Now that the Christmas spending period is over now might be a good time to look at a debt consolidation loan, especially if you knocked your credit cards around over the buying season.

If you think you are going to have trouble making a credit card repayment because you have overspent, it’s best to act fast and deal with the problem before it develops into something more serious. A lot of people end up in more strife by putting off the inevitable when it could have been a relatively simple process.

It’s no secret that home loan rates are cheaper than credit card interest rates so it makes sense to investigate whether it is possible to refinance your home loan and incorporate all of your credit card debts at the same time.

Let’s take a look at the process and the advantages.

First, the advantages of this debt consolidation strategy.

Let’s say you have an existing home loan of $300,000 with a monthly repayment of $2056. (This is calculated as a 30 year loan at 7.3%). On top of that, let’s assume you have a credit card debt of $20,000 which requires a monthly repayment of $600. This means you have total monthly repayments of $2656

Now, if you were to consolidate the $20,000 debt into your home loan, the minimum monthly repayment required on $320,000 is $2194. This means that you can actually save $462 a month!

Alternatively, this type of debt consolidation loan can actually make it easy at to repay your debts even faster. How?

Well, if you were to continue making repayments of $2656 a month into the new home loan of $320,000, you would actually pay the loan off in just under 12 years earlier! That’s right if you make repayments of $2656 per month on a home loan of $320,000 it would be paid off in just 18 years instead of the usual 30 years. Additionally, by taking 12 years of your loan term you are actually saving yourself 12 years of repayments, or $382,464!!

It almost seems too good to be true, but if you can manage your finances correctly this is the type of saving you can look forward to.

Of course, another alternative would be to look at a personal loan that consolidates all of your existing non-home loan debts. The only disadvantage with this strategy is that a personal loan will be several percentage points dearer than a home loan.

Assumptions about using this debt consolidation strategy.

Before you start getting excited, you have to ensure that you will qualify for this loan in the first place. There are two things that you have to look at.

1. Does your salary qualify for the higher loan amount?
2. Do I have sufficient equity in my house?

The only way you can work out whether you are earning sufficient income is to ask a mortgage broker to do some income testing for you. Secondly, you have to ensure that the total amount of the home loan you will be seeking is no more than 95% of the value of your property.

If you can satisfy these two hurdles, the chances are you’ll be in a good position to get a debt consolidation loan that will place you in an excellent position. Of course, the figures we have talked about here only apply in light of current interest rates. As times change and rates change with some, not to mention your salary or personal circumstances, the overall strategy may need to be tweaked from time to time to make sure you stay on track.

There is no doubt about it that a debt consolidation strategy such as this has tons of advantages but you will also have to learn to exercise some restraint by cancelling your credit cards or, at the very least, minimise your usage so that they don’t get out of hand again.

The best way you can start the process is by talking to your mortgage broker. If you have any doubts just list the phone and call me on 1300 133 193 to discuss your debt consolidation plans.

Australians love to bash the banks. Every time we read about their latest profit spike we can feel the blood rush to our head just before we explode with renewed invective.

So, when I read the following article it got me wondering whether or not we might be a little too harsh in our criticism. It’s really all about how they treat their customers and how they perceive themselves. Do the banks really think they treat their customers well? How can they find out the truth?

 Banks ignore consumer pain.

David Leermakers | Australian Financial Review | November 14, 2011

It seems like almost every day someone from the banking industry is bellyaching about the pace of banking and credit reform, why all this regulation is pointless and why we should feel sorry for them. So I wasn’t surprised to read that the Australian Bankers Association still refuses to believe that these reforms have been provoked by real problems with the way banks do business. How is it possible for the bank chiefs to think that fees are readily accepted by their customers? Where else will you find a seller of any product tacking on a raft of fees after you have bought their product? Here’s your ice cream sir, hope you enjoy it….by the way there’s an extra 20 cents a month for the next 6 months charged to your credit card so we can continue to bring you the best flavours.

Then you see a series of advertisements showing how much they care for you because they live in your world or they are determined to be different, when we all know they couldn’t give a rats!

Is it really a surprise to them when we tell them we still think they stink?

