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rent-to-buy

‘Rent to Buy’ Scheme – Everything You Need To Know About

Rent to buy is basically a scheme wherein you have to pay rent for the home you wish to buy for a set time period, and at the end of the contract’s term, you have the pay the pending amount. Many Australians who wish to own their dream home are curious about it. The main aim of this scheme is to provide access to affordable housing and also to ensure that the houses that are built remain affordable into the future.

Many property developers across Australia give buyers the opportunity to own homes through such schemes, though the number of houses on offer through rent-to-buy are much lower as compared to houses offered on regular sale. Once you find a home you want to purchase through a rent to buy scheme, you sign a contract. You follow this up by paying regular installments for few years, normally 4 to 6 years and at the end of which you have the option to buy the home.

The cost incurred in buying a home through this scheme is comparatively higher than the average rent in the market. Take for example, if the market rent for a home is $800, you might end up paying $600 to $800 as rent and might also have to pay premium in lieu of the potential purchase.

One advantage of rent to buy scheme is that you don’t have to worry about getting a home loan at the early stage and it also provides a way for Australians to buy a home even if they can’t obtain a regular home loan, whether that be due to bad credit, deposit or income reasons.

Before considering this scheme, it’s important to seek professional advice as there can be potential pitfalls to it. Like lack of security, as the buyer’s name is not on the property’s title. Also, if you’re making extra payments and one month you’re late, it might be considered that you’ve voided the whole contract & end up losing all the money you paid.

It’s nothing like buying a property in the standard way, with contracts and legislation in place that protects both the buyer and the seller. Besides, after paying off our regular rents, you’ll still require some kind of finance to make the final payment on your property purchase. That’s not the ideal way to move up the property ladder, is it?

When looking at rent to buy schemes, establish how much of the rent that you pay actually goes towards the value of the property. With a number of rent to buy scheme promoters coming under the hammer, it’s best that you follow due diligence and to know exactly what you’re getting into at the onset.

fixed-variable-interest-rates

Fixed Rate or Variable Rate? Which Home Loan is Right for You?

Fixed Rate or Variable Rate? This is probably one of the biggest decisions you’ll make when considering your choice of home loan. Choosing between fixed & variable is a difficult choice and therefore, it’s important to gain a strong understanding of how each type of mortgage could affect you.

The journey to securing your home loan is a winding one, regardless you’re an experienced investor or a first time buyer. You’ll probably take some wrong paths along the way. However, with some thorough research and perhaps getting some guidance from a professional, you’ll get a desired home loan with your personal circumstances and preferences.

Both loans have their pros and cons, and if you’re weighing up between both the options, here’s a short overview of the few pros and cons of each.

1) Fixed Interest Rate
  • Pros: The main benefit of fixed rate home loan is the greater sense of reliability that it provides. The interest rate on your mortgage is locked for a specific period which means that any change in the interest rates shall not affect your repayments. It also helps you to make your budgeting easier as you know exactly what you’re repayments will be so that you can plan ahead for your financial goals.
  •  Cons: A potential downside of fixed rate home loan is its inflexibility. No benefit from a drop in interest rates in cases where your fixed rate is more than the variable rate. Some lenders may even prevent you from making extra repayments, or charge you a fee for it. In addition, if you decide to sell your home within your mortgage term or make adjustments to your loan, you will have to pay expensive break fees.
2) Variable Interest Rate
  • Pros: Most of the people in Australia choose to finance their home with variable home loans largely due to the greater number of options & flexibility that it offers. Extra payments are usually allowed at no extra cost which in return helps you save on interest and also helps you pay off your loan faster. It also helps you greater flexibility in terms of switching loans if you find a better deal elsewhere.
  • Cons: The main disadvantage of variable home loans is its uncertainty. Loan payments increases with increase in interest rates. Also due to fluctuating interest rates, it becomes difficult to plan for your financial goals.

Which Home Loan is Right for You?

A number of experts have their opinion so as to which is a better option of the two. However, there’s no one-size-fits-all solution here. What is right for one buyer may not necessarily be the best option for another. You should consider factors like your income stream, financial goals & flexibility into account before choosing your right home loan.

home-loans

Tips to Pay off Your Home Loan Mortgage Faster

 

Anyone who has ever had a mortgage will tell you how they would love to pay-off their debts faster & dream of a debt-free lifestyle. We are sure you would like your pockets to be bulging with saved cash.

Your home loan is probably your biggest investment & with some smart strategies, you can slice thousands of your interest payments. To help make that dream a reality, here are a few tips & hints to pay off your mortgage faster.

1) Align your Mortgage Payments in-line with Your Payment
If you are being paid fortnightly, schedule your payments fortnightly. Doing this cuts down on your interest payable and will help you save a lot of money over the course of your home loan tenure.

2) Look beyond the Big Banks
It’s not just about reputed names, you can also find small lenders that will find you a more personalized service such as lower interest rates, lower ongoing fees, longer long terms fixed rate with 100% offset account, higher lending ratios and much more.

3) Keep your lump sum payments for home loan payments.
If you receive an unbudgeted lump sum of cash each year like a work bonus, tax refund or some investment dividends, then consider dumping those lump sum amount into your mortgage payments. Its money you’ve learned to live without to this point and chances are you’ll never miss you’ve never had.

