credit card is the type that give you points for every purchase you make using that card. Once you have accumulated enough points, you can redeem them for items and other cool things. Some cards will have limits as to how many points you can receive, which again makes it your best interest to shop around.

There are also credit cards with frequent flyer miles, which have been around the longest. Some cards will base their rewards on points, while some choose to use actual miles. For every dollar you spend using your frequent flyer credit card, you’ll receive either a point or a mile. Once you get enough accumulated, you can redeem them. Most frequent flyer rewards take about 25,000 points or miles in order to redeem them, which can make it nearly impossible for some to reap the benefits of using the card.

No matter where you look, finding the right credit card reward card can take some time and effort. You may have no problems finding the card to fit your needs, and if you do, you should consider yourself lucky. Before you choose your card however – you should always take the necessary time to read the fine print and compare what each unique company has to offer you.

 

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Basic Financial Information Tips (Part 1)

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Savings. Pay yourself first. Start now stashing 10% of your income in an “Emergency” savings. Don’t use it for anything but real emergencies. Keep a “For Sure” savings account for yearly expenses you know are coming and you can estimate (e.g. Christmas, insurance, taxes, etc.). Also have a “Buy Stuff” account. If you do, you’ll be able to avoid many financial disasters which will face you, and you can avoid borrowing money from high-rate lenders.

Borrowing. Don’t borrow money unless you are willing and able to pay it back. Failure to pay debts – on time – causes severe financial, emotional, and family problems. Experts recommend you don’t borrow for wants, only for needs, or for things that increase in value. Many lenders will loan you money you can’t afford to pay back, especially high-rate lenders.

Co-signing. Don’t co-sign on a loan unless you are willing and able to pay it back. Often, co-signers end up paying off loans they are unprepared for, and financial hardships follow. Numerous co-signors now have negative credit ratings because a primary borrower paid late. Many lenders do not notify the co-signor before reporting delinquencies or repossessions to the credit bureau.

Compare. Before you decide who to borrow from, compare! Find out who is offering the best deal at that time – look for the loan with the lowest rate (APR).

APR. The Annual Percentage Rate (APR). It is the standard rate, so we may compare the cost of borrowing. It is the cost of credit expressed as a yearly rate. When you borrow, always beat 13% APR (consider “13” to be unlucky when it comes to borrowing). Some have been illegally stating other rates such as weekly or monthly rates. Compare APR to APR. If you pay your bills on time, and you aren’t over-extended, you can nearly always find loans or financing arrangements at rates lower than 13%. Beware though, because beating 13% does not always mean you are getting a good deal. For instance: the difference in total interest paid on an 11% versus an 8% 30-year, $100,000 mortgage loan is $64,283 (assuming all payments are made as agreed).

Consolidation Loans. A consolidation loan can result in great savings to borrowers if the new interest rate is significantly lower, and if you don’t run-up debt similar to what was just consolidated. But beware, because consolidation loans usually result in substantially more money out of your pocket into the lenders’. For instance, mortgage loans usually involve closing costs. They increase the total debt. Many refinances involve reducing the monthly payment, but increasing the length of payback, which substantially increases the total interest paid. Borrowers, who refinance unsecured debt (e.g. credit cards) into a home mortgage, also increase their risk of losing their homes. Also, remember to keep all of your payments current until the old debt is paid off. Too many people have damaged credit ratings, and are in bad financial condition because they counted on money which didn’t come when they expected it. Expect delays when applying for loans, especially consolidation loans. Don’t spend money before you get it.

Desperation. Don’t get desperate for money. The more desperate you are, the less likely you are to get a good loan.

Auto insurance. Keep your auto insurance current. If you fail to keep your insurance up-to-date, you could end up making loan payments for years after your car has been totalled.

Establish good credit. To avoid bad credit, don’t borrow too much, and do pay your bills on time. Inexpensive ways to establish good credit: (1) Obtain a good credit card. When you charge things, pay off the balance each month – on time – and pay no interest. (2) Establish a revolving line of credit (an empty loan) as an overdraft protection against bounced checks, and don’t use it as a loan. (3) Get a loan to buy a car, or furniture, or etc.) and pay it off within a few months.