The article continues:

 Reforms on mortgage exit fees, unsolicited credit limit increase offers and key facts sheets respond to longstanding issues that consumers have been making noise about for years. The typical response from the banks has been to deny that there is a problem. But even if there is, it can’t be fixed because of the “cost”, much of which is never substantiated. It seems to us as a consumer watchdog that if banks had responded when concerns were originally raised that the tick and flick credit limit increase offers cause consumer detriment, or that mortgage exit fees and incomprehensible product disclosure stifle competition, these problems could have been addressed without government intervention and at a pace the banks find more agreeable.

What I think is finally happening is that regulations are bringing the banks screaming and struggling in touch with what the entire community has known for decades.

Banks will finally have to understand that they are not able to rely on their exclusive right to peddle money. They must treat their customers with respect and dignity and realise they must win the trust and loyalty of their customers and not simply talk about it.

If you are looking at buying an investment property as part of your new year resolutions, now could be the best time to look at mining towns.
An article on the Aussie blog says that:

Mining towns across Australia are the big movers in the rental property market, with regions such as Illawarra and the Hunter Valley in NSW seeing sharp increases of around nine per cent in weekly rents over the past year.

Of course rental returns are a critical element when assessing the viability of an investment property purchase but there are a lot of other factors too.

“Location, location, location” is the catch cry used by property spruikers and this is nowhere more important than in the investment property market. The same Aussie blog reminds us that buying in a flood zone can be made more difficult because it is nearly impossible to work out exactly what the house is worth. Worse still how do you determine the likely future value increases which are imperative when putting a wealth creation strategy in place.

But the fact remains that vacancy rates are low and rental values are soaring. In fact the Advisor says:

“With regard to rents, 2011 has been a landlords’ market with rents nationwide recording rises of 4.6 per cent-plus, according to the Australian Bureau of Statistics (ABS),” managing director of SQM Research, Louis Christopher, said.

 So, when looking at buying an investment property, remember this.

Get advice from the experts and that doesn’t just mean your local Real Estate agent (who is keen to sell you anything on their books). Instead read the investment property market news and gather as much intelligence as you can. For example:

While properties in Melbourne, Adelaide and Hobart are set for a modest year in terms of property price growth, other parts of the country are likely to enjoy robust rises in home values over 2012, Australian Property Monitors (APM) senior economist Dr Andrew Wilson has claimed.

(Thanks to the Advisor for this snippet)

Compare that to this:

Continued economic uncertainty could cause house prices to fall by as much as 5 per cent in the first six months of 2012.

According to AMP’s chief economist Shane Oliver, the Reserve Bank of Australia will be forced to cut rates at least twice more in a bid to stimulate buyer confidence.

(Again thanks to the Advisor.)

Is there an easy way to select an investment property?

OK, so it might get a bit confusing and when it comes to any type of investment, there are always risks. That’s why it’s so important to get as much information as possible and not to take the word of anyone with a vested interest.

At the end of the day the final decision rests with you, but if you want to discuss the options surrounding buying an investment property please call me on 1300133193.

Self Managed Super Funds.

During the last six months or so I have received a lot of phone calls about self managed super funds. There are a lot of retirees out there who want to know how to use their self managed super fund to purchase property and borrow to fund other investments.

I need to point out that I am not an expert in this area but I thought it would be worthwhile to summarise exactly how self managed super funds work and point out some issues when it comes to borrowing money.

Most banks and lenders will approve home loan applications for self manage super funds but the real issue comes in managing the fund itself.

Let’s look at some of the issues you need to know about.

Effectively, self managed super funds allow you to take over the management of your superannuation investments for your retirement. If you sat at one of these funds yourself you will be completely responsible for it, meaning that you have to report to the Australian Taxation Office in the appropriate way.

Here is a link to the Australian taxation office website which gives you all the information you need.

Self managed super funds work in much the same way as any other superannuation fund does. The real difference lies in the fact that members of a self managed super fund are the trustees and this means that the members run it for their own benefit.

But, these funds after everyone and you certainly need to take a lot of advice before making a final decision. It is a major financial commitment and you have to make sure that you have sufficient time and skill to run it properly.

