A. Complete our short online form or call us on 1800 REDLOANS now for a free consultation. We will get back to you to organise a meeting and coffee at a time and place of your convenience. The initial discussion will help us to understand your personal situation and requirements so we can then go and research the best options available for you. We will then organise a second meeting to go through the preferred options and ensure you understand all the details being shown to you.
Q. What is the difference between a fixed rate loan and a variable rate loan?
A. Fixed Rate Home Loans have interest rates and loan repayments that remain the same for an agreed period of time, and then at the end of the term, reverts to a variable rate. A Variable Rate Home Loan has an interest rate that can move up and down according to fluctuations in the housing market. You should consider a fixed rate if you want the certainty of knowing what your repayments will be and therefore help you budget.There are some risk associated with a fixed rate loan such as the break fees for being released early form the lockin period can be up to thousands of dollars.
Q. Can I switch between a fixed rate and a variable rate?
A. Yes. You can change from a fixed rate to a variable rate, or vice versa, at any time. If you switch from a fixed rate loan, you may need to pay an Administration Fee and an Early Repayment Adjustment. At the end of a fixed rate period your loan will automatically move to the variable rate (at no cost), or you can switch to another set period.
Q. What is a Comparison Rate?
A. A Comparison Rate reflects the true costs of a loan into a single interest rate. The aim of the Comparison Rate is to give a realistic figure for the loan costs and help you make a decision on the overall costs associated with a loan, and help you to compare various loans and services offered by financial institutions and mortgage providers.
The formula for calculating a comparison rate is regulated by the Consumer Credit Code, and all Australian financial institutions and mortgage providers use this same formula.
Q. What is Lenders Mortgage insurance (LMI)?
A. Lenders’ Mortgage Insurance can help you buy your home sooner, if you have a smaller deposit. It's a one-off cost that's added to your home loan (so you don’t have to pay anything upfront) and allows you to borrow more than 80% of the property value for standard home loans, or 60% of the property value for Low Doc Home Loans.
For example, if you want to buy a house that’s $500,000 and you have a deposit of $60,000, we could normally only lend you $400,000 towards the price of the property. However, if your income could support the loan and you took advantage of Lenders’ Mortgage Insurance, we could lend you the full $440,000 that you need to buy your new home.
Lenders’ Mortgage Insurance is designed to protect a lender against the risks of providing you with a home loan, in the event that you default on repayments.
Q. What is the difference between a ‘Principal and Interest’ Home Loan and an Interest-only Home Loan?
A. A Principal and Interest Home Loan is where both the principal repayment and the interest are repaid together throughout a loan’s term. This means you are paying down the balance of your home loan. Interest only loan is a means of paying lower installments by only paying for the interest on the loan for a period of time.
Q. What is Loan to Valuation Ratio (LVR)?
A. The Loan to Valuation Ratio (LVR) is our way of working out the true financial value of your property, and decides whether your Home Loan needs to be covered by Lenders Mortgage Insurance
The Loan to Value Ratio is simply the loan amount divided by the value of your property. Most lenders will require you to have LMI if you want to borrow more than 80% of the value of the property.For example, the LVR of a $318,000 loan on a $400,000 property is 79.5%. In this instance, no Lenders Mortgage Insurance would be required
Some lenders will lend as high as 95% of the property value and in addition add the LMI to your loan (up to a maximum of 97%), so it doesn’t cost you anything upfront.
You must take into account that the value of a property is normally determined by the lender and NOT the price you paid for it. There may a difference between the valuer's price and the purchase price.
Q. Can I take a break from my loan repayments?
A. Repayment Holidays are available for some Home Loans, this usually has restrictions such as the customers must have made additional repayments on their mortgage. Loan suspension periods usually range from approx. 3 months to 12 months.
Q. What if some of money is tied up in savings, other equity or shares?
A. No Problem, subject to conditions we can arrange for up to a 10% of your purchase price deposit to be guaranteed for up to 48 months so you can keep your money safe until its needed. This is a great option for off the plan purchases or for auction sales where you need a guarantee of funds.
NEGATIVE -V- POSITIVE GEARING
Q: I am hoping to buy my first investment property in the next six to 12 months, but I’m not sure what the difference is between positive and negative gearing, or how to work how which is best for me. Can you help?
A: When deciding which investment strategy is right for you it’s also really important to think about, and understand, whether you want your investment property to be positively geared or negatively geared. There are a few simple questions which can help you work out the right approach pretty quickly, like are you investing for short or long term gain, and do you want a lump sum payout or regular cash income? But I think the main question to help you work out if positive or negative gearing is better for you is: Do you need the income from your rental property to be higher than the costs of your investment property? If you answered yes, then generally speaking that means you need your property to be positively geared.
Positive gearing applies when the money you receive on a rental property is higher than your expenses, like the mortgage repayments, insurance, strata and other ongoing costs. This generated some level of income for you and means that your investment property costs don’t come out of your own pocket. Positive gearing is typically paired with a rental return or cash flow investment strategy. This is when you buy a property that will deliver a strong rental return through high rents. These properties are more often found in regional or outer suburban areas where rental demand is strong.
Negative gearing is essentially the opposite. This means the property’s expenses are higher than the income you receive, so you will be out of pocket overall. One approach isn’t ‘better’ than the other; it mostly depends on your personal circumstances and what you want to get out of your investment property. Knowing your investment strategy is important, and seeking expert financial advice is smart if you need help determining the right approach for your finances and goals. An accredited mortgage broker can also help you learn more about how you can structure your home loan to suit your needs.
Redlands Mortgages Pty Ltd - Where Mortgages Are Just The Beginning