Renting vs Buying: Which One is Better?

Wouldn’t it be nice to have your own home? It may be a wonderful idea but everybody knows that buying a house costs a lot of money. When you compare home loan rates, you’ll realise that purchasing a property entails serious consideration and huge funds, or at least a steady income that can cover repayments. That’s why for many, renting a house is a temporary solution. But for how long? Do you intend to pay monthly rent until your retirement?

Which is a better solution: to buy a home or rent one? To help you decide, let’s weigh their pros and cons:

Pros and Cons of Renting

When you rent, you can keep the savings that would otherwise be allotted to a home deposit and all the other expenses involved in buying a home. Being a tenant also enables you to live anywhere you want. You can choose where to live, the type of house and environment, and you can adjust based on your funds. Likewise, renting gives you the freedom to have a diversified portfolio that will generate more income for you than a house.

On the other hand, renting means you need to pay rent on a regular basis. Bear in mind that with inflation and ever-increasing property prices, it may be hard for you to pay your rent when you reach retirement age and income may decrease.

Pros and Cons of Buying

Buying a house is an investment in itself. That’s probably one of the best advantages. The asset can increase its value over time. Property prices fluctuate and are affected by different factors, so it’s essential to remember that this form of investment is for the long term. Buying a house also gives you a sense of stability and security, and enables you decorate your own place.

The downside is, there is loan interest and fees involved. When you compare home loan rates, you will see that buying a house can be really expensive. The down payment alone can leave a hole in your pocket, whereas if you’re renting, you can use your money for other things such as for travel or setting up a business.

So which is better: renting or buying a house? It’s really up to you. It depends on your needs, preferences, and financial capability. The key is to do your research and see the pros and cons of each option.

Do you have other ideas on renting or buying a home, and how to compare home loans? Share your insights in the comments section.

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How to Get the Best Deal on Your Home Loan

Buying a home is an exciting affair. It’s a milestone in anyone’s life. But it can also be pretty daunting, considering the number of documents that need to be prepared and factors considered, not to mention the huge money involved. That’s why it’s important to think things through and make sure that you’re emotionally and financially ready to buy a home.

When buying a home, most people take out a home loan. Different lenders offer different types of home loans. The key is to find one that meets your needs and preferences. But how can you get the best deal on your home loan? Let us help you:

Do your own research

As with any major purchase or life decision, it pays to have all the necessary information. This is an investment that costs a lot of money, so you might as well understand what you’re getting yourself into.

Compare mortgage rates

When you compare home loans, it goes without saying that you need to find out what rates new home owners are paying.  Some offer high mortgage rates, while others may be able to meet your needs. In some cases, lenders offer discounted rates and special features to new customers.

Use a home loan calculator

To help you with the mortgage rates, you can always use a home loan calculator so you will know how much you need to pay on a regular basis. Keep in mind that a mortgage repayment calculator should only be used as a reference for when you are looking for the best deal on your home loan, or when you are thinking about refinancing. It is used only as a guide. It is not designed to give you exact figures since a lot of factors come into play.

Never be afraid to ask

As the saying goes, “if you don’t ask, the answer will always be NO.” If you want lower interest rates, more manageable mortgage repayment schemes, and/or other special features, don’t be afraid to ask your lender or financial institution.

Do you have other trips on how to compare mortgage rates and how to get the best deal on your home loan? You can share your ideas in the comments section.

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Effective Ways to Increase Your Borrowing Capacity

Buying your dream home is often fraught with tight requirements. It is better to make your loan application attractive when it comes to the lender’s assessment. You can explore monthly payments, your borrowing amount, the interest rates, and the duration of the payment of mortgage.  This can help you compare different lenders and make your choice easier. You can also use a home loan calculator to give you estimates. However, it all depends on your borrowing capacity.

An increased borrowing capacity is beneficial to anyone who wants to ensure a good return on investment. There are several factors involved – your income and commitments, lifestyle and expenses, your credit history, property deposits, loan type and terms and interest rates, your assets and the value of your property.

Having understood these factors, here are some tips to help you increase your borrowing capacity.

Do extensive lender research

Lenders operate in different ways when it comes to income.  Some allow share capital as income while others do not. So, it is very important to do your research first and take a look around for a lender that can serve you best.

Healthy credit history

Having a good credit history can also increase your borrowing capacity. Paying your bills on time says a lot about you being a responsible borrower.

