Australian Mortgage and Loan Information

Hail the Reserve Bank Board for acting quickly and decisively on interest rates.

As a result and despite all the doom and gloom, bail out and prop up talk, property prices and auction clearance rates seemed to have stabilised.

Experts are predicting home loan rates are going to fall way below any previous historical low of the last fifity years. So, It is time to evaluate your current or proposed mortgage, or test “what if” scenario’s if you are considering refinancing or consolidating debt.

Loan calculators and other recourses available on the web can help you test these “what if’s”. And the best thing is they are generally free and flexible enough that you can do things like calculate the effect of interest rate rise and falls or compare loans. In most cases you can print out the results. If not then just print the web-page.

Most calculators are easy to use. Generally it is all a matter of putting your numbers in the boxes and then clicking on the calculate button. You can have a bit of serious fun just playing with them. I have gathered what I consider the best Home Loan Mortgage calculators below:

List of Calculators
Loan Comparison
Loan Payment with Amortization Schedule
Mortgage Consolidation & Refinancing
Variable vs Fixed Interest Rate
Debt Consolidation
Accelerated Debt Payoff
Loan Statement Mistake Finder

With 70% of all housing stock in the hands of owner occupiers and home loan interest rates moving in the right direction, I seriously doubt it. Home owners will generally do what ever it takes to keep their home, so if the Banks and other lenders are sensible about foreclosures, we are unlikely to see a heap of properties, dumped on the market at once.

However, having said that, it is impossible to predict what new crisis, may spook the herd into action. If this happens, I suggest you may be best served by adopting a maverick attitude and not follow the herd. Property is long term, financial markets operate in cycles, the current tough times will only be temporary.

Rising unemployment could effect the value of House’s in the coming years. More Australians than ever are now employed on a casual basis or as subcontractors. They will be the first casualties of any big down turn in our economy and if they have bought homes in the last 5 to 6 years they may not have enough equity to help them ride out periods of unemployment. I suggest all casual employees and small business home owners look seriously at refinancing to interest only mortgages, for part or all of their home loan borrowing in these uncertain times.

The environment poses a different dilemma. Australia has a shortage of housing stock in areas where people want to live. To improve the situation the government has to sponsor a movement toward environmentally sustainable housing projects, taking into account the problems of water and transport. The internet and whatever is next will make communication and delivery of services more efficient, but people need drinking water and a way to get around without it costing them half of their incomes.

I am still bullish for property in all countries of the world. Individual house price’s may fall for a variety of reasons, but experienced investors know that the best time to buy property is when the market is weak. This year may be a good time to buy property if the basic fundamentals, including return on investment, are right.

I have always found it a good time to buy, when everybody is telling you that property is a bad investment. Now is the time to get set for the future. Don’t wait for the next boom to invest. Get set for the next boom and be one of those investors who pushes property to the next level by building and renovating this year. Create your own boom. Then when everyone else hop’s in and pushes the value of the properties up, you will be rewarded handsomely.

Refinance my home loan!

Having a home loan with the lowest interest rate is preferrable, it means we will pay less back to our lender. But is it always the best fit for our particular circumstance?

I have just come back from my meeting with my mortgage broker. We have had a frank discussion about my circumstance’s and the way I feel about my current “Line Of Credit” lender. The upshot is, it is time to move on.

My broker originally suggested no less than twelve suitable products and lenders. Going though the details, features and benefits of each product took us about 15 minutes. We have narrowed it down to 3.

The table below sets out the details of each as at 11/11/2008. I use my Line of Credit for Investment, so no comparison rates are quoted.

Lender:……………Colonial……..ANZ………..RAMS

Product:..Line Of Credit..Equity Manager…Line of Credit Pro Pack2

Rate at 11/11/08:…7.79%……..8.32%……….7.49%

App Fee:……………….$600……….$600………….$600

Reg Fees:……………..$12 pmth…..$150 pyr……..$300 pyr

Split Acc’s:……………..Yes…………Yes…………….Yes

Credit Card:…………….Yes………..Yes……………..Yes

Cheque Acc…………….Yes………..Yes………………Yes

Internet Banking:………Yes………..Yes………………Yes
Interest Only:…………..Yes…………Yes………………Yes

As you can see there is quite a difference in current interest charged and yearly fees. I currently favour the Colonial Product, but my broker is leaning me toward the ANZ. He feels the ANZ product offering is much more clearly defined. A higher rate yes, but ultimately easier to manage. This is his opinion, and my circumstances will be vastly different to many. The important thing here, is that I have complete confidence in my broker. I think I am going to go with his recommendation.