In fact, financial advisers may be able to show you some better ways to manage your money, but any case you certainly need to get professional advice.

Self managed super funds are run according to the terms of a trust deed and the laws and rules that apply to them. The sole purpose, as we stated before, is to provide retirement benefits to fund members.

The fund’s investments must be managed in the best interests of members and in accordance with the law. This means that you have to keep your personal investments separate from those of the fund itself. Remember, the fund can be audited at any time so meticulous records need to be kept in respect of every undertaking and every transaction.

Contributions can be accepted from members but there are always restrictions. Depending on the members age there are certain contribution caps that limit how much can be accepted, and assets can never be contributed except in certain circumstances.

One of the greatest impositions you will experience as a self managed super fund administrator is that of accurate record-keeping, reporting and administration.

As the administrator of the fund, you will need to arrange an annual audit and keep records in accordance with Australian Taxation Office rules and you also have to report to the tax office about the fund’s operation.

When it comes time to access your super, you need to remember that the payment of benefits is only allowed when a member reaches their preservation age and they meet the specified conditions of release. This normally means retirement.

In some cases superannuation can be accessed before this event but it is limited to certain circumstances such as death or terminal illness.

The taxation regime that applies to self manage superannuation funds is quite attractive in that the fund is taxed at a concessional rate of 15%. Naturally, the fund has to be what is termed, ‘complying’ and you need to consult with a superannuation expert to make sure your fund is in the right category.

If the fund is not compliant than much higher rates can apply to the income and investments which accumulate above the contribution caps.

When it comes time to wind up a self managed superannuation fund, for instance where all the members and trustees have left and benefits have been paid out, you have to be certain to comply with the Australian Taxation Office requirements and that you report it accordingly.

All in all managing your own superannuation fund is a huge responsibility and you have to decide whether you are in a position to invest the time and energy to fulfil all the statutory requirements and spend time seeking professional advice to ensure you don’t fall foul of Australian Taxation Office rules and regulations.

In fact, the Australia Taxation Office advises that if you are not confident after seeking advice from a professional, you could be better off with a different type of fund.

Self managed superannuation funds can be a great vehicle to take control of your retirement plans and you may be looking for investment loans to suit.

Remember you can call me at any time to talk about your self managed superannuation fund investment opportunities and I will point you in the right direction.

Listen To This Story About Home Loans.

Home loans come in all shapes and sizes, and every bank has their own varieties too. Just how many there to choose from was brought home to me after talking to a couple about to buy their first home.

As a mortgage broker I am used to talking about home loans every day of the week and it is easy to underestimate the complexity when it comes to explaining home loans to clients, especially new home buyers.

I constantly remind myself to stop using jargon and use easy to understand language to explain the ins and outs of things like variable rates, fixed home loan rates, lines of credit, split loan facilities, professional packages and interest only loans.

In fact, there is very little point in explaining all home loans because most new borrowers just want to get the cheapest loan they can.

This can be a mistake however because it’s really important to choose the best home loan to suit your individual circumstances first and then decide on the cheapest rate for the type of loan you want.

For instance, some of the cheapest home loans on the market are what you might call frill free loans. They have a low rate of interest, are usually very will interest rates, and they only have the option of principal and interest repayments. In many cases they also carry a monthly fee and offer very little to borrowers apart from a cheap rate.

It might surprise you to find that you may well be better off choosing home loans with a slightly higher rate of interest with no ongoing fees and charges because, in the medium term, they may in fact cost you less! I have explained his earlier so it might help you if you read this post first.

If you have subscribed to my Home Loans Shortcuts you probably don’t need to read much further because you already know:

• How to choose a good home loan.
• What you need to apply for a home loan.
• Questions you need to ask your mortgage broker.

If you haven’t already subscribed I suggest you go over to the right hand side of this page and fill in the details right now.

But, let’s continue the story.

These borrowers had visited no less than three banks looking for explanations about the home loans each institution had to offer. They were simply trying to get a good idea of what was available for them so they could make an informed choice. And, of course, the cheapest loan they could find.

After four days into their investigation, a friend suggested they ring me.

