Recent competition, combined with technology has greatly assisted consumers. Used correctly, specific home loan products and packages now available, can reduce your loan term and potentially save you thousands of dollars in interest charges.
With any new invention or idea, it is up to the individual to seek information, then decide whether they can benefit as a result. In the Finance Industry there have been many recent changes. For example: Newly developed loan packages can today offer consumers a dynamic advantage by showing them numerous ways of better handling their income, savings and loan accounts.
In the past we used to pay our home loan with a monthly payment drawn out of our savings or cheque account. Now the main issue is that we earn little or no interest on our savings accounts while paying higher interest on our daily loan balances.
Another problem we previously had was the inflexibility of old home loan accounts. Extra repayments off of our loan could never be redrawn without making new loan applications and paying new loan fees to extend our borrowings back up to previously approved limits.
Today we can better manage our cash flow by structuring our savings and loan accounts in a number of different ways.
Types of Loans
Standard Variable Rate Home Loans
This is the lenders standard home loan that has a standard variable interest rate which may move up or down dependent upon the movement in interest rates. This Lenders Standard Variable Rate is guided by the overall state of the economy and the Reserve Banks’ Cost of Funds.
Introductory/Honeymoon Rate Home Loans
These loans offer an initially discounted, fixed or capped period generally for 12 months which then reverts to the Standard Variable Rate Home Loan.
Borrowers can fix their interest rate for a specified period of time most commonly 3 to 5 years. This protects against interest rate increases but does not allow clients to take advantage of falling interest rates. Early repayment or payments in excess of the minimum amount allowed will generally incur interest adjustments and/or penalties.
Line of Credit (L.O.C) & Salary Mortgages
These loans are where you pay your income directly into the home loan. You then pay all your monthly expenditure via credit card and utilize a cheque book or ATM card to access your cash. Used correctly, these facilities will significantly reduce your monthly interest commitments allowing your home loan to be much faster than the standard 30 year loan term. Disciplined spending and monitoring ensures the best possible results. The main difference between the two facilities is that the limit on the Salary Mortgage reduces over time whereas the limit on the L.O.C remains constant.
Mortgage Offset Accounts
A traditional Home Loan with interest offsetting from a linked transaction account generally at the same interest rate as the home loan. This facility has the same overall benefits as a Salary Mortgage Facility. The transaction account is separate to the Home Loan making it easier to budget.
As the interest is offset against the home loan the interest is not taxed. This is a facility that maximises your cash flow, reduces the loan term and ensures funds are available via a redraw facility when required. All standard services can be linked to the offset account. For example: Credit card access, direct salary credits, phone banking.
Basic Variable Home Loan
A basic no frills Home Loan with a lower than Standard Variable Rate that generally has limited features and no ongoing fees.
Split Loans or Combination Loans
These facilities allow for a combination of facilities. For example, a borrower may wish to have a portion of his/her loan on variable and another portion on fixed.
How do I choose which loan is best for me?
By discussing your personal position with your Ryan Home Loans consultant they will assist you make the best possible choice. Some questions they may ask you include:
1. Are your current circumstances likely to change in the near future?
2. Do you have a preference between fixed & variable?
3. Are you a financially disciplined person?
4. How regularly do you get paid?
5. Is a redraw facility important to you?
6. How often would you like to make your repayments?
7. What are your future goals & dreams?
How do I apply?
Your Ryan Home Loans Mortgage Broker will arrange all the necessary paperwork with your loan application.
For further information request your free appointment today.