Nov 10

Home finance – yes it is still available in Australia and at good rates

Published in mortgage brokerhome loan financehome financecheap home loan by Vicky Edema
If you are in the market for home finance then the best bet is to speak with a mortgage broker who will have access to a wide range of home finance product and will be in a position to recommend the right home finance for you. Once an experienced mortgage broker has discussed your home finance needs with you and ascertains whether you prefer home finance with all the “bells and whistles” or rather just a basic home finance loan then he or she will be better able to suggest a few good home finance options for you.

Currently in Australia, banks and other lending institutions, including non-bank mortgage managers are still approving loans for those wanting to purchase and who require home finance to complete the transaction. With the world global credit crunch and the government responses to this we have seen interest rates for home finance dropping rapidly. The government around the world are keen to keep consumers and home buyers in the market. Without people buying consumables and property the economy will grind to a halt and we risk a recession. Fortunately governments world wide are addressing this by reducing interest rates which in turn makes for some very attractive home finance packages. Interest rates are now below 7% p.a. and are likely to drop further so when considering home finance it is probably wiser to stay in a variable rate. It is important than even your basic home finance provides you with an option to fix as at some point rates will “bottom out” and when they do it will be worth considering fixing at least a portion of your home finance debt. Discuss these options with you mortgage broker so that he knows what home finance will best suit you.

Another feature in your home finance that is important and usually comes with even the basic variable home finance packages is the ability to make extra repayments without penalty and to be able to access those extra payments in the future by way of a redraw feature. This enables you to save interest on your home finance in the long run because you can apply any surplus cash you may have to an extra repayment but if required for any reason in the future then you can redraw it. Interest on most home finance is calculated on a daily basis so whenever you reduce the principal sum under your home finance you are saving interest – the lower your outstanding balance at any time, the lower your interest will be under your home finance loan.

Sometimes a basic home finance loan will not allow you to split your loan into two accounts. You are restricted to one single home finance loan. While this may not be a concern when negotiating your home finance, in the future it could become an issue if you want to increase the loan and use that increase for investment purposes. It is important that you do not mix your personal home finance with your investment loan finance. The Australian Taxation Office has strict rules on the treatment of extra payments to what it calls “mixed accounts”. Under any home finance arrangement that includes both personal and investment loans any extra repayments must be apportioned between both the home loan and the investment loan portion. This means that rather than applying all of an additional repayment to the home finance you must pay some of it towards the investment loan – this is not tax efficient and should be avoided at all cost.
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