I asked them what they had discovered and they told me they were absolutely confused and still couldn’t tell the difference between one bank and the next. Even their own bank, with whom they had been banking for the last five years, was not able to convince them about the correct product.

I suggested to them that we go over their current circumstances and map out a plan about which features of a home loan might be attractive to them, and which ones we should disregard. In order to do this we went through a short 30 minute process where I know it all their needs and requirements both for the foreseeable future and the medium term (the next five years).

After sifting through all the information I was able to highlight the features of a home loan that might benefit them, and then narrowed down their search to a few banks that would be able to offer them a suitable home loan.

One of the surprises they found was that none of the three banks they had visited were able to provide a competitive product. In fact, the cheapest loans were from a nonretail bank.

They pointed out to me that they could have probably discover the same information if they had been astute enough to do some online research. Whilst I agreed with them I showed them that the information on some nonretail bank websites would not have alerted them to the suitability or of some other products that were not highlighted there.

In the end, we all became aware of the fact that three or four days solid research by these borrowers actually led them up the garden path and that simply by talking to your mortgage broker of their choice (preferably me), they could have avoided all the angst and worry and got the job done in an hour or so.

Not that I am tooting my own trumpet or anything!

So, what were the key points we went over during a 30 minute interview? Here is a list of the points were covered.

• We established an accurate assessment of their borrowing capacity, and we coupled that with their expected lifestyle expenses. We did this to work out how much they could comfortably afford in monthly rate home loan repayments without compromising their lifestyle.
• We clarified their cash position and factored in the impact of the first home owners grant, the savings they had in their bank account, how much cash they want to keep in their account after the home loan was settled and how much cash they should keep aside for incidentals and unexpected items.
• We assessed what changes they were anticipating in their lives over the next five years, including the possibility of starting a family, educational and ongoing expenses for their education and how long they intended to stay in the home.
• We examined the various types of loans that would be appropriate for them including the flexibility to make extra repayments, the possibility of reverting to interest only should the circumstances require it, the inappropriateness of lines of credit (they did not qualify for one), and looked at the possibility of splitting their loan into two parts to take advantage of a fixed rate and a competitive variable rate at the same time.

Once we have these points clear it made the decision as to which home loan war is the most appropriate quite a simple process.

They realised that interest rates are not the best criteria when it comes to deciding which is the best home loan and that there is no point being loyal to your bank if they can’t provide the product you really need.

One thing that really stood out during a discussion was that they had not realised the possibility of negotiating a better deal than the ones the banks advertise. I showed them how even banks have monthly specials and home loans sales which borrowers can take advantage of and that with the proposed abolition of exit fees it might be feasible to change banks sooner than they thought.

I think the thing that impressed the most was working out the real cost of a loan rather than blindly accepting what the bank says. By taking them through my five-year plan approach they realised how easy it is to compare home loans free of the hype that the bank’s marketing throws at you.

I guess it’s easy for a mortgage broker to look at home loans with a critical eye but it is so easy for new borrowers to get caught up in the details.

Ever wondered if there is a better way to compare home loans? How do you choose with any degree of certainty?

While there is no certain way to choose a home loan that will stand the test of time, there is a method I use to demonstrate to my clients how you can at least get a better idea. It’s called the 5 Year Test.

Best Home Loan

How Does The Home Loan Test Work?

Well, first we have to make some assumptions, based on experience and fact. Let’s look at these assumptions and the associated facts.

• We only know the interest rate that applies to a loan at the time we do the analysis. We don’t know whether the rate will change upwards or downwards in the future. Therefore that only way to compare loans is on the basis of the current interest rate.
• The average duration of a home loan in Australia before the borrower either sells or refinances is between 4 and 5 years. (http://www.essentialsofborrowing.com.au/~/ar/25/Mortgage-Refinancing-and-Mortgage-Management/Why-refinance-mortgage/MFAA) So the best term over which to compare loans is 5 years.
• Home loan products are shrouded in marketing terms that might be totally irrelevant to us. So, we have to exclude the fancy words and the outrageous claims from almost every bank, lender, building society and credit union. For example does “Home Loan of the Year” or “Home Loan Bank” of the year really mean anything? Absolutely not!
• The interest rate does not tell us the whole cost of a loan. There are application fees, associated bank charges and ongoing monthly and, in some cases, yearly fees to add in too.

