What types of loans are out there?
Choosing a home loan is not as simple as walking into a shop and picking a sandwich. This is the next 20-30 years of your life we’re talking about, and the vast number of home loan options out there can make it difficult, to say the least. Defence Finance wants to make it easy, connecting you to a panel of lenders that match your needs.
- Home Loans
- First Home Buyer Loans
- Investment Loan
- Refinancing Loans
Home Loans
When going ahead with a home loan, there are various rate options available:
- Standard Variable Rate:
This full-feature loan provides budding homeowners with flexibility,
including the ability to make more repayments, as well as additional redraws and loan-splitting. It’s not uncommon for this rate to rise/fall in line with interest rate changes put into place by the Reserve Bank.
- Basic Variable Rate:
Looking for something without any confusing bells and whistles?
This “frills-free” loan offers a much more affordable option for homeowners looking to save. If you’re not interested in cumbersome additional features, this could be the perfect match for you.
- Fixed Loans:
This is a great option for anyone looking to avoid undesirable rate fluctuations in the future.
It works by “locking in” your rate for a certain amount of time. It’s a great choice if you wish to enjoy more peace of mind and security knowing that your monthly repayments will always be the same, no matter what. The downside is that, should interest rates ever reduce, you will not be able to enjoy the benefits of this.
- Split Rate/Combination Loan:
Sometimes, the best of both worlds is the best option.
This is where a split rate (otherwise known as a combination loan) comes in; empowering you with the ability to assign a certain percentage of your loan amount to a variable interest rate, and another percentage for a fixed interest rate.
First Home Buyer Loans
First Loan/Pre-Approval:
This is probably the most nerve-racking part of the entire process. That’s why we want to make it easier for you. Our team of expert Wealth Management Specialist are ready to connect you to sound advice, information, and guidance. All we need is more information on your unique needs, after which we can source a range of lenders that align. From there, we can take care of all the hard work, so you don’t have to, leaving you to explore your home loan options.
We’ll help you understand the costs involved, secure pre-approval, determine your eligibility, and ultimately, fund the home of your dreams. The amount you will be able to borrow will be affected by numerous factors.
- How much do you earn?
- What do your monthly expenses look like?
- How much will you be able to contribute to the purchase?
Deposit:
This is one of the biggest concerns for first time home buyers in Australia. How much should you put down? Is the full 20% necessary, or will your lender give you some leeway? Contrary to popular belief, 20% isn’t always a requirement. Many banks are more than willing to let you pay a far less deposit, sometimes as little as 5%. We can help you make this decision. Deposit aside, don’t forget to take other expenses into accounts such as legal costs, Stamp Duty, and potential Lender’s Mortgage Insurance (or LMI for short).
Investment Loan
While there are certain similarities between a Home Loan and an Investment Loan, they are not one and the same. Investment loans allow the property-generated income generated to be included in serving the loan. Nearly every lender’s product is available to Investment Loans, however, owing to government regulation changes, lenders are forced to restrict their new investment lending. This has resulted in investment loans being priced higher than regular owner-occupied loans.
Interest Only:
Interest-Only Investment Loan is different in the way it is repaid. Conventional Home Loans involve repayments that include interest and a small percentage of the principal. Interest-Only loans, however, repay just the interest part of a loan over a specified time period. Usually, this is up to five years. The principal amount won’t be reduced. However, you will be able to reap the rewards of a lower monthly repayment number.
The Australian Prudential Regulation Authority (APRA) has clamped down on interest-only loans. Essentially removing them from the owner-occupied product range. However, investors can still apply for interest-only loans if it is part of their overall investment strategy.
Interest-Only products that suit your goals:
Interest-only loans provide an attractive range of benefits, including more flexibility to make more repayments, the ability to redraw, tax advantages, and ultimately, lower monthly repayments. However, there are two sides to every story – and it’s important to be aware of the cons of Interest-Only loans too.
In this regard, you may experience a higher interest rate charged by your lender. Credit approval may prove more challenging, and you may be subject to additional lender fees. With limited LVR (loan-to-value) ratios, it’s a good idea to consult trusted experts before making any decisions. We can help you avoid common pitfalls and reach your goals.
TIP: Countless property investors benefit from tax savings through “negative gearing”. This means the return on your rental income is less than the cost to borrow. This can subsequently be used as a tax deduction. Don’t understand these techniques? Be sure to seek the advice of an expert financial planner or investment coach. The more the world evolves, the more scams arise. Don’t be another statistic. It’s not uncommon for property investors to be overcharged, losing more than they gain.
Refinancing Loans
Many people hear the word “refinancing” and run for the hills. Contrary to what many think, it’s actually not always a negative thing. By refinancing, you could potentially save thousands upon thousands of dollars.
In Australia today, lenders are constantly trying to outdo one another to attract more customers and sharpen their pencils, especially if they think there’s a chance of losing a customer. In other words, there’s no better time than now to re-look at what you’re paying for your mortgage and see if there is an opportunity for you to cut corners and save, save, save.
Unfortunately, there’s a harsh reality every homeowner needs to accept: Banks do NOT reward clients for their loyalty. If you think your loyalty to your bank was indeed saving you money, you thought wrong. Sure, clever advertising gives bankers the impression that they’re getting a better deal by sticking with them, but unfortunately, blind loyalty could see you losing more money. Refinancing will help you save more, and failure to switch could mean failure to save.
Did you know that close to 25% of Australians keep their mortgage with the same bank they used as a child?
Stubbornness when it comes to switching could be costing you thousands. Loyal homeowners pay an average of 4.5% interest when compared with the 4.3% paid by homeowners who make the smart choice to move to a new lender. Don’t forget Australian banks do NOT reward loyalty, and the only way to start saving is to start switching.
Better Cash Flow
Refinancing is a smart way to maximize your cash-flow. Nobody likes being in debt, after all. Imagine being able to reset that home-loan clock, drop your interest rate and minimize your monthly payments. The best way to get started is to use our calculator to discover roughly how much you can save by refinancing. Remember that your cash flow is one of the most important pieces of your financial puzzle. You need to understand where your money’s coming from, where it’s going, and how to keep it all under control. If you’re not able to pay off your debt faster, you can refinance your loan – should you qualify – enjoying a lower interest rate and lower monthly payments.
Cash out
Have you considered using your home’s equity to get finance and secured rates? You can use your equity to do any of the following:
- Home Improvements/Renovations
- Consolidate Debt
- “Cash Out” for personal requirements
- Lower your Monthly Repayments
- Get a Better Interest Rate
- Buy a New Car
- Purchase Another Property for Investment
- Switch from a Fixed to a Variable Interest Rate, Or Vice Versa
Eliminate Debt Faster
Looking for a better rate? Want to pay off your home loan faster and declare yourself debt-free sooner rather than later?
Refinancing is a fantastic way to do so. When refinancing, you can structure your loans and monthly repayments to meet your evolving financial goals – such as lower repayments for improved cash-flow, or higher repayments for expedited debt freedom.
At the end of the day, refinancing really has some perks that could be too attractive to pass up. Maybe you don’t want to change lenders, because you don’t think it’s worth the hassle. Perhaps you think it will take up too much of your time. With Defence Finance, it won’t. We have streamlined the entire process to make everything as painless as possible for you. Don’t hesitate to get in touch with us at any time to discover more. We’re ready to spend the time interacting with lenders, so you don’t have to.
If you’d like to know more, get in touch with us!
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