You will no doubt be aware of the current lending practices exercise by major banks and how restrictive they can be when it comes to approving home loans. Although Lo

Doc home loans can still be obtained, the conditions under which they are approved have dramatically changed.

Lo Doc is simply shorthand for Low Documentation, and it is a description of our banks lending policy which means that a borrower is not required to satisfy the normal documentation requirements in their application for a home loan.

Typically, self-employed applicants are required to present at least two years full financials and tax returns to have their home loan application assessed. Many businesses, even prosperous and very profitable businesses, cannot always satisfy this requirement as tax returns are not required to be lodged for up to 9 months after the end of the financial year. This means that many applicants who would normally have had their home loan application approved, will not qualify submit because they cannot resent the appropriate documentation.

Lo Doc loans were introduced to overcome this difficulty. In effect, the bank would allow an applicant to make a formal declaration as to their capacity to repay the loan instead of having to produce tax returns.

Although the bank was taking a risk through this approach, they introduced safeguards to protect their interests.

• Loans are charged at a higher rate of interest.
• Loans are limited to 80% of the value of the property.
• Applicants must produce an ABN number with at least two years history.
• The ABN number must have GST registration attached to it for at least two years.
• The bank insures the loans with a mortgage insurance company.
• Loans are not available for construction purposes.
• Loans had limited cash out provisions and are generally limited to 25% of the total loan amount.

With these safeguards in place the bank’s risk is considerably reduced and in terms of loan performance banks have found that Lo Doc loans have a low rate of default payments.

With the onset of the global financial crisis and the shortage of funds available for home loans generally, Lo Doc loans have become less popular and more restrictive. Many banks now require applicants to show:

• 3 to 6 months bank account statements of their main trading account.
• Copies of all BAS returns.

So although the loans still bear the title Lo Doc, it can be seen that although tax returns are not required, applicants still have to provide substantial evidence of income for an application to proceed.

These conditions demonstrate bank’s reluctance to take a blanket approval approach to Lo Doc home loan applications, especially in the current climate, but as liquidity increases in the financial sector many commentators are predicting the return of these loans to former levels.

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Of course, in the real world this does not happen as interest rates change from year to year making the required monthly repayment change in accordance with the rate variations.

Many people also choose to make extra repayments on a home loan and this means that the term of the loan reduces accordingly.

But there is another class of home loan which works in a different way. It is called a line of credit. A line of credit is most useful for investors as they utilise equity in their own property to purchase an investment property. When set up as a separate loan account it makes the accounting process a lot easier and provides the investor with a snapshot of the financial position of the investment.

A line of credit is an interest only facility which means that the borrower only has to pay the interest on the outstanding debt. This is a standard accounting tactic as well because the interest on an investment property is tax-deductible. When it comes to completing tax returns, the line of credit statement provides a ready summary of interest paid.

Let’s look at an example. Say an investor owns his own house which is valued at $800,000 and he wants to purchase an investment property for $400,000. Assuming he has the income and credit worthiness to satisfy them makes criteria he can set up a line of credit for 80% of the value of his house, in this case $640,000.

Once approved this gives the borrower immediate access to $640,000 by way of a cheque or a simple bank transfer. This means that he can purchase his investment property for $400,000 without having to make another application to the bank. Once his purchase is successful the low credit balance will reflect his $400,000 purchase and at the end of the firstmonth he will be charged interest on $400,000.

He can now credit the same account with the rent he receives from the investment property so that at the end of every month the rental income is noted as a credit and the interest charged will be noted as a debit. If the income exceeds the interest, the balance on his lower credit will go down or, if the interest exceeds the rental income, the balance will increase accordingly.

The flexibility of the line of credit enables an investor to use the money as he sees fit without having to ask the bank for an advance home loan every time he wishes to make a purchase.

Home loan rates, comparisons, mortgages, and more. Save money on your home loan today, visit Home Loans.

Although this sounds like a simple proposition it can take a little planning, but with a proper budget most people are surprised at how much fat they can find in their income which they can then use to repay their home loans quicker than they had originally thought.