Let’s now go forward with a dispassionate eye and a clear goal of calculating the only way to compare home loans. And that’s by calculating the exact total cost to us over the first 5 years of the loan.

Step 1.

Get your broker or lender to tell you the minimum monthly repayment required.

Step 2.

Ask if there are any ongoing fees and charges including monthly and yearly charges.

Step 3.

Ask if there are any fees for transactions you know you will be using. For example redraw costs. For these transactions you will need to estimate how many you will incur every month on average.

Step 4.

Add up all application fees, Mortgage insurance premiums where applicable (remember different banks use different mortgage insurers and the costs may vary slightly), bank settlement and legal fees and any fee charged by the bank or lender at settlement.

You can ignore Government fees and charges as these will be the same with all lenders.

Step 5.

Add up all the monthly costs obtained in steps 1 – 3 to get a true monthly cost.

Step 6.

Multiply the figure in Step 5 by 60.

Step 7.

Add the number obtained in Step 6 to the total figure obtained in Step 4. This is the FINAL FIGURE.

Now simply repeat this process for every loan you are considering and compare the final figures to see which loan is cheapest.

WARNING ON THE HOME LOAN TEST!!

You should only use this test after determining that the loans you are comparing are entirely suitable for you and that you can qualify for them. Only a qualified Mortgage Broker can assist you through this process. In other words get the assistance of your Broker to take you through the necessary qualifying steps first.

SAFEST OPTION

The safest option is to call me and I’ll go through it with you on the phone. Free of charge.

Call me on 1300 133 193 NOW

TO GET THE BEST HOME LOAN.

Have you ever wondered how some people seem to always get what they want when they go to their bank, especially when it comes to getting the best home loan? Well don’t be surprised.

Best Home Loan

I see it all the time when I visit clients who talk about their friends who went to their bank and got exactly what they wanted, yet when the clients went to the same bank they didn’t qualify for what they needed.

Let’s look at what is happening and work out what you can do.

What’s involved in finding the best home loan?

When a bank assesses your borrowing capacity it looks at a whole range of factors. The most important ones are:

• How much money you earn.
• How much deposit you have.
• Your credit history.
• The value of the property you want to buy.

For the sake of simplicity we will temporarily ignore the other factors that banks use when assessing a home loan application and pretend that these are the four key factors. Then we’ll look at finding the best home loan.

To make things even simpler, let’s assume you have a good credit history and have a 20% deposit because when we do this it makes it easier to compare bank loans and understand exactly what is happening at the bank.

Here are the constants which we can use to compare home loans and borrowing capacity and finally answer the question “how much can I borrow?”

• Applicant 1. Salary $65,000. Credit card with $8000 limit.
• Applicant 2. Salary $50,000.

If you visit Heritage Building Society you will probably qualify for a home loan maximum of $546,000. Oh, bad luck! You actually needed to borrow $700,000, so it’s back to the drawing board. Why not try the Commonwealth Bank? There you’ll qualify for $583,500 which is better but nowhere near enough. Not the best home loan anyway.

So, you decide to try your friend’s bank and visit your local Suncorp branch, but after a 30 minute process they tell you your borrowing capacity is $623,000.

Despondently you head home and write down the results:

After some thinking and long discussion you think about the possibilities:

• You might be able to borrow the extra with a personal loan.
• You might be able to convince Mum and Dad to help you get over the line.
• You might call Michael Haydon on 1300 133 193 for a free consultation.

In the end you do the right thing and call me and I tell you the following things about how to find the best home loan.

All banks have different lending criteria and you’ll get a different answer about your borrowing capacity. They’ll possibly try to convince you to choose another property and give you a Pre-Approval Home Loan Certificate to make you feel special. (Don’t be fooled into thinking that a Pre Approval Certificate is worth something! I’ll tell you why later.)

What’s more

It’s very common for your borrowing capacity to vary by hundreds of thousands of dollars!

So, is it really possible for the borrowers we talked about above to really get the loan amount they need? The answer is a very loud yes!