Lowest rate is not always best! But don’t take my word for it, contact a reputable broker and have a chat. They are a lot like the old fashioned Bank Manager. They want to help and they want your ongoing custom.

I am about to jump ship and refinance my line of credit. I use my line of credit as the base loan for my property investments. I leverage the equity in my home to grow my wealth in property. I always use a mortgage broker to find the best rate and deal for my circumstance. I am not happy with my currect lender as they have been tardy passing on the rate cuts and seem ambivalent to my welfare. They gotta go!

What is a mortgage broker and what can they do for me?

A mortgage broker is like an old fashioned Bank manager with a special difference, they are not tied to a certain Bank. Like the old Bank manager, they will:

Be available for personal interviews where you can let them know your lending requirements and provide a professional service to help manage your finance needs.

They will then talk you though the home loan options that may meet your requirements.

They will source the application paperwork necessary to secure your home loan and act as your representative in complex negotiations with lenders.

So, if you need a mortgage overhaul or need a new home loan to purchase your own piece of earth, then you might want to consider using a mortgage broker. A mortgage broker can save you valuable time and money. Two very valuable commodities.

For you current and potential investment property borrowers I have put together a short survey of the one year fixed rate offerings from the major lenders.

I am not suggesting this is the best type of loan in these uncertain times, this survey is just to provoke some thought about your current loan structure. Home Loan rates are trending down as the Government tries to soften the blow from the impending recession or depression.

Please find below the results of a quick Interest Only Home Loan survey for Investment purpose:

Major Australian Lenders.
Investment property home loans, Interest only, best rate, one year fixed interest rate.

No comparison rates are supplied as the rate is for investment purpose only. Borrowing costs and other fees may be tax deductible over one or several years.

Lender, rate, max LVR with MI, application fee, monthly fee.
ANZ…….6.79%……..97%………………$600…………….$10
CBA…….7.14%……..95%………………$600……………..$8
NAB…….6.89%…….100%……………..$600……………..$8
St G……7.39%………95%……………..$600……………..$10
Wpac….7.19%……..100%……………..$750……………..$8

Figures are gleaned from individual enquiry from each lender.
This is just a snapshot to give you an idea of what’s currently available, the terms and conditions of each loan are available from your mortgage broker or direct from the lender. Products may vary from lender to lender, but are for one year fixed, interest only, investment home loans advertised by the lender as at 07/11/2008. Remember, your home loan funding is an important part of your plan to create wealth through property investment. Interest only home loans can give you the edge. Consider interest only when you refinance your home loan mortgages.

When the Board of Reserve Bank of Australia announce a rate cut, they are talking about a thing called the cash rate. The cash rate is the overnight money market interest rate. The overnight money market is where many home loan lenders source some of their money for home loan mortgage lending.

The recent cut of .75% in this rate should bring about further relief for home mortgage borrowers who have standard variable or market rate loans. This recent cut is the third in three months and now sees the cash rate at 5.25%. There is usually a gap of around 1.8 to 2.50% from the cash rate to the rate your lender may be charging you. This gap plus account keeping fees is your lenders profit. Historically home loan rates will take a week or so to come down. So check your next statement and remind your lender of the cut if they have not made the change.

When ever there is a change of interest rate, there is an opportunity for you lender to make a mistake with your mortgage interest figures. And unless you pick it up you could be adding years to your loan and be ripped off thousands of dollars. I implore you to get some mortgage checking software. Check all your statements including your credit cards.

After watching an episode of CSI last night about a young woman’s attraction and loyalty to a “Bad Boy”, I started to wonder what happens to women who sign loan guarantees for “Bad Boy’s”.

You get the picture: He wants to impress with a flash house, but doesn’t have a steady job, so the love-struck girlfriend signs a guarantee, as he confesses his undying love and devotion while promising faithfully to keep the loan in order until it is paid. However, six months later no payments have been made, he’s gone and the Sherriff delivers a demand for payment to the guarantor! What should an ex girlfriend do?

In the good old USA I gather she can hand back the keys and let the bank worry about it, but how does this effect her credit record?

I am interested if anyone has a comment? In CSI she has him killed for the life insurance, so justice is served. I think!

In Australia, the guarantor has no rights to the property or asset they are guaranteeing payment for. You will need a private agreement with the person or entity you are agreeing to go guarantor for if you want rights to an asset. The minute you sign a guarantee you become legally bound to assume responsibility for the debt, generally both jointly with and as alternate too the loan applicant. You will not be able back out, change your mind or argue that you didn’t understand what you were signing.