4) Home Loan Offset Account
An offset account is a transactional savings account linked to your home loan. When interest on your home loan is calculated, the balance of your offset account is taken off the principal amount owing. This can reduce the amount of interest you are charged and help you pay off your principal and interest home loan faster.
Say for example, you have a home loan of $600,000 with an interest rate of 5%. If you had $100,000 in your in your offset account, you’d only be accruing interest on $500,000 of your home loan. This means you’d pay $25,000 in interest per annum rather than $30,000, saving you $5000 per annum.

5) Annual Home Loan Health Check
In a competitive market, lenders will compete for your business, so take out some time every year & do a home loan health check to see what offers are available. On doing so, you may realize that your loan might not be the best fit for you anymore.

6) Refinancing
If you’ve reviewed your home loan and found it doesn’t suit your needs, look at refinancing whether it is with your existing lender or a different one. This will result in savings and help reduce the term of your principal and interest loan.

7) Always consider your Home Loan a Priority
Having control on some of your less important expenses can add up to significant savings over time. Whether it be your weekly shopping, electricity bills or other household expenses. There’s no point overpaying for things you do, so find where you can compromise a bit & make some cuts. You can use these savings to make additional payments on your home loan that will in return help you secure a debt-free lifestyle much sooner.
For advice on how you could pay off your home loan faster, contact us and get a free consultation with our experts.

save-on-home-loans

Tips on How to Save on Your Home Loans

For most of us, buying a house is the biggest investment that we make. The difficult part is to choose the right services to get a home loan that doesn’t leave you financially crippled for the rest of your life. Financial experts warn that many Australians are overpaying for home loans, spending thousands more in interest than they should be paying. Overpaying for home mortgage can be detrimental to building wealth and has long term effects when you are trying to have financial stability. So here we are to help you save your money by giving you the correct guidance.

1) Cut your Payments in Half
This tried and tested strategy has been saving money for mortgage holders bucket loads of cash over the years. You simply take your monthly mortgage repayment – say $2,000 – and cut it in half ($1,000), and then pay this amount fortnightly instead of monthly. With monthly repayments of $2,000, you will pay $24,000 off your loan by year’s end. However if you pay fortnightly, by splitting the monthly repayment in half and making repayments of $1,000 every two weeks, you will pay $26,000, as there are 26 fortnights in a year.

2) Round up
If you’re like most people, a set amount is whisked out of your account each month for the mortgage. Say you’re the average Aussie with an average $369,600 home loan on an average 5 % interest rate (of course you should be paying less). Your required monthly repayments are $2161 but without too much discomfort to your brain or budget, you could round that up to $2200 … and save more than $11,000 and get out of debt nearly a year early.
Just be sure to re-set your direct debit so there’s never any active deliberation.
By the way, never adjust your mortgage repayments down. You’ve already got your head – and your hip pocket – around that level of repayment. If the minimum falls, you’re making a “bonus” overpayment that will save you significant money and time.

3) Rent out a room
Many homeowners are happy to share their home with non-family members, and will rent out rooms or a separate basement suite to long- and short-term renters. Before you decide to rent out part of your home, consider your lifestyle and comfort level, as well as the local laws that apply and any associated costs
If you are planning to rent out a space intermittently, make sure there are no restrictions on this, especially if you live in a condo or other community, and take into account the time and money required to manage the property. If you live in a city that has an upcoming high-profile event such as the Super Bowl, a large conference or festival, you may be able to head out of town and make enough for a mortgage payment or more in a week or less.

4) Use every dollar twice
A magic little Aussie invention called an offset account lets you use every dollar twice. A savings account that runs parallel to your mortgage, it nets off 100 per cent off any money you have in it against your home loan balance. So if you have a $100,000 mortgage and $5000 in an offset, you’ll pay interest only on $95,000.
You might have separate savings for a holiday, for your next car, for kids’ school fees … you should instead be putting every single dollar – which you get to keep – in an offset account. That way you get to use it for its intended purpose and to save dramatic interest.
Let’s assume you have the average mortgage and an average of $10,000 sitting in your offset. You’ll save more than $22,000 in interest, and almost a year and a half.
You could also take this to a higher level by getting your salary paid in and using a credit card for all your expenses, shifting the money out only when your credit card bill is due each month. At which point more salary should go in your account.

5) Get a health check
Review your loan to decide if you need all the features you may be paying a premium for. Compare it against others by getting a home loan health check from an experienced mortgage broker, to see if you can save money by negotiating a better deal with your current lender or by switching lenders.

6) Make it race
Australian interest rates are at all-time lows so, now, you have once-in-a-lifetime chance to repay your debt cheaper and faster than ever before. Do so at an average 7 % rate and the total cost of your average house will be $784,000. Do so at 5 % and that falls by about $200,000 to $585,000. And you save even more when you repay extra … even if you trick yourself into it!
Choosing the right home loan is not only about getting the lowest the rate of interest but also getting the best loan features. Once you know how much you can borrow, you may select the home loan that gives you the best deal, which could give you competitive interest rate as well as the right loan features. When you look for mortgages you not only look at lower interest rate but also at monthly repayments and loan period. So I hope that these tips may help you to make the right decision regarding your home loan.