First of all, let’s look at what impact just a small extra repayment can really make. Take an average couple who have a variable rate home loan of $350,000 over a 30 year term at 6.5%. The minimum monthly repayment they will be required to make is $2212.24. If they could find enough in their budget to pay an extra $50 per week this would equate to an extra $216.67 per month. Simply by doing this, the term of the loan would decrease by just over 6 1/2 years!

So, in real figures if they reduce their loan term by 6 1/2 years, they would be saving 78 monthly repayments which mean a total savings of $172,554.72. Not bad for an extra $50 per week is it?

Now that you have seen how a small increase in repayments can have a massive effect on the total amount of money you can save it is easier to make the decision to actually do something about it.

Here is another way to think about it. If you were to save $50 a week for 30 years of your life, at the end of the day you will have saved $78,000. You may have earned a little interest on this, but you would also have paid extra tax on it, which means that at the end of 30 years the original $78,000 may have become maybe $85,000. On
the other hand if you attempt to save $172,554.72, you will have to put away $110.61 every week.

This example simply shows the power of time and the effect of interest rates. Making an extra $50 a week contribution to your home loan repayment is the same as
saving $110.61 a week. There is not a savings plan or investment that comes anywhere close to this return.

This is what makes doing a budget really worthwhile. It is such a simple process and can have a massive impact on your life you should treat it as compulsory.

To start with you might want to consider making your home loan repayments fortnightly instead of monthly. If you make a repayment of half of your monthly requirement each fortnight you will shave six years off your loan!

None of these measures are difficult to implement and whichever way you look at it, you can save tens of thousands of dollars by making a simple adjustment to your home loan repayment. It is probably one of the few chances in life you have to make not just an impact on your home loan on your lifestyle too.

Home loan rates, comparisons, mortgages, and more. Save money on your home loan today, visit Home Loans.

1. Employment History. Every lender will want to make sure that the borrower is currently in employment and has a history of steady employment. Normally a first-time borrower should be able to demonstrate an employment history of at least one year in permanent full-time employment. In some cases the bank will require a longer period of employment depending on the industry and the amount of money applied for.
2. Income Level. It goes without saying that the amount of income borrower is able to demonstrate by way of payslips and PAYG summaries will ultimately determine his or her borrowing capacity. All income is offset by any existing debts such as personal loans or credit cards. In making this current elation the bank will take into account the limit of the credit card rather than the outstanding balance.
3. Credit History. Any lender will want to ensure that the applicant does not have any adverse items on their credit report. So, a borrower who has a history of , court judgments or bankruptcies will have a difficult time convincing the lender to approve the loan. Each application is dealt with on a case-by-case basis however, and if the amounts of money are minimal and a suitable explanation is available the loan may still be approved.
4. Savings History. A first time applicant for home loans will probably have to show their ability to save money. In most circumstances the bank will require you to provide 3 to 6 months worth of transaction account statements showing regular savings, and an accumulation of at least 5% of the purchase price of the property being considered. This shows the bank that the potential borrower is able to exercise discipline in their financial affairs.
5. Common Sense. In some cases a bank will consider an application on its individual merits. This means that even though borrower satisfies every criteria listed above it may still decline the application if they judge the application to lack commercial appeal. In other words they simply don’t like the look of it! This may happen if the bank has some doubts about the accuracy of the documents provided to support the loan or there may be other elements such as the location of the property that they simply do not like.

Although this outline is not an exhaustive one and bank lending policies change all the time, if you satisfy the elements on this list is more than likely that your home loan application will be approved.

Another point to bear in mind is that even though one bank may reject the application another bank may approve it. When a bank declines a home loan application it is not a reflection on the individual, rather it is only a reflection on the bank’s lending policy.

Home loan rates, comparisons, mortgages, and more. Save money on your home loan today, visit Home Loans.

With a home loan there are many elements to think about, not just the interest rate, as you try to decide which is the best home loan that suits your circumstances.

In the first place you need to be certain that the features of a home loan will suit your needs both now and in the immediate future. For example of variable rate will allow you to make as many additional repayments as you wish, whilst a fixed rate will have limits on this.