Late fees. To avoid late fees (which multiply the cost of borrowing), pay early, or at least on time.

Repossessions. To avoid repossessions and associated fees, pay early or on time, and keep your insurance current.

Extra principal ® less interest. To pay less interest on loans, pay more than the minimum required payment. Even small amounts of extra principal, can significantly reduce the total amount of interest you would otherwise pay over the life of the loan. Before doing this, however, make sure your lender accepts extra principal payments, and find out what particular procedure you need to follow to ensure your extra principal is properly applied.

Bi-weekly payments. If you get paid weekly, or every other week, paying bi-weekly is a very convenient (almost painless) way to reduce your loan term and interest. For instance, if you make ½ of your required monthly payment every 14 days (a bi-weekly period), you pay the equivalent of 13.052 payments in an average year. If you don’t get paid bi-weekly, or if your lender doesn’t like biweekly payments, you can pay the equivalent amount in monthly instalments. If you pay 1/12 of the sum of 13.05 payments each month, you will match the bi-weekly advantage (minor rounding differences).

Contrary to popular belief, the frequency of paying ½ payments bi-weekly doesn’t accomplish much, the real advantage is paying the extra principal (13.05 payments, or more, each year) which reduces the term and the interest paid. If you are considering signing up for a bi-weekly program, pay close attention to the cost. Some servicers have large set-up fees and transaction fees. Also consider the credibility of any company handling your money, some have diverted payments into their own pockets, leaving borrowers to make payments twice.

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3 Steps You Must Do If You Want To Pay Off Your Mortgage Early

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All Australia home buyers use a mortgage, that only benefits banks and mortgage companies. Now a revolutionary mortgage program is available that will show them how to pay off their home mortgage in as little as 7 years.

Money Principal Group, a company located in Utah, founded by Ariel Metekingi. Their premier innovative mortgage product, The Mortgage Eliminator, is based on a 30 year+ proven Australian industry standard and model in use by over a third of homeowners in that country.

This powerful new tool to combat the current financial plague of debt combines a mortgage and a full-service bank account. The new “all-inclusive” type loan creates huge savings in interest payments and loan payoffs in one-half to one-third the time requiring little to no change to current spending habits or income.

How does it work? Homeowners deposit income and other assets into the new mortgage account and since it allows access like a checking account, expenses are paid out from it by check or ATM card. The fundamental part is, that when the homeowners’ money isn’t being used it sits in the mortgage account, reducing the daily loan balance on which interest is computed. This saves on average hundreds of thousands in interest over the life a typical loan and reducing interest means more money for principal; so the homeowner builds equity faster and owns their home sooner.

There are three steps that the consumer can take, in order to reduce their mortgage payout and enjoy a home paid off in as little as 7 years.

1. Decide what your goals are

One of the first steps with The Mortgage Eliminator program is to have a clearer picture of where you are heading financially-speaking, and decide on what kind of goals you’d like to reach. First take a look at where you were five years ago. What kind of expectations did you have than? Did you plan on certain things to happen by now? If they didn’t happen, do you have the willingness to make changes to reach those goals?

 

Using your flexible mortgage account through The Mortgage Eliminator can greatly increase your ability to save interest and money and free up resources to help you reach those goals. And it doesn’t have to drastically change your spending habits or current household income. Just determine your budget and where the money you make is spent in your life.

2. Set up a budget

The next step in paying off your mortgage quickly is to look at your current spending habits and create a budget. How difficult is this? That depends on your level of commitment and your ability to discipline yourself into reviewing your budget.

One way that helps homeowners is through the included budgeting software and personal coaching and review available with The Mortgage Eliminator, from Money Principal Group. With The Mortgage Eliminator, you’re given that important part, a coach to review, create and stick to a budget that creates positive cash flow, which will take you to the next steps of paying off your mortgage in less time, without any change to your current income or spending habits.

