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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5 Important Things that You Need to Know about Your Home Loan

Planning to buy a house anytime soon? It’s an exciting milestone for many Australians. It is also one of the major financial decisions you’ll make, that’s why it is important to understand what buying a house entails.

In most cases, people consider getting a home loan, and there are several factors to take into account should you take this route. For instance, it is essential to save money for the deposit. The bigger the deposit, the lower the amount of loan that you need, and the less interest that you’ll pay throughout the loan term.

Here are other important things that you need to know about home loans:

  1. Fixed loan vs. variable loan. There are two types of home loans. The fixed loan has a fixed interest rate for a certain period, while a variable loan comes with an interest rate that changes depending on market rates. In this case, your repayments will also vary.
  2. Compare home loans. Financial institutions offer a wide range of home loans to cater to people’s varying requirements. Look around and compare home loan rates from different institutions to make the selection process easier. A comparison rate is a good way to compare home loan interest rates.
  3. Check the fees. Aside from the interest rate, it is important to know the fees included in your home loan, whether upfront or ongoing fees, as these can easily increase your repayments. Also, esquire if there are charges for incidents such as late payments or cancelling your home loan.
  4. Know the amount of repayments. A home loan calculator is a useful tool to know how much you need to pay every month. Bear in mind, however, that it should serve only as a reference. There are several factors to consider when it comes to getting home loans, and a home loan calculator is designed to give mortgage estimates, not the actual amounts.
  5. Check the home loan key facts sheet. Financial institutions that offer home loans will have a home loan facts sheet available upon request. It will include important details such repayments, fees, interest rates, and other charges. It makes it easier to compare homes across different lenders.

As with any other important document, make sure to read and understand the terms and conditions before signing any contract for your home loan. Clarify terms with the financial institution to avoid having to deal with unpleasant surprises later on.

Got other ideas on home loan comparison and how to compare home loan rates? Share your insights in the comments section.

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How the Reserve Bank Cash Rate Impacts Home Loan Rates

When you look at home loans and compare mortgage rates, you may encounter the term “Reserve Bank cash rate” or simply “cash rate”. This refers to the market interest rate on overnight loans among financial institutions. It is monitored by the Reserve Bank of Australia which is the country’s central bank and has the ability to increase or lower the official cash rate. This is through basis points to manage economic inflation.

The Reserve Bank of Australia covers the country’s monetary policy and discusses how to manage it. The Governor will then release a statement which influences various aspects not only home loans but also bonds and stocks, deposits, and bank rates.

So how does the Reserve Bank cash rate affect home loan rates? Based on the set cash rate, banks will make adjustments to the fees and charges to their products. As the RBA raises or cuts the cash rate, banks will also change their interest rates for home loans. This strong influence can be seen particularly in variable rate home loans. In other words, the Reserve Bank cash rate plays a significant role on what the interest rates on home loans will be, as well as the amount of repayments you need to handle each month. That is why it is important to be aware of it when you compare mortgage rates.

Now that we’ve seen the impact of cash rate on home loans, bear in mind that financial institutions are not required to take on the changes in cash rate, but not following it will do more harm than good. For instance, they may get a bad reputation should they fail to consider a cut in cash rate which means lower interest rates for the customers.

Cash rate is a crucial component on how much interest rate banks will charge customers on their home loans. That is why it is very important to understand the rates your bank implements, so you will have an idea of how high your repayments will be per month. You can likewise do your own research. Many websites of banks offer a home loan calculator that can give you an estimate of your monthly repayments. But since you can only get estimates, it is still better to seek help from a financial expert so you will know how to compare mortgage rates and choose what meets your requirements.

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

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How to Use a Mortgage Repayment Calculator

Planning to buy your first home or investment property in Australia? A home loan will be able to help you achieve your goal. There are several banks and other financial institutions that offer different home loans. One important step is to compare home loans and mortgage rates to ensure that you’ll get the best deal.

There are different aspects to look into and factors to take into account when it comes to home loans in Australia. One of the main considerations is to make sure that you’re capable of covering the monthly payments. The amount depends on the actual value of the loan and other factors but in general, it may take a long time for a home loan to be fully paid so it is important to know how much you need to pay on a regular basis.

One way to get an idea of the monthly repayment is through the use of a mortgage repayment calculator. Not only will this provide estimates of your mortgage repayments but also aid you in deciding which home loan type fits your requirements and financial situations.

A home loan calculator is pretty straightforward. All you need to do is indicate the loan amount, interest rate, and the term of home loan. You also need to include the payment type and how frequent you prefer to make payments. The home loan calculator will give you an estimate of the monthly repayment based on the figures you’ve indicated. Also, you can indicate different figures, loan terms, payment frequency, and payment types to see which best suits your capacity to pay.

Some home loan calculators even have a function that enables you to compare home loans. With figures displayed side by side, you can easily see the differences of home loans and identify the most appropriate loan setup for you.

One important thing to keep in mind is that the mortgage repayment calculator can only give estimates of your monthly repayments. You can only use this online tool as a guide and should not be considered as the sole resource for calculating how much you need to pay for your home loan. While it is a helpful resource, it is still better to seek advice from the experts so you will better understand how a home loan works before entering any contract or agreement.

We have a Mortgage Repayment Calculator in the tools section of our website. Click here.

Do you know other things worth considering in relation to home loan calculators? Share your ideas in the comments section.

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Five Reasons Why Having a Loan Approval in Place is Important

There’s no point wasting your time searching for or getting emotionally attached to a property if you can’t make an offer on it.

It’s a sunny Saturday, and you’re prepping for a spot of house shopping. You’ve got a shortlist of properties to see, an inspection checklist, your significant other, and a strong coffee. But, have you got your finance sorted out?

Before you start doing any inspections, you need to get a loan approval. Here’s why:

1. You know you can get a loan

There is no point doing open house inspections and getting excited about a property if you have no assurances that a bank will lend you money to buy it. Get approval before you waste any Saturdays.

2. You can be more choosy

You must compare home loans to get the best deal. While the interest rate is important, you need to consider the entire cost of having a loan, and any discounts you can get on your banking. Organising pre-approval gives you time to shop around for the best home loan for you.

3. Have realistic price expectations

It’s all well and good to use a home loan calculator at home, but until you have pre-approval, you have no idea how much you can actually borrow. Getting pre-approval means you don’t waste time on properties that you just cannot afford.

4. You are ready to buy

When you find the right property, you need to move fast for two reasons. It ensures no one else gets a chance to buy it before you, and gives you a bit of bargaining power. Being able to move ahead quickly will entice some buyers and can use this to negotiate the price lower. Loan approvals in Australia take time, so don’t leave it until you’re negotiating.

5. It makes the negotiations process less stressful

There will be a million things to think about and do when negotiating for a property. The last thing you want is to be chasing a payslip from five months ago to give to a bank. If you have a pre-approval, you just call the bank and provide them with the address and sale price. No stress.

So, before you spend hours poring over real estate listings or plodding around open houses get yourself a pre-approval. It will save you stress, time and money.

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How to Reduce Your Home Loan Balance Faster By Making Fortnightly Repayments

Your payment frequency can impact the length of your home loan and the total interest you pay.

Your home loan repayments are likely to be one of your biggest expenses. This makes them a good place to start if you are looking to cut cost. Small changes to your interest rate or loan term can have a dramatic effect on the amount you end up paying in interest.

A simple, yet effective, trick to reduce your home loan balance is to make fortnightly repayments. Doing so will increase the amount you repay each year and get you out of debt sooner. How does this work? Let’s have a look;

Loan repayments are normally made monthly. This means you make 12 repayments each year. When you make fortnightly repayments, you end up make the equivalent of 13 repayments each year.

Here’s an example to demonstrate.

Let’s assume you have a 30-year loan for $300,000 and the interest rate is 4.5% p.a. Your monthly repayments are about $1500. By the end of the year, you would have paid roughly $18,000.

If you choose fortnightly payments your monthly repayment is split in two, for our example, it would be $750. However, and this is where you get the saving, you make repayments every two weeks, not twice a month.

There are 52 weeks in a year, so making repayments every second week means 26 repayments to a total of $19,500 each year.

You end up making 13 months’ worth of repayments each year!

Does it make that much of a difference? Yep. For our example, fortnightly repayments would have saved $40,000 in interest charges over the life of the loan and had it payback four years quicker.

Making fortnightly repayments isn’t any different to making additional repayments. Anything on top of your minimum monthly repayment will have the same effect.

The benefit of fortnightly repayments is that it doesn’t feel like you are paying any extra each month.

Play around with our mortgage repayment calculator to see how much you will save with fortnightly repayment.

If you want to save more on your mortgage you should first compare home loans in Australia to make sure you’re getting the best deal available. After that, fortnightly repayments are an easy way of getting ahead on your mortgage.

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