Take a look at the following table* to see just how much your borrowing capacity varies from bank to bank.

*This table is accurate as at 4 July 2011 and will change from day to day. This is because banks are continually changing their lending policies and this in turn affects borrowing capacity. Also, remember that there many other factors that affect whether you will qualify for a particular loan. This table is used to demonstrate the large differences between banks and other lenders.

You can see from this table* that from top to bottom the difference is just under $200,000.

That’s enough to confuse anybody!

With these differences is it still possible to get the best home loan?

Happily, the answer to this question is once again, a very clear and resounding yes.

That’s because you’ll find that many non retail bank lenders like ING DIRECT, AFG and Macquarie offer some of the cheapest fully featured loans on the market, but you’ll have to talk to a mortgage broker to get the details and see whether or not is appropriate for you, because these lenders usually only take applications lodged with a broker.

So, this is a good time to review the things you might want to consider when deciding what is important in a home loan.

• Make sure the loan has the features you are looking for like a redraw facility and the capacity to make extra repayments without restrictions or limits.
• Look at the costs involved with every loan so you are going in with your eyes open and won’t be caught out by any unexpected fees or charges.
• Remember that to qualify as the best home loan it must meet your requirements which mean that just because it was good for your friend, it may not be right for you.
•  Do your research long enough in advance so you won’t be forced into a loan with a lender who can process your application in time to meet the finance clause on the purchase contract.

The best way to do this is to discuss your needs with a mortgage broker and go over all the alternatives like:

• What are the most competitive variable interest rates?
• What are the best fixed rates at the moment?
• Are there any special offers which can save me?
• Is there a better way to structure my loan to pay it off faster?

Just sitting down with your broker for an hour or so can literally save you thousands of dollars or more in the long run and ensure that you do end up with the best home loan on the market.

A fixed rate home loan is more complex than you might think and we need to cover a lot of points to completely understand whether you should stay with a variable rate or fix your loan for a few years.

Over the past few years we have all seen the effects of the global financial crisis affected interest rates dramatically. Rates plummeted from around 7.5% to 4% or 5% depending on the lender. This uncertainty confused many borrowers, especially when it came to deciding whether or not to choose a fixed rate home loan.

When To Choose a Fixed Rate Home Loan

It is normally a golden rule of borrowing that when rates are going down, it is not a good time to fix your home loan. Nevertheless, with the uncertainty in the market many borrowers jumped on the fixed rate bandwagon.

Compare this to the situation just prior to the onset of the global financial crisis. With rates hovering around 7.5% and are looking to go higher, many borrowers chose to fix their home loans at that point. This meant that when rates began to fall, they were stuck on high rates sometimes as much as 3% above the going market rate.

These borrowers found themselves in a real bind and sought to get out of their fixed rates and go back onto a variable rate home loan. Unfortunately, this is when the small print of fixed home loans really hit home.

So, before we jump into the ins and outs of whether or not a fixed rate home loan is good for you, let’s take a look at how fixed rate home loans really work.

The most salient points about a fixed rate home loan are as follows.

• Most lenders offer fixed rates for 1, 2, 3, 4, or 5 years. Some of the major lenders will go as high as 10 years or even 15 to 20 years depending on the circumstances. This means you have many choices to make.
• All fixed rate home loan contracts lock you in to the term you choose. This means that if you wish to terminate the fixed rate term earlier than normal there will be penalties attached. The actual amount of the penalty is difficult to ascertain but as a rule of thumb if the variable rate is lower than the fixed rate, the greater the difference the greater the penalty. Naturally, if the fixed rate is lower than the variable rate there is unlikely to be any penalty if you want to terminate your fixed-rate home loan early.
• There are restrictions on the amount of extra repayments you can make on a fixed rate home loan. This means that you don’t have the flexibility as you do with the variable rate home loan by making extra payments to pay the home loan off earlier.
• One of the advantages of a fixed rate home loan is that there is no uncertainty in your cash position. You will know exactly how much your monthly home loan commitments are because interest rate changes do not affect you in the slightest.

What these points really mean will change according to your own particular circumstances and the prevailing conditions in the interest rate market.

