Home Loans

Home Loan Types

Home Loan Types

Finding the right home loan is as important as finding the right property. There are literally hundreds of home loans available, with new products emerging all the time. At AKL Finance Group, we can recommend a loan for your particular needs, help you to complete the paperwork, professionally package it with your supporting documents and submit it to your chosen lender. When you’re ready, get in touch with us to discuss the next steps. Here’s a snapshot of the main types of home loans and some of their pros and cons. If you would like to know more, give us a call or use our APPLY ONLINE button to give us a better idea of how we can help tailor a loan to suit your needs.

Variable
Standard variable loans are the most popular home loan in Australia. Interest rates go up or down over the life off the loan depending on the official rate set by the Reserve Bank of Australia and funding costs. Your regular repayments pay off both the interest and some of the principal. You can also choose a basic variable loan, which offers a discounted interest rate but has fewer loan features, such as a redraw facility and repayment flexibility. Pros If interest rates fall, the size of your minimum repayments will too. Standard variable loans allow you to make extra repayments.  Even small extra payments can cut the length and cost of your mortgage. Basic variable loans often don’t come with a redraw facility, removing the temptation to spend money you’ve already paid off your loan. Cons If interest rates rise, the size of your repayments will too. Increased loan repayments due to rate rises could impact your household budget, so make sure you take potential interest rate hikes into account when working out how much money to borrow. You need to be disciplined around the redraw facility on a standard variable loan. If you dip into it too often, it will take much longer and cost more to pay off your loan. If you have a basic variable loan, you won’t be able to pay it off quicker or get access to money you have already repaid if you ever need it.
Fixed
The interest rate is fixed for a certain period, usually the first one to five years of the loan.  This means your regular repayments stay the same regardless of changes in interest rates.  At the end of the fixed period you can decide whether to fix the rate again, at whatever rate lenders are offering, or move to a variable loan. Pros Your regular repayments are unaffected by increases in interest rates. You can manage your household budget better during the fixed period, knowing exactly how much is needed to repay your home loan. Cons If interest rates go down, you don’t benefit from the decrease. Your regular repayments stay the same. You can end up paying more than someone with a variable loan if rates remain higher under your agreed fixed rate for a prolonged period. There is very limited opportunity for additional repayments during the fixed rate period. You may be penalised financially if you exit the loan before the end of the fixed rate period.
Split rate loans
Your loan amount is split, so one part is variable, and the other is fixed.  You decide on the proportion of variable and fixed.  You enjoy some of the flexibility of a variable loan along with the certainty of a fixed rate loan. Pros Your regular repayments will vary less when interest rates change, making it easier to budget. If interest rates fall, your regular repayments on the variable portion will too. You can repay the variable part of the loan quicker if you wish. Cons If interest rates rise, your regular repayments on the variable portion will too. Only limited additional repayments of the fixed rate portion are allowed. You will be penalised financially if you exit the fixed portion of the loan early.
Interest only
You repay only the interest on the amount borrowed usually for the first one to five years of the loan, although some lenders offer longer terms.  Because you’re not also paying off the principal, your monthly repayments are lower.  At the end of the interest-only period, you begin to pay off both interest and principal.  These loans are especially popular with investors who plan to pay off the principal when the property is sold, having achieved capital growth. Pros Lower regular repayments during the interest only period. If it is not a fixed rate loan, you have the flexibility to pay off, and often redraw, the principal at your convenience. Cons ·         At the end of the interest only period you have the same level of debt as when you started. ·         If you’re not able to extend your interest-only period, you could face the possibility of increased repayments. ·         You could face a sudden increase in regular repayments at the end of the interest-only period.
Line of Credit
You can pay into and withdraw from your home loan every month, so long as you keep up the regular required repayments.  Many people choose to have their salary paid into their line of credit account.  This type of loan is good for people who want to maximise their income to pay off their mortgage quickly and/or who want maximum flexibility in their access to funds. Pros You can use your income to help reduce interest charges and pay off your mortgage quicker. Provides great flexibility for you to access available funds. You can consolidate spending and debt management in a single account. Cons Without proper monitoring and discipline, you won’t pay off the principal and will continue to carry or increase your level of debt. Line of credit loans usually carry slightly higher interest rates.
Introductory/Honeymoon
Originally designed for first-home buyers, but now available more widely, introductory loans offer a discounted interest rate for the first six to 12 months, before the rate reverts to the usual variable interest rate. Pros Lower regular repayments for an initial ‘honeymoon’ period. Cons Loans may have restrictions, such as no redraw facilities, for the entire length of the loan. You may be locked into a period of higher interest rates at the expiry of the honeymoon period
Low doc
Popular with self-employed people, these loans require less documentation or proof of income than most, but often carry higher interest rates or require a larger deposit because of the perceived higher lender risk.  In most cases you will be financially better off getting together full documentation for another type of loan. But if this isn’t possible, a low doc loan may be a good option to secure the funds you need. Pros Lower requirement for evidence of income. May overlook non-existent or poor credit rating. Cons You will probably pay higher interest than with other home loan types, or may need a larger deposit, or both.

