Purchasing a home or an investment property is a big task and the sheer number of mortgage products available is huge.
Even the options on a single product alone can be overwhelming – and confusing.
We have been in this job for a long time and we know exactly what to look for to make sure you get the results you need.
Our strength lies in dealing with our clients on a case-by-case basis. What you need in a home-loan, is not what the next person will need. We help you work out how much you are going to need to purchase the property you’ve chosen including costs such as your deposit, stamp duty, solicitors fees, Council Rates at settlement, and lender’s mortgage insurance (if applicable).
We also help with pre-approvals so you know exactly how much you have at your disposal before you select a property to purchase. A pre-approval can also put you in a stronger negotiating position.
There are a large range of loans on the market today, and while each lending institution will spruik their products, there are generally 5 key things you need to understand about the loan.
What interest rate you will pay
A variable rate is one that can move up or down over the life of your loan. Sometimes this can be in response to where the Reserve Bank of Australia (the RBA) sets official interest rates, and sometimes because of other economic factors.
Variable rates are usually selected when interest rates are falling, or when you want the ability to pay extra on your mortgage without being penalised.
A fixed rate loan is one where the rate doesn’t change during the period you’ve opted to fix for – usually somewhere between 1 and 5 years, but some lenders offer longer periods.
Fixed rates are usually selected when rates look like they are likely to rise, or whenever budget-certainty is important.
It’s possible to hedge your bets and have a bit of both – this often provides the best of both worlds; budget-certainty, protection against rising rates, but still retaining the ability to make extra payments without penalty.
How you choose to pay it
Principal and interest (P&I)
A P&I loan means that each month you are paying some of the interest and some of the loan amount. What this means is that you are reducing the amount of the loan each month, as each payment includes the interest on what was borrowed and a small amount to reduce the loan balance.
P&I is usually favoured by owner-occupiers or investors who have positively-geared investment properties.
An interest only loan means you are only paying the interest on the amount borrowed, but you are not reducing the loan amount at all. This is often favoured by investors looking to minimise their holding cost while maximising the tax-efficiency of their borrowing.