For lender’s, a guarantee can be a very powerful and useful document. If the borrower does not pay, you as the guarantor will be compelled too. One missed payment by the borrower could be enough to make you responsible. It won’t matter why the borrower stopped paying, if they cease or are short on their required repayments your guarantee means you said you would pay in their place.

If you fail to make payments after they have been demanded, the lender may take legal action against you to recover their money. As a result of successful legal action a lender may take your house, land, shares, savings or any other things of value to satisfy their debt.

My advice is you should never consider taking on a guarantee, but if you must, make sure it has a limit and get an agreement in place as regards the ownership of the asset. A reputable mortgage broker will have options other than a guarantee if you need to help a family member get into their first home or help a friend in need. Get legal advice if a guarantee becomes your only option.

So what is refinancing?

Refinancing is actually the closing out of a mortgage and then financing your home with a new loan. Before refinancing can be considered an investigation and comparison of available loan types needs to be carried out. Your mortgage broker can help, but a little home work of your own can pay huge dividends.

There are many reasons why homeowners decide to refinance their home. Refinancing your home and your home loan can be a lot of work. It can be as involved, confusing and as costly, as when you took out your first mortgage. With that said, refinancing can result in some significant savings, depending on your needs and circumstances.

The following are some of the most common reasons why people choose to refinance their homes.

1. Lower Payments. When interest rates fall below your current mortgage interest rates you may want to consider refinancing to lower your payments. Although there are costs involved, if you plan to stay in the home for a long time then the reduced monthly payments will likely offset the costs associated with the refinancing.

2. Converting Equity into Cash. Another reason why you may decide to refinance your home is to convert your equity into cash. The cash could be used to finance home improvements or for wealth creation.

3. To Consolidate debt. A common reason for refinancing is to pay off credit cards, auto loans, and other debts.

4. To Convert an Variable Rate Mortgage to a Fixed Rate mortgage. When interest rates are low, it might be a good time to convert an variable rate mortgage to a more stable fixed rate loan which will likely save the borrower money over time.

Deciding on whether to refinance your current mortgage will depend on many factors including the current interest rates, your reasons for refinancing, how long you plan to stay in the home, your current loan features, and your goals for mortgage refinancing.

The Home Loan Club (HLC) is an emerging online exchange that connects interested consumers to various professional mortgage services companies in its Australia wide network. Fill out the online form for a free no-obligation quote to see if Refinancing will help you.

In brief, The First Home Owners Grant has been given a boost as follows:

First home buyers who purchase established homes will now receive a grant of $14,000

First home buyers who contract to build a new home or purchase a spec type, newly constructed home will receive a grant of $21,000.

To qualify for a grant you must have never owned or had an interest in a residential property other than a block of vacant land. The same seems to apply if your spouse/domestic partner previously owned a residential property anywhere in Australia. According to the SA government fact sheet, a spouse/domestic partner must be included on your application.

The boost is applicable to contracts signed between October 14 2008 and June 30 2009.

For clarification of your position I suggest you contact a reputable mortgage broker, they will also be able to advise you about which lenders can be used to take advantage of the grant. You may also want to consult the relevant Government Department in your state. I also suggest you get information on the First Home Buyers Deposit Saver Scheme as well.

Property developers and vacant land owners should benefit from these changes the most. So if you have a piece of land that has development potential, get moving. This is why I like investment properties on their own title. The opportunities for wealth creation are always there, even in tough economic times.

A few post’s ago I started to extol the virtues of rental property investment and that I thought there were going to be some outstanding opportunities on the horizon.

Well, unless you’ve been living marooned like Robinson Crusoe on an Island in isolation for the last year, I’m sure you’re aware of the US credit meltdown, and its domino effect on the economies of the world. A new style of economy is coming, and I am now doing a John Howard style back flip.

Don’t get me wrong, I am still bullish for Australian residential property for the long term, but with such a high percentage of our workforce now employed on a casual basis, and consumer demand on the wane, the short term outlook is now very cloudy. Timing is nearly as important as location in the current financial climate. Move to soon you, and you may get badly burned, especially if you have a short term outlook.

It is now a perfect time to review your current loans, credit cards and spending habits. Interest rates are coming down. Call your mortgage broker, organise a sit down, review your mortgage suitablility and see what’s available. If you can better your cash flow at the moment, you may well be in the box seat to take advantage when the new economy emerges.