3. Get a financial review and analysis

In order to determine just how quickly you can pay off your current debts and mortgage (or how fast you can pay off your first home, if you’re a first-timer), a financial “snapshot” or review must be completed. Taking a look at your entire picture of income, debts, and how it relates to your goals, is the crucial step, in determining how best you should start your plan.

What is the strategically best way for you to reach your goals? With a financial review and analysis from Money Principal Group, a plan is created to show you the best options that HELPS YOU in reaching those goals quickly. Only a loan that SAVES YOU MONEY is offered and if it doesn’t make strategic, financially sound sense for you, it’s not offered and a different course of action is suggested.

For more information on how you can be debt-free and pay off your home mortgage in as little as 7 years, and experience the savings with the Money Principal Program using their proprietary calculator, visit www.PDXLoan.com or call 1-800-862-0784 ext 21.

 

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Knowing When You Are Ready To Buy

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All across Australia, there are millions of people looking to a buy home – either now or in the future. Over the last few years, lower interest rates have come along, making it more affordable than ever to buy a home. When most people stop and give it some thought – buying a home makes a lot more sense than renting a home or an apartment.

In order to buy a house, you’ll need to start saving your money and have enough for the closing costs and a down payment.  You should always best try to have 20% to put down as your down payment. If you aren’t able to put 20% down, you’ll need to buy some private mortgage insurance, which will cost you more in terms of your monthly payment.

In most cases, the closing costs will run you around 5% of the property price. Before you purchase the home, you should always get an estimate. An estimate won’t be the exact price, although it will be really close. You should always plan to save up a bit more money than you need, just to be on the safe side. It’s always best to have more than enough than not enough.

You’ll know your ready to buy a home when you know exactly how much you can afford, and you’re willing to stick with your plan. When you buy a home and get your monthly mortgage payment, it shouldn’t be any more than 25% of your total monthly income. Although there are lenders out there who will say that you can afford to pay more, you should never let them talk you into doing so – but stick to your budget instead.

Keep in mind that there is always more money involved with a home other than the mortgage payment. You also have to pay for utilities, homeowners insurance, property taxes, and maintenance. Owning and caring for a home requires a lot of responsibility. If you’ve never owned a home before, it can take a bit of time to get used to.

Before you fill out any applications, you should always look over your credit report and check for any errors. Although you may think you don’t, you can easily get an error on your credit report and not even realize it.  If you check your credit report early enough, you may leave yourself enough time to fix any problems and get your credit back on track. Rebuilding credit can take time though, sometimes even years. You should always plan ahead – and give yourself plenty of time to fix your credit.

 

Credit Crunch Looms Over Interest Only Borrowers

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While many Australians are looking forward to this new year to start afresh, there are those who dread what is to come, particularly the interest-only borrowers who are scheduled to switch to principal-and-interest repayments.

The interest-only periods of around $300bn worth of mortgages are expected to end this year, and many borrowers are left with no choice but to transfer to another lender or sell their homes amid the housing downturn. This translates to roughly 900,000 loans, or one in six mortgages, based on Australia’s $1.7bn mort According to a report in The Australian Financial Review (AFR), a borrower owing an average interest-only loan of $316,000 will need to pay an additional $400 monthly in order to meet the higher repayments. Borrowers with around $1m worth of home loans will have to pay about $880 more.

Many borrowers are faced with tight lending rules imposed by most banks. Some of those who find themselves stuck often turn to shadow banks or non-authorised deposit-taking institutions. Digital Finance Analytics principal Martin North said banks will be trying to refinance as many loans as they can, but the alternative for many buyers facing a dilemma is to seek help from these non-banks.

“It is fair to conclude that non-banks are lending like fury compared with the ADIs. But this is a big thing for the python to swallow. This is a symptom of easy non-bank funding, different capital requirements and a greater willingness to lend,” he told AFR.

However, this could potentially spur more risks ahead as borrowers who are rejected by banks often have to pay larger interest rates when they apply to non-banks.gage loan book.

 

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