Tips
Variable or Fixed Rate or Both
Fixing your interest rate has the advantage of surety. You know exactly what your repayments will be for the term. This is helpful for budgeting and it gives you the peace of mind that you will not be affected by interest rate increases. However, fixed rate products lack flexibility and these generally do not allow you to make extra repayments. They may also have high exit costