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Home Loans

piggieBuying a home is one of the most important decisions you’ll make in life.

And can be exciting and daunting at the same time. We can ensure you’re armed with the all the information you need to help you on your way to owning your home. Sandcastle Finance will do the leg-work for you.

We have access to hundreds of loans from a wide variety of lenders and will work with you to find the loan that suits your individual lifestyle circumstances.

Take a look at our online calculators. This will help give you an idea of the amount you may be able to borrow and what the likely repayments may be.

Once you have an idea of your options, give us a call or email us and we’ll continue the legwork for you and arrange a time to meet to present the right options in detail. We are happy to meet you at a time and place that is most convenient to you.

Fixed or Variable home loans

The basic interest rate on a home loan is known as the standard variable rate. The rate is calculated using the interest rate set by the Reserve Bank of Australia, which changes according to economic criteria set by the Bank. As the name suggests a variable rate loan may go up or down during the term of the loan.

Many lenders also offer loans at a fixed interest rate. This means that your interest rate does not change for a given period of time – usually from one to five years.

Fixed rates are generally higher than variable rates, because they include a premium to keep the rate fixed, and thereby protect against the risk of rising rates. The longer the term, the higher the premium.

The certainty of a fixed rate can help with budgeting in the early years of a home loan – it’s good protection against the unexpected.
As a rule of thumb, if a rise in interest rates of more than 2% would mean that you couldn’t cope, then it might be a good idea to fix at least a portion of your loan.

Usually you cannot make extra repayments or vary repayments with a fixed rate loan. These loans also carry penalties if you cancel the loan.

Split loans

If you are attracted by the certainty of a fixed rate, but would like some flexibility, then you might consider a split loan.

You can choose which proportion of your loan you would like at a fixed rate and which you would like at a variable rate.

You benefit from the lower rates and flexibility of a variable loan, but also give yourself some protection against potential rate increases.

Basic home loan

The main feature of a basic home loan is a very low variable interest rate with little or no regular fees.
These loans offer few extra features. For example, if you want the flexibility of a redraw, you generally pay extra.

Honeymoon loans

A discounted introductory rate for the first few months or years is a popular feature on home loans. For example, your introductory rate might be two percent below the standard variable rate. Your rate will change if interest rates change, but it will remain cheaper than the standard variable rate.

During the introductory period take advantage of the lower interest rate and pay off your loan as quickly as you can. When the introductory period ends, your mortgage will revert to the standard variable or fixed rate. These loans may have high fees if you wish to cancel the loan during or immediately after the initial period.

No deposit home loans

Some lenders also now offer no deposit home loans covering 100% of the property’s purchase price.
In some cases, your lender will ask you to pay stamp duty and other costs and fees yourself, but with first homebuyer incentives and grants, these have been greatly reduced.

A handful of lenders will lend more than 100% so that your loan also covers these fees, but approval is harder as strict lending criteria apply, and you may also pay a higher interest rate.

Redraw facility

Loans with a redraw facility allow you to put extra money into your loan. You can take the money back out again when you need it.

Over time these payments can significantly reduce your interest payments and the life of your loan. If you think that you might be able to pay a little bit extra into your mortgage, either regularly or intermittently, then this type of loan might work well for you.

Some lenders charge a fee to activate this feature, and/or a fee each time you redraw, so you need to take these costs into consideration.

100% offset loans & accounts

With an offset account your income is paid into an account that is linked to your loan. You can use the account for all your:

  • EFTPOS
  • cheque
  • Internet banking
  • credit transactions.

The balance in the account is offset against your loan. The more money you keep in your account, the faster your loan is reduced.

These loans are usually charged at the standard variable rate or higher, and may have other fees.

Line of credit

With a line of credit, or an “all in one” account, you pay all your income into your loan account. Essentially it all goes to pay off your loan, but you also use your account as your cheque, credit and savings accounts combined – almost like a simple redraw facility. Keeping money in the account can reduce your loan amount and your interest payments.

You have a pre-approved loan amount that you can access bit by bit, or all at once. This is a very flexible way to borrow, but interest rates tend to be higher than standard variable rates, and there are usually fees.

These loans are more difficult than standard loans for most people to repay because there is no set monthly repayment.

Professional packages

Professional packages can offer substantial discounts and special benefits, but are only available to those who satisfy specific criteria.

The key criteria for most professional packages are that the home loan be in excess of $150,000, and that you earn more than $50,000 per annum.

You do not actually need to be a white collar ‘professional’ to qualify.
The benefits vary between lenders, but in general can include interest rate discounts of between 0.50 and 0.75 per cent for the life of the loan, lower fees and discounts on other bank products.

These are generally great products and well worth considering if you qualify.

Low doc home loans

With no need for documentation to prove income, low doc home loans are designed for borrowers who would not normally comply with the usual income verification policies for standard home loan products.

For example, people with irregular income streams such as the self-employed, those who have difficulty in separating their personal and business cash flows, or who do not yet have up-to-date financial statements.

Borrowers must complete a self-assessment of their financial position in the form of a declaration and they should be sure that they have the ability to repay the loan without undue hardship. Lenders require a substantial amount of equity in the property being offered as security and a clean credit history.

Bridging loans

A bridging loan (or relocation loan) is a short-term loan that covers the gap period between purchasing your new property and selling your old one.

These loans are offered at the standard variable rate and usually have a term of six months if you are selling your property.

Each lender assesses bridging loans differently, so it pays to have an expert on your side. All lenders will require you to have significant equity in your property for a bridging loan.

Reverse mortgages

For anyone aged 60 or over, a reverse mortgage can free the equity in their property without it being sold. Depending on their age, applicants can borrow up to 45 per cent of the value of their home with funds advanced in one payment on settlement, or as needed.

No repayments are required over the life of the loan. Interest fees and charges are capitalised to the loan and repayment is deferred until the property is sold, the borrowers are no longer living in the house, or the borrowers are deceased.

Lenders apply strict conditions to reverse mortgages. For instance, before funding can take place, all applicants are required to seek independent financial and legal advice.

Read more about other options for seniors are Aged care accommodation bond finance.

Family products

There are a number of innovative new mortgage products specifically targeted at first home buyers. These new home loan products assist young people wanting to enter the property market for the first time by allowing family members to help out.

These loans have the added bonus of reducing the Loan to Value Ratio, meaning that borrowers can dramatically reduce, or even avoid, paying mortgage insurance.

Deposit bonds

A deposit bond (or deposit guarantee) is a simple and cost-effective alternative to a cash deposit when purchasing property.

This is particularly useful if you are buying at auction, as it means that you don’t have to keep a significant sum of cash on hand for what could be a prolonged period of time – and it enables you to move quickly when you have to.

A deposit bond is also an excellent solution for investors who don’t have cash at their disposal and don’t want to cash in investments such as shares.

First Home Owners Grant

The First Home Owner Grant is not means-tested but there may be a limit on the purchase price of your property. For example, in New South Wales, the property purchase price cap is $835,000.

It should also be noted that there is not just a grant as there are also other state-based incentives available to first home buyers designed to make your first purchase that bit more affordable – these include stamp duty concessions and building grants. Your mortgage broker will be able to provide you with information, as well as help you arrange your all-important government assistance.

Need More Information

The FHOG is administered on a state-by-state basis. For further information on terms and conditions in your state, visit the relevant government revenue office website (below) or speak to us at Sandcastle Finance.

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