So, let’s cover some of the main points you will want to consider in your deliberations.

1. Variable Rate or Fixed Rate. As mentioned above a variable rate loan gives you the flexibility of making extra repayments whenever you wish, meaning that you can pay your home loan off a little faster. Fixed rates however, whilst giving you peace of mind knowing that your rate cannot increase, has limitations on the extra repayments you can make. There are also penalties for paying a fixed rate home loan out earlier than the approved term. This means that if you want to sell your house all refinance to another lender you may have to pay a large fee.
2. How Much to Borrow. When you make your application for a home loan the bank will take into account the income of all parties to the loan. This will largely determine your borrowing capacity. If you are considering a change in occupation or starting a family, you want to make sure that you can make the repayments on the home loan based upon the income left to support the family. In other words don’t over commit yourself. Some banks allow a repayment holiday to cover you in unusual circumstances, so make sure you ask about this at the time of your application.
3. Fees. Invariably, banks will make special offers at different times of the year and may have an exemption on application fees or account keeping fees. Provided the features you are looking for have been ticked off you may be able to negotiate a lower or nil application fees. Do not underestimate the effect of ongoing fees on the real cost of your home loan. This is one area that banks like to target so if this is a concern make sure you choose a lender who does not charge ongoing fees on their home loans.

These three points are amongst the most important questions you should be asking as part of your investigation process. Your personal circumstances and needs should be the only things you concern yourself with. Is easy to become distracted by the interest rates offered by the banks competing for your business, but it is simply no good to you if you choose a loan that ultimately does not serve your best needs.

The best advice is that you should always seek professional assistance when choosing the best home loan that will satisfy all your needs now and in the future.

Home loan rates, comparisons, mortgages, and more. Save money on your home loan today, visit Home Loans.

As banks jockey for position in a tight credit market, cheaper offers can often come thick and fast with discounts of up to 1% being offered on a standard home loan. Let’s take a look at some examples and determine whether the discounts stack up.

Let’s assume a married couple is considering a home loan of $450,000 over 30 years at 6.67%. The bank then advises them that there is a special offer available, a honeymoon rate of 5.67% for the first year. The deal sounds too good to be true and the couple is tempted to sign up on the spot.

If you find yourself in this situation take a deep breath and do the five-year test. The five-year test is a simple mathematical calculation where you add up the entire repayments you have to make in the first five years of the loan. Be sure to include all application fees and any ongoing monthly account keeping fees that the bank charges.

Choose a number of products from different lenders and do the five-year calculation, you might be surprised at the results.

Let’s take the above example and compare it to another banks offering of the same amount and loan term at an interest rate of 6.1% with no introductory honeymoon rate.

For the honeymoon loan the first year’s repayments at 5.67% will be $2603.25 per month. For the next 48 months of the loan interest rate reverts to 6.67% requiring monthly repayments of $2894.80. If you do the calculations you find that the total repayments over the first five years of the loan amount to $170,189.40.

The second loan at 6.1% will require a monthly repayment of $2726.98, making the total repayments over the first five years $163,618.59, making it a clear winner.

This comparison is a typical and realistic example of what can happen. It shows that the honeymoon rate loan would eventually cost the borrowers $6570 more over the first five years of the loan and more as the term goes on.

The calculations will vary with each individual case and for the simplicity of calculation the monthly account keeping fees have been excluded from these figures. In some cases, especially for lower loan amounts, the honeymoon rate can be cheaper over a five-year period.

This big is the question of why you should use a five-year period to do this calculation. Figures show that most home loans in Australia last less than five years before borrowers look at refinancing to another lender or selling their property and moving to a more expensive one. So, a five-year comparison time is a fair one.

Although this example will not be true in every case it highlights the importance of working out the exact amount to be repaid rather than relying on interest rate to make your home loan decision.

Home loan rates, comparisons, mortgages, and more. Save money on your home loan today, visit Home Loans.

Whilst fixed rates will always have a place in the home loan market there can be a sting in the tail if you do not do your homework. Let’s look at some of the facts about fixed-rate home loans so you can decide whether they will suit your circumstances or not.

