In Australia, there are a number of ways to structure your home loan repayments. Finding the best option may save you time and money on your mortgage. Here is some information to help you choose the repayment structure that works best for you.

Variable rate loans

Variable interest rate loans are all about flexibility. Essentially, with a variable rate loan, the interest rate moves up or down as the market moves. This means your loan repayments may also change month-to-month.

If the interest rate drops, then your repayments may drop as well. However, in the event of an interest rate rise, your repayments could also increase.

Many variable rate loans come with additional features, which can reduce the amount of interest paid over the life of the loan. For example, a variable rate loan with a 100% offset arrangement links your loan account to your savings account. Any funds held in your savings account are offset against the borrowed amount, reducing the interest you have to pay.

Many variable rate loans offer flexibility in terms of increased payments, allowing you to pay off your loan faster if you have additional funds available.

Fixed rate loans

A fixed rate loan is one where the interest rate is fixed for a limited period, and immune from any movements in the market. The most popular choices are three and five-year fixed interest loans, although options ranging from one to ten years are available.

Fixed rate loans allow you to make steady, regular repayments. They’re great for borrowers on strict budgets, or if you’re entering into a mortgage at a time when interest rates are likely to rise.

In the event of a drop in interest rates, being locked into a fixed rate may mean your repayments are higher than they otherwise would be. It’s also worth noting that breaking a fixed rate loan can potentially cost thousands of dollars in fees.

Additionally, many banks will charge you a fee for making extra payments towards the loan during the period it has been fixed.

Split rate loans – a foot in each camp

A split rate loan is when you break your mortgage into two loans – one with a fixed rate and one with a variable rate.

It’s something of an ‘each-way bet’. A split loan offers borrowers protection from rate rises (with the fixed portion of the loan) alongside the advantage of rate drops (with the variable portion of the loan).

Most banks will allow you to split your loans from the outset, without having to pay for two separate loan applications.

Choosing the right kind of loan depends on your personal situation, earning capacity and long-term goals for your property. Speaking with a mortgage broker can help you to figure out the best way forward, and could help you save money along the way.

The home loan market is constantly changing, with new and attractive deals coming up all the time. Refinancing can help you secure a more competitive interest rate, access the equity in your home, add features (such as an offset account) or consolidate your debts, but there are some important questions to consider before you get the ball rolling.

1.Has my financial situation changed since I first applied for a home loan?

A refinance is effectively a brand new loan application. All of the personal financial data you had to gather the first time around will need to be produced again. The stability of your income stream, your assets, and your credit card debts and other debts and expenses will all be reviewed, and may impact the result of your application.

It’s important to think about your ongoing ability to pay off your loan, particularly if you’re planning on making big changes that will affect your financial situation, such as starting a family or quitting your job to start your own business.

Of course, if you’ve just received a big pay rise or are now an empty-nester, this may also make a difference to your loan application.

2.Will the refinance really save me money?

Negotiating a lower interest rate or consolidating debts may seem like a financial no-brainer, but the fees associated with switching loans can be hefty, so you need to look at all the costs to work out whether you will really be saving money.

Fixed rate loans can be particularly expensive to exit, and leaving your home loan early will usually see you pay some combination of exit fees, application fees, stamp duty or even legal fees. If you’re borrowing more than 80% of the value of your property, lenders mortgage insurance (LMI) may also be required.

Unfortunately, these fees and costs are not usually transferable from one loan to another, so you may need to pay them again even if you paid them when you took out your original loan.

3.Am I planning on keeping the property for much longer?

If you plan to sell your property within the next few years, refinancing might be a rather big investment of time and energy for little benefit. Similarly, if you only have a small amount left to pay off your loan, you may want to consider whether it’s really worth going through the process of refinancing for the marginal cost savings you may receive.

Refinancing can help you save some money, but it’s worth considering your plans and options before you decide to go ahead with it. If you need some support working out what’s best for you, contact your mortgage broker.

Resources from Fast. Marketing Hub

http://yourloanhub.com.au/2016/06/29/ten-questions-to-ask-a-mortgage-broker/

Ten questions to ask a mortgage broker Using a mortgage broker to help you choose a home loan can save you considerable time and could result in huge savings. However, before you decide on a broker, you need to make sure they’re going to meet your needs. Here are some questions to ask.

1. How long have you been a mortgage broker?

It may help you feel more comfortable with your decision if you know the person you intend to choose as your broker is experienced and has a solid track record. This question will let you know how long they’ve been a broker and what sort of lending they’re involved in. Also ask them to provide client testimonials, if possible.

2. Are you a licensed broker and a member of a professional mortgage industry body?

It’s important to check a broker’s qualifications and credentials. Major lenders require that brokers complete at least a Certificate IV in Financial Services and either hold an Australian credit licence or be authorised under a licensed home loans aggregator or lender. They should also be a member of the Mortgage and Finance Association of Australia (MFAA) or the Finance Brokers Association of Australia (FBAA).

3. Do you have access to a range of different mortgage lenders?

The mortgage broker you choose should be able to offer you loans from a large number of Australian lenders. Ask how many they have access to and if they can provide you with a full list. That way you can have confidence in their contacts and know that they have a wide selection to choose from.

4. How do you determine the best lender?

Your broker’s primary job is to source the best home loan for your specific needs. Securing a low interest rate is key, but a broker should also assess your requirements and then present a number of product options. They should be able to demonstrate how they research and rate their selections, and which loan best fits your circumstances.

5. What fees and commissions are you entitled to?

This question may seem blunt, but keep in mind that brokers generate income from every transaction they complete. It’s good to understand how they are paid, and how that may affect you. The broker must disclose all payments and commissions they receive.

6. How much can I borrow?

As part of the process, a broker should provide an idea of how much you can borrow based on your deposit, income, assets and liabilities. This will help you understand what type of property you can afford to buy.

7. Do you help with first home owners grants?

First-time home buyers may be entitled to government grants and other incentives. Your broker should know what’s available in your state or territory and assist with any paperwork.

8.What’s the best loan structure for me?

A good broker should advise you on which loan structure makes most sense for you. Ask whether a variable interest rate loan is best, or whether you should have a loan with split portions providing both variable and fixed rates. Does it include an interest offset account, a redraw facility, and should you pay principal and interest, or interest only?

9. What are the next steps?

Ask about the process for getting your loan application underway, including any information and documentation you need to provide them as the intermediary between you and the lender. Your broker should be able to give you a checklist.

10. How long will it take?

This will determine how quickly you can start shopping around. Ask the broker to estimate when you should get pre-approval from the lender and also how long the full approval and settlement process should take from start to finish. To get the ball rolling on your home loan, talk to a mortgage broker today.

Resources from Fast. Marketing Hub

http://yourloanhub.com.au/2016/06/29/ten-questions-to-ask-a-mortgage-broker/