In essence, choosing to take a fixed rate home loan means you are taking a gamble. You are gambling as to whether the interest rate will be going up or down, and if you are correct you stand to save a lot of money. On the other hand if you are wrong, you stand to lose thousands of dollars or even more.

At the height of the global financial crisis when variable rate home loans were at their lowest ebb, many fixed-rate borrowers who sought to terminate the contract early discovered they were up for tens of thousands of dollars in early repayment fees. This was the worst of all worlds and many borrowers faced extremely difficult times.

This should sound a warning to anyone contemplating a fixed rate home loan for a long term.

Let’s summarise the position so far.

The advantages of taking out a fixed rate home loan are:

• You can plan your budget a long way in advance because you know that 30 monthly home loan repayments will not change.
• Fixed rates can give you peace of mind especially when you have to budget for things like school fees or other recurring expenses.
• If variable interest rates rise, you will save a lot of money.

The disadvantages of fixed rate home loans are:

• If variable interest rates rise, you could lose a lot of money.
• If you decide to sell your house, or you want to pay out your fixed-rate home loan and convert to a variable rate you could face very high termination fees as we have discussed above.
• There are restrictions how much extra you can pay into your home loan, which means you may not be able to pay off as soon as you would like.
• Most fixed rate home loans do not come with ‘frills’ like offset accounts, which means that you have less opportunity to save money.

Variable rate home loans have several advantages:

• When interest rates fall you can save a lot of money.
• Generally, you can pay as much as you like into your home loan whenever you like which means you can pay it off sooner.
• You can take advantage of facilities like offset accounts which can help you reduce interest payments and help you pay off your home loan sooner.
• Many lenders offer professional packages which offer discounts on variable rate home loans that are not available on fixed rates.

But variable rates also have some disadvantages:

• As interest rates rise, you may find it a struggle to keep up with a home loan repayments.
• Your lifestyle can be severely restrained if rates continue to rise over a sustained period of time.

All in all, you need to make some carefully considered judgements before deciding to opt for a fixed rate home loan.

Remember when you are taking out a fixed rate home loan you are saying to the bank: “I bet the variable rate will be higher than this for the next x years”.

And the bank is saying back to you: “we bet it won’t!”

Banks have been wrong in the past and they are likely to be wrong in the future at some stage, but you can minimise the gamble before deciding whether a fixed rate home loan is best if you talk to some experts before making your decision.

The recent State Budget announced some changes to transfer stamp duty and grants which I thought you might like to know about – this could save you $$$$s if you are looking to purchase a property in the near future.

Building Boost Grant – The Ins and Outs

Transfer Stamp Duty:

Currently there is a Home Concession for transfer duty available to people who are not first home buyers when buying a home to live in as their principal place of residence – this concession will cease from 31^st July 2011*.

So if you are considering looking to buy a new home to live in it would be worth trying to do this before the end of July! (*there will still be some concession on stamp duty for First home buyers though).

From 1 August 2011 both owner-occupiers and investors will pay the same rate of stamp duty.  Details of the actual stamp duty rate changes are attached.

First Home Owners Grant:

The existing $7,000 First Home Owners Grant is continuing and is available now – this was created to help people buy or build their first ever home.  The grant applies to first home buyers purchasing a home with a value less than $750,000.

For more information or to see if you are eligible click here – First home owner grant—Office of State Revenue, Qld

New!! $10,000 Queensland Building Boost Grant:

Now for the really good news!!! …

This new grant is available to any person or corporation buying or building a new home to live in, or to rent out for investment purposes, for homes less than $600,000.  This Building Boost Grant is designed to re-ignite Queensland’s housing construction sector following a combination of falling property transfers and the economic impact of a summer of natural disasters.  That’s right … it’s for investors too!

This grant is available for a limited time only – from 1 August 2011 to 31 January 2012

Interested?  Check out the Frequently Asked Questions document attached for further details or to check your eligibility go to – Queensland Building Boost Grant eligibility tester (Queensland State Budget)

Need help?

If you have any questions, or if I can assist with more information on the Building Boost Grant please give me a call on 1300 133 193 and I’d be happy to help you.