Fixed rate home loans become a mini contract within your overall home loan agreement. This means that when you choose a 1, 2, 3, 4, or 5 or more fixed rate term, you are making a commitment with the bank to keep the loan for the duration of that period.

If you wish to sell your home all refinance your loan to another lender, you will have to pay out the fixed rate home loan. The lender is entitled to charge you for breaking your contract and you will have to pay whatever the bank calculates as its loss. For example if your fixed rate is set at 6% and the variable rate on the day you pay your loan out is 4%, you are likely to be paying a hefty figure. On the other hand if the variable rate was, for example 8%, the penalty would be minimal or maybe even zero.

As interest rates fell during the global financial crisis many borrowers who had previously locked themselves into relatively high fixed rate terms discovered that the payout figures were prohibitive, rendering their plans to refinance to a low variable rate impossible.

The greatest benefit of a fixed rate home loan is that it cannot change. So if you think that home loan variable rates are on the increase then you should consider fixing your home loan for a period that gives you the greatest comfort. It is extremely difficult to predict the market too far in advance so it is no surprise that most borrowers choose a three year term. In any case you should make your own decision about this and do your own assessments because no one will give you a guarantee.

One important point to consider is that you do not have to fix your entire loan. This means that you can choose to fix a portion of your loan for any period of time that you wish. For example if you have a $300,000 loan you can choose to:

• Fix the entire amount.
• Fix $150,000 for three years and leave the rest of variable.
• Fix $100,000 for two years and fix $100,000 for three years and leave the rest of variable.

In other words the choices are endless and completely at your discretion. Note that most banks require a minimum amount for anyone loan account, generally around $50,000.
In a nutshell, fixed-rate home loans provide you with immunity against rising variable rates and can give you peace of mind in times of uncertainty.

Home loan rates, comparisons, mortgages, and more. Save money on your home loan today, visit Home Loans.

This makes their total monthly commitments $2970, with the non-home loan repayments totalling $758. So, if they can consolidate their total debt of $32,000 into a personal loan that costs less than $758 per month, they will be in front.

In today’s market a personal loan of $32,000 over seven years at 11.5% will require a monthly repayment of $556 meaning a saving to this couple of just over $200 per month. This is what makes a consolidating personal loan and attractive option and it is little wonder that many people go down this road.

But let’s consider for a moment that the couple makes an alternative decision to increase their home loan for the same purpose. By taking out an additional home loan of $32,000 they have a choice of starting a new term of 30 years or adding to their existing home loan over its remaining term. Let’s assume they added to their existing loan over a remaining term of 25 years.

A home loan of $32,000 at 6.5% over 25 years will cost this couple $216 per month. This makes their cash flow $540 better than their current position. Whilst this looks like an even more attractive proposition than a personal loan there is a sting in the tail.

The new $32,000 debt will take 25 years to repay unlike the personal loan which would have been paid off over seven years. But, if this couple was prepared to pay a personal loan repayment of $556 per month than they should be prepared to make the same repayment on the home loan. If they do this, that is make repayments of $556 per month into their new home loan of $32,000, the loan will be paid off in 69 months. This means it will be paid three months sooner and will save the couple three repayments, a total of $1668.

This repayment strategy will not work in every situation but it does show the benefits of using home loans to consolidate personal debt provided you are prepared to make some sacrifices and show some discipline in your repayment strategy.

Home loan rates, comparisons, mortgages, and more. Save money on your home loan today, visit Home Loans.

Everybody wants to own a home, but the reality is that we don’t want to own just any home, rather, we want to own the home that’s just right for our needs and our lifestyle.

But, what, exactly, does that mean? The truth is that the definition of the perfect home is different for every individual. It has to do with your lifestyle, your short term and long term goals, your budget, your career, and, yes, your personal preferences.

Before setting out to find your perfect home, your first priority should be to determine what you’re looking for in the first place, so that you will know it when you see it. In other words, don’t start house-shopping until you have a plan of action and know that you can reasonably cover the payments on a mortgage for that ideal home.