Home Loan Features

Home Loan Features

One size doesn’t fit all when it comes to home loans. Make sure you choose a loan with the features and benefits that are right for you. We can recommend a loan for your particular needs — and take care of all the paperwork. When you’re ready, give us a buzz and we’ll start walking you through your options. Here’s a guide to common loan features and benefits.

Should I refinance?
My Bank is charging me a higher home loan rate than I see advertised elsewhere. Can I change lenders? This is exactly the reason why most people change lenders. There may be a penalty clause in your current home loan, meaning you may need to pay a discharge fee, but it could still be in your financial interests to change. When shopping around it is always important to look for the comparison rate of a product. A comparison rate is essentially the true rate, taking into account the fees and charges you will pay on the loan. So even though you see a lower rate it doesn’t mean the repayments are less. AKL Finance Group brokers are able to take the hassle out of this for you.
I have just come off a ‘honeymoon’ interest rate to a much higher rate. Can I move lenders or am I locked into my mortgage?
You can walk away from most mortgages, although penalty fees sometimes apply. To review your options, why not contact an AKL Finance Group broker?
If I move my mortgage to a new lender, is there anything stopping that lender from increasing their rates in a few months’ time?
It depends what kind of product you have. If you’re concerned about rising rates, perhaps you should consider a fixed rate home loan, where repayments are fixed for a period from 1 to 5 years.
Why do some lenders charge more than others for lending the same amount of money?
Banks and other lenders pay different amounts for the money they on-lend to you, they have different overhead structures and different profit expectations. All these factors affect how much they charge to lend people money.
What documentation do I need to refinance?
The last 3 – 6 months of mortgage statements is sufficient to begin this process. An AKL Finance Group broker can advise on other documentation
Can I get a mortgage where I pay less than I’m paying now?
With lenders adjusting their rates outside of the reserve bank now is a great time to shop around and check that you have the right loan for your needs, and one of our brokers is a great starting point. It will depend what interest rate you’re currently paying, what type of home loan you have (e.g. fixed, variable, interest only, line of credit) and what features you want in your loan.
Can I consolidate credit card or other debts into a home loan?
This is one of the reasons many people refinance.  The advantage is that you pay a much lower interest rate on a mortgage than for most other forms of debt – e.g. credit cards, overdraft facilities, personal loans etc. Providing you have sufficient equity in your property, you may be able to consolidate all your debt into a home loan. If you take this option though it is important to make sure you maintain your repayments at their current level or you could end up paying more over a longer period of time.
How much money can I borrow?
We’re all unique when it comes to our finances and borrowing needs. Get an estimate on how much you could by contacting one of our brokers who can help with calculations based on your circumstances.
How do I choose the loan that’s right for me?
Our guides to loan types and features will help you learn about the main options available.  There are hundreds of different home loans available, so contact an AKL Finance Group broker who can recommend the right loan(s) for you.
How often do I make home loan repayments – weekly, fortnightly or monthly?
Most lenders offer flexible repayment options to suit your pay cycle. Aim for weekly or fortnightly repayments, instead of monthly, as you will make more payments in a year, which will shave dollars and time off your loan.
What fees/costs are involved in switching mortgages?
enalty fees could apply if you’re paying off your current mortgage early, especially if you’re exiting a fixed home loan.  But these may be offset by repayment savings when you switch home loans. Contact AKL Finance Group to discuss which fees would apply in your circumstances. You can give us a call or use our APPLY ONLINE button to get a tailored response.

Refinancing your home loan

Refinancing your home loan

As time marches on, situations change. Perhaps you’ve changed jobs? Or there’s a new addition to the family? Maybe you would just like a better rate? Maybe it’s the advent of school fees, or perhaps the kids have flown the coop? Or maybe that leaking shower or tired kitchen has just reached the end of its life. A shift in circumstances may mean it is time to revisit your home finances. For many, the idea of refinancing a mortgage can be daunting. Fees, fixed versus variable interest rates and monthly charges all need to be considered. The right refinanced loan could help you pay off your mortgage faster and for less, clear unhealthy debt or help you upgrade and add value your home, all of which are steps in the right direction.