Consolidate your debts

Consolidating all your debts into a single loan simplifies your payments.  This helps with your budgeting and allows you to refinance at a better rate. This is also a good sign for potential lenders.

Financial records

The assessment of your application can be improved when you include proofs of bonuses that you receive and other income generated from your investments.

Shared equity

This may vary from lender to lender, some can give you the benefit of a larger mortgage in exchange for a negotiated share of profits. When you consider shared equity, you can borrow money more easily. With rising prices in the market, having a co-owner can help you buy rather than struggle to come up with a bigger deposit.

Savings

Your savings for at least three months are usually required by lenders before the approval of your loan. More importantly, making a 20% deposit prevents you from paying Lenders Mortgage Insurance.

Do you have other ideas on how to increase your borrowing capacity and home loan comparison? Share your insights in the comments section.

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Fixed Rate Home Loan vs Variable Rate Home Loan

Are you planning to buy a house in the near future? One of the main things to do when it comes to home loans is to compare mortgage rates. You can use a home loan calculator that can give estimates on your monthly mortgage repayments and other details. Another thing to look into is the type of home loan. In general, it can be a fixed rate home loan or a variable rate home loan. Of course, each has its own share of pros and cons. In this article, let’s take a look at the features, benefits, and drawbacks of these loan types:

Fixed Rate Home Loan

As the name implies, this type of loan comes with a fixed interest rate for a particular period that can be one year, three years or even five years.

One of the advantages is that since it has a fixed rate, you already know how much you need to pay on a regular basis, enabling you to manage your finances and work around your budget. Also, in case there is an increase in interest rates, you will not be affected.

Now here are the drawbacks of getting a fixed rate home loan. First of all, it said that you will not be affected by rate increase. But the downside is, you will not be able to take advantage of interest rate drops which can make your mortgage repayments lower. Also, you may not be able to redraw as this facility may not be available on this loan type. In case you found a better home loan deal and you want to change your loan, a fixed rate home loan may come with a break fee.

Variable Rate Home Loan

Unlike the fixed rate home loan, the variable rate home loan is affected by interest rate fluctuations. Your loan’s interest rate will move depending on the market rates. This leads to variations in your monthly repayments.

One of the benefits of this loan type is that extra repayments are allowed without additional costs. Making extra repayments can help you pay off your home loan sooner than expected, plus save on interest. It is also easy to switch home loans in case you’ve found something better. The variable rate home loan likewise offers other features such as unlimited redraws on extra repayments as well as setting up an offset account, helping you save on interest.

Of course, since your monthly repayments vary, it can make budgeting more difficult. What’s worse is that you may not be able to keep track and make your mortgage payments if you’re not aware of interest rate increase.

Got other ideas on mortgage repayments and interest rate comparison? Share your tips in the comments section.

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Things to Consider when You Refinance Your Home Loan

If you think that switching to a new home loan or lender to lower your mortgage repayments, think again. Refinancing can be expensive if you’re not careful. There are various reasons why people want to refinance their home loans. As needs change over the years, the mortgage that was suitable before may not fit their situation now.

Think long and hard before you refinance. It’s not as easy as getting the cheapest home loan possible, or whichever proves to be more convenient for you. Here are several things to consider before making the switch:

Know when to refinance

Replacing your current home loan with a new one comes with several advantages. Most people refinance when they need to secure a home loan with a lower interest rate, while some look for improved loan features.  There are also homeowners who are planning to renovate or get a major purchase, and refinancing their home loans will enable them to access home equity to get funds.

Do your research

There’s more to refinancing that just getting a lower interest rate. Make sure that you will benefit from the shift. Compare home loans offered by different providers. It is likewise important to compare mortgage rates. You can also use a home loan calculator so you’ll have an idea on how much your repayments will be and if these can actually help you manage your finances.

Check the conditions of your current home loan

Moving to a new loan or lender is not free. Make sure to look at the conditions stated in your existing home loan to see what the costs of refinancing are. Consider charges like exit fees, deferred establishment fees, as well as break costs.

Consolidate debts

Another reason why many people refinance their home loans is that they will be able to consolidate their debts including credit card and other loans. Debt consolidation can reduce your monthly repayments while getting a new home loan with a better price. When refinancing, take a look at this feature and see if this will work well for you.

Bear in mind that getting a lower rate is not the sole reason to refinance. Ask family and friends who have experience with refinancing so you will have an idea of what it takes to move to a new loan or lender. Consider other factors that can affect your home loan, and ensure that you’ll greatly benefit from the switch.

Do you have other ideas on home loan comparison and refinance? Share your tips in the comments section.

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What is Lenders Mortgage Insurance?

If you’re planning to get a home loan and doing a research on offerings of financial institutions in Australia, you may have encountered the term “Lenders Mortgage Insurance” (LMI). This offers protection to the lender in the event that the borrower can no longer pay loan repayments. This is very different from the mortgage protection insurance which offers coverage for your mortgage in case of death, sickness, disability, or unemployment.

LMI  protects the lender against any loss that they may incur as a result of the borrower not being able to make their loan repayments. It protects the lender against risk of default, therefore they will be more likely to approve the loan with this policy in place.

Usually a bank of financial institution require you to pay a 20% deposit on the property you are purchasing in order to give you a loan. However, if you don’t have 20%, you might be required to pay LMI instead, which may allow you to borrow a higher portion of the property’s purchase price.

LMI just forms a part of the lender’s policy and home loan products. So how can you choose the best deal on a home loan? Here are several things to consider:

Compare home loan rates

Financial institutions vary in the cost of their lenders mortgage insurance. Make sure to compare mortgage rates to find the one that meets your requirements and financial situation. By having a higher deposit and no requirement for LMI, might mean you can get a cheaper interest rate on your home loan. Therefore just because LMI might enable you to borrow more, this might cost you more money.

Use a home loan calculator

When comparing  home loans, you can use a home loan calculator. This helps you determine the estimated amount of what you need to pay. Take note, however that the results can be used only for reference, factors such as the borrower and security types, and purpose of the loan affect the cost of annual premiums.

Know the factors that affect LMI

Lenders mortgage insurance can be based on several factors. These include the amount of loan that you need, the amount of deposit that you have, and whether it’s a residential property or as an investment. It will come down to the individual insurance company requirements and calculators when calculating how  much you will be charged.

Lenders mortgage insurance can help you achieve your dream of having your own home. But before anything else, make sure to know the ins and outs of this insurance. Compare home loan rates and do your research. You can also seek advice from a professional so you can better understand the factors that can affect your lenders mortgage insurance, and home loan in general.

Do you know other tips on home loan comparison and how to compare mortgage rates in Australia? You can share your ideas in the comments section below.

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Why some Young Australians are Buying an Investment Property as their First Home

According to the NAB Residential Property Survey released in 2016, there is an increasing number of young, first-time Australian buyers of investment property. It was found that for the third quarter of that year, first-home investors account for 12.2 percent of all new property sales which is higher compared to the 11.1 percent posted in the second quarter.

Why do some young Australians prefer investment property? The survey shows that first-time investors like flexibility. They can invest in property in other locations which offer lower rates, while at the same time, rent in the city.

It’s never too young to join the investment property bandwagon, but before entering the real estate market, there are various things to take into account so you can get the most out of your chosen investment and minimise risks.

Know the ins and outs of real estate and property investing

Buying an investment property is a major decision, that’s why it is important to educate yourself on how the market works. It costs a lot of money and if you’re not knowledgeable enough, you may end up paying more than you should. But don’t worry. There are a lot of resources online that cover what investors need to know.

Seek professional advice

Aside from educating yourself with online resources on real estate and investing, you can seek advice of qualified professionals. Obviously, they understand the market better, so they can give you helpful insights on home loan comparison, investment strategy, and borrowing capacity.

Save early

One common mistake of those who want to venture into property investing is that they fail to save as early as possible. Young Australians can take advantage of time. This is one great asset since savings have a lot more time to grow. Save early and make saving a habit. Eventually, you’ll have enough disposable income to buy investment property.

Compare home loans

In a competitive market such as investment loans, it pays to have a better understanding of mortgage products. To lower your repayments, you can look for features such as lower ongoing fees, offset account, and a redraw facility. It is likewise essential to compare mortgage rates and choose what suits your needs and financial situation.

Use a home loan calculator

This is a great tool to compare home loans and have a better idea of how much an investment property would cost. There is also a home loan repayment calculator that you can use to get the minimum monthly repayments and interest paid.

Got other tips on how to compare mortgage rates and home loans? You can share your ideas in the comments section.

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