Here are some basic questions to ask yourself before making this decision:

1. How long will I live in this home?

Are you planning on spending the rest of your life in this home, or only a few years? Do you have any major plans to move elsewhere soon, or even potential plans to move, as in are you expecting a possible promotion or transfer at work that would involve moving? Even if your plans might involve a move some years down the line, it’s still worth considering.

2. How much time will I spend here?

For example, if you do a lot of travelling, then you may be looking for something more modest for now. Just a comfortable place to come home to will be a more sensible decision than, say, a two story condo in the suburbs where you will only spend a couple months in a year.

3. Where do I want to live?

This is where personal preference comes into play, of course. If you’re not happy with the home on a personal level, then there’s no reason to bother living there. Simply put, look for a home that seems inviting and that is located in an area you can enjoy living in.

4. What can I afford?

The reason this question is not a little higher up on the list is that, no matter the cost of a home, it’s not a good deal unless it’s a home you want to own. Look to buy a home within your price range, and if there are none that you want to buy within that range, then simply wait until they are in your price range. No matter what your budget, you’re not going to be happy with the purchase unless you actually like the home you’ve bought.

Beyond that, you simply need to consider all of your options; your desires, your means, your budget, your needs, and then contact a reputable real estate broker.

Finding the home you’re after, with the help of a skilful broker, is actually not that difficult. There are thousands of properties on the market. Choosing the one that’s right for you, however, will take a little planning and forethought on your part.

Home loan rates, comparisons, mortgages, and more. Save money on your home loan today, visit Home Loans.

For many first time home owners, it can be a little imposing walking into a loan agency and asking for a mortgage. Just bear in mind that these lenders and agencies would not be in business in the first place if they did not want your business. Right now, lenders are competing with one another to offer lower prices and better service to their borrowers, agencies are trying to find the best deal possible in order to secure more customers, and real estate is becoming something of a buyer’s market.

In other words, the ball is in your court, so to speak, so don’t assume that you’re backed into a corner, or that you will have to accept the first deal that’s offered to you. Try to get the best mortgage deal you can find.

In fact, it may be a good idea to address a few of the common worries here:

1. Bad credit

Bad credit may limit your options when it comes to taking out a home loan, but you do still have choices. Expect to pay slightly higher closing costs than you would on a standard mortgage, but know that you can still come to an agreement that will let you make reasonable payments.

2. Lower income

As long as you can reasonably cover the mortgage payments on a regular basis, you do not, in fact, need to be wealthy, moderately wealthy, or even upper-middle class to take out a solid home loan. In other words, if you have a decent job, you can get a decent loan.

3. Bad financial history

While anyone with bad financial history, such as delinquent loans and so on, will be considered “high-risk”, and, as with a bad credit loan, can expect to pay more in terms of interest and closing fees, it’s still not impossible to get a decent loan. Again, it comes down to income more than anything: If you have a decent job, you can get a decent loan.

The actual home loan application process is fairly simple, but will require a little bit of research, paperwork-gathering, and preparation on your part.

First, check your credit rating. You can get a good loan without great credit, but the better your credit, the more options you have open to you. Contest any inaccuracies in the credit report, and work to fix any unpaid debts and so forth.

Second, gather up as much proof of income as you can. Every dollar counts. Get together your bank statements, wage or salary statements, everything you can to prove that you have reliable income to cover the mortgage payments. This is the primary item lenders are looking for, more so than good credit or a spotless financial history: Proof of reliable income.

You should definitely consider going through an agency rather than simply calling up lenders directly. A lending agency is out to find the best deal for the borrowers. Furthermore, a lending agency will simplify the application process for you by presenting you only with the best options within your means. This means less paperwork and stress on your end.

In short, the application process itself is, in fact, not all that difficult to understand. As long as you’ve done your homework, you’ve checked your credit score, and gathered all the requisite documents, it shouldn’t be difficult at all to come to some loan terms that you can be happy with.

Home loan rates, comparisons, mortgages, and more. Save money on your home loan today, visit Home Loans.