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Archive for November, 2010

How to Choose the Home Loan That Is Right for You

November 9th, 2010 at 06:37 am

Congratulations, you've found your dream home! It's just what you've been looking for; it's in a great suburb with a choice of terrific schools, there's plenty of parkland for the kids to play, the kitchens and bathrooms have been renovated, and your bedroom gets the morning sun! But the really good news is - you already know you can afford it!

It's the scenario we all dream of. There are some amazing online calculators you can use to find out so much before you go house-hunting or even talk to a mortgage broker. Find out:

- How do I achieve my savings target?
- How much can I afford to borrow?
- Make home loan comparisons
- Can lump sum repayments shorten the length of your loan?
- Can I make extra repayments?
- How much is stamp duty?

And there are many more. I was impressed with the detail provided and how easy they are to use. Even if you don't know what questions you should be asking, the list of calculators available will prompt you.

You can save so much time and effort by doing this research beforehand. Once you've found your dream home, the next thing is to find the right home loan - one that is both flexible and affordable. Let's take a brief look at the different types of loans available:

Standard Home Loans are where you borrow the amount you need in order to complete the purchase of your home. You'll need a substantial deposit and a good savings record. The loan repayments will probably be calculated over a 25 or 30 year term, on a fixed or variable rate of interest.

Home Equity Loans allow you to use the capital equity you have accumulated in your home. You may wish to renovate or make some major repairs, or perhaps you want to use the equity as security against the purchase of an investment property, buy a car or take a holiday.

Refinance Loans - There are many reasons for wanting a refinance loan. Your partner has given up work to stay home and mind the new baby and consequently, the household income has dropped. Or maybe you've noticed your current lender isn’t keeping pace with the market and there are much better loans available elsewhere.

Reverse Mortgage / Reverse Home Loans are perfect for those who are who are retired and are asset-rich but cash-poor. This kind of loan allows you to draw a cash advance against the equity you have built up in your home. If you've retired, you may need to fund your living expenses, meet unexpected medical bills or you just want to take that well-earned overseas trip. Like any loan, interest will accumulate, but no repayments may be necessary until the house is sold.

Debt Consolidation Loans can give you greater financial freedom by combining two or more loans – including personal loans and credit card debt – into a single loan with the convenience of only one monthly repayment. Not only will it make your finances easier to manage, it will reduce your total monthly repayments.

Low Doc Loans can suit those who don't fit the criteria for a conventional home loan. Perhaps your financial history or current employment situation makes you a high-risk borrower. Fees, charges and interest rates are generally high because the lender is assuming more risk.

Shared Equity Mortgages – are a viable alternative for cash-strapped home buyers or owners. In a shared equity scenario, a traditional mortgage lender will provide a home loan in partnership with an equity provider. The equity provider will effectively be taking a stake in the ownership of your house. Shared equity mortgages are designed to give you access to a more expensive property which would normally be out of your reach using a traditional home mortgage. However, you must talk to a mortgage broker and make sure you fully understand all the implications and are happy sharing the future capital appreciation from your property in return for lower monthly loan repayments throughout the term of your loan.

Family Pledge – is a home buying solution like no other. Family Pledge is available to assist first home buyers or investors enter the property market; the central idea being that your family, as guarantor, helps you fund the purchase of your property. The support from your family would allow you to borrow more money than you would otherwise have been able; rather than having to settle for the cheaper alternative, you could get the house you really want! Your guarantor must understand the responsibility they are assuming – should you default on your repayments, the mortgage lender would sell the property and your guarantor would be asked to cover any shortfall to repay the mortgage debt in full.

Your financial situation - the amount you earn and your long term goals - are unique to you. But no matter what your situation or which home loan you think is right for you, I recommend you always take advice from a professional mortgage broker.

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Home Loan Advisers are finance industry professionals servicing the
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home loan market in Brisbane, Gold Coast and Sunshine Coast who can offer advice on a diverse range of loans – at no cost to you. Their focus is to build on-going relationships with their clients, so they will always recommend a home loan product which is right for your situation and professionally guide you through each step of the process to make your dreams of property ownership a reality. Their website has some great online calculators which allow you to make an initial self-assessment.