Loans

WHAT LOAN IS BEST FOR YOU?

You want to ensure that you get the home loan that is most suited to your needs. This means finding the best product, and selecting the best options for you.

In addition to the convenience and peace of mind that comes with efficient service, you also want to become debt-free sooner, paying as little as possible in interest and other charges.

You must therefore consider interest and charges over the life of the loan. A low introductory rate is of only limited benefit if you will be paying a higher rate for the next 10 years. Also, beware of advertisements claiming their loan is the best over the full 30 year period. Do you really think you will still have that loan in 30 years time?

The life of the loan depends on how much you intend to repay, and when. The impact of lump sum repayments can reduce total interest charges enormously due to the compounding effect. Make sure your loan allows these additional payments without penalty.

You should choose the best rate and repayment basis that suits your financial circumstances.

We hope the following pointers help.

I want to know that my loan repayments won't be affected by interest rate rises....

Rate Loans allow you to lock in a known interest rate and repayment amount. Many lenders will allow you to make additional repayments to your fixed rate loan at any time without penalty.

I would like the certainty of a fixed rate of interest, but I don't know if now is the best time to fix rates…

You could choose a variable rate now and elect to fix your rate further down the track when the interest rate picture becomes clearer.

OR, you could hedge your bets by selecting a Split Rate Loan where part of your loan is on a fixed rate and the remainder on a variable rate. If you want to make additional repayments you can do so to whichever part of the loan that has the highest rate at that time.

How can I own my home sooner?....

A typical home loan is written for a term of 25 years and minimum repayments are calculated so as to fully pay off the loan in that time. The only way to pay off the loan quicker is to re-pay more than the minimum repayments. You can do this several ways;

• increase your regular repayment amount
• pay half the monthly repayment amount fortnightly
• make your loan repayments on the same day that you get paid
• make additional lump sum repayments whenever you have surplus funds
• have your pay and any other income paid directly into a 100% Mortgage Off-set Account.

If I make additional repayments can I get access to that money later if I need to?....

Yes, you can apply for a re-draw of excess repayments at any time. Alternatively, if you want full control over this money why not pay all your excess repayments into a 100% Mortgage Off-Set Account and you can access those funds 24 hours a day, 7 days a week.

I want to maximise the tax effectiveness of my investment loan…

An Interest Only Loan enables you to maximise your tax deductions and free up any surplus funds for other investments.

I want a negatively geared share portfolio with the flexibility to trade my shares on a regular basis…

A flexible Line of Credit account gives you cheque book and electronic access to your funds when you want to invest, can be used to receive your dividend and share sale proceeds electronically and provides the major benefit that you are only charged interest on the amount of the facility that is drawn down.

Buy a new home before you sell your existing one…

To avoid expensive bridging finance or the risk that the vendor of the new home won't accept an offer "subject to the sale of your old home" many Lenders provide you with "two loans in one" while you sell your existing home, giving you more financial freedom, more bargaining power and less stress!

Lower repayments whilst your dream home is being built…

You still have to pay the rent or existing mortgage repayments whilst your new home is being built. You're probably also saving up to buy new furniture and so cash-flow is "tight". Many Lenders make getting into your new home easier by only requiring you to repay the interest on the amount drawn down during the construction period