Interest only repayments
You only pay the interest on the loan, not the principal, usually for the first one to five years although some lenders offer longer terms. Many lenders give borrowers the option of a further interest-only period. Because you’re not paying off the principal, your monthly repayments are lower. These loans are especially popular with investors who pay off the principal when the property is sold, having achieved capital growth.
Extra repayments
If you pay more than the required regular repayment, the extra amount is deducted from the principal. This not only reduces the amount you owe but lowers the amount of interest you repay. Making extra repayments regularly, even small ones, is the best way to pay off your home loan quicker and save on interest charges.
Weekly or fortnightly repayments
Instead of a regular monthly repayment, you pay off your home loan weekly or fortnightly. This can suit people who are paid on a weekly or fortnightly basis, and will save you money because you end up making more payments in a year, cutting the life of the loan.
Redraw facility
This allows you to access any extra repayments you have made. Knowing you have access to funds can provide peace of mind. Be aware lenders may charge a redraw fee and have a minimum redraw amount.
Repayment holiday
You can take a complete break from repayments, or make reduced repayments, for an agreed period of time. This can be useful for travel, maternity leave or a career change.
Offset account
This is a savings account linked to your home loan. Any money paid into the savings account is deducted from the balance of your home loan before interest is calculated. The more money you save, the lower your regular home loan repayments. You can access your savings in the usual way, by EFTPOS and ATMs. This is a great way to reduce your loan interest, as well as eliminate the tax bill on your savings. Lenders provide partial as well as 100% offset accounts. Be aware the account may have higher monthly fees or require a minimum balance.
Direct debit
Your lender automatically draws repayments from a chosen bank account. Apart from ensuring there is enough cash in the account, you don’t have to worry about making repayments.
All in one home loan
This combines a home loan with a cheque, savings and credit card account. You can have your salary paid into it directly. By keeping cash in the account for as long as possible each month you can reduce the principal and interest charges. Used with discipline, the all-in-one feature offers both flexibility and interest savings. Interest rates charged to these loans can be higher.
Professional package
Home loans over a certain value are offered at a discounted rate, combined with discounted fees on other banking services. These can be attractively priced, but if you don’t use the banking services you may be better off with a basic variable loan.
Portable loans
If you sell your current property and buy somewhere else you can take your home loan with you. This can save time and set-up fees, but you may incur other charges. If you would like to know more, simply give us a call or use our APPLY ONLINE button and we will get in touch with you an answer any questions you may have.

Construction Loan

What is a construction loan?
Building your own house can be a wonderful and fun experience – but it can also be a long and expensive process. However, most people cannot afford to pay for the cost of home construction up front, and getting a mortgage can be tricky. After all, you’re asking a bank or a mortgage lender to give you money for something that doesn’t even exist yet. A standard mortgage loan is not going to cut it – but you may be eligible for a special type of loan known as a construction loan.
Qualifying for a Construction Loan
Banks and mortgage lenders are often leery of construction loans for many reasons. One major issue is that you need to place a lot of trust in the builder. The bank or lender is lending money for something that is to be constructed, with the assumption that it will have a certain value when it is finished. If things go wrong – for instance, if the builder does a poor job or if property values fall – then it could turn out that the bank has made a bad investment and that the property isn’t worth as much as the loan. To try to protect themselves from this problematic outcome, banks often impose strict qualifying requirements for a construction loan. These usually include the following provisions: 1.      A Qualified Builder Must Be Involved. A qualified builder is a licensed general contractor with an established reputation for building quality homes. This means that you may have an especially hard time finding an institution to finance your project if you are intending to act as your own general contractor, or if you are involved in an owner/builder situation. 2.      The Lender Needs Detailed Specifications. This includes floor plans, as well as details about the materials that are going to be used in the home. Builders often put together a comprehensive list of all details (sometimes called the “blue book”); details generally include everything from ceiling heights to the type of home insulation to be used. 3.      The Home Value Must Be Estimated by a Valuer. Although it can seem difficult to appraise something that doesn’t exist, the lender must have an appraiser consider the blue book and specs of the house, as well as the value of the land that the home is being built on. These calculations are then compared to other similar houses with similar locations, similar features, and similar size. These other houses are called “comps,” and an appraised value is determined based on the comps. Providing that you meet all these criteria and have good credit, you should be able to qualify for a construction loan. Generally, lenders also require information regarding your income (to be sure you can afford the mortgage payments) and your current home, just as they would with any type of standard mortgage loan.   To find out if you qualify or if you just have some questions, give us a call or use our APPLY ONLINE button to get a more tailored response to your specific needs.

First Home Buyers

First Home Buyers

Buying your first home is a big step to take, a very exciting step, but one that comes with endless questions and options and decisions on how to finance it, how mortgages work and how to find the right one for you and the big question on how much you may be able to borrow.

That’s where we come in, our job is to take the stress away and do all the legwork for you in terms of comparing home loans with hundreds of products available from Australia’s leading lending institutions.

No question is a silly question so give us a call to find out more or simply clicking on our APPLY ONLINE button to see what we can tailor for you, with no obligation or cost, we look forward to chatting with you and walking you through the options available that will suit your specific needs.

For many, the idea of refinancing a mortgage can be daunting. Fees, fixed versus variable interest rates and monthly charges all need to be considered. The right refinanced loan could help you pay off your mortgage faster and for less, clear unhealthy debt or help you upgrade and add value your home, all of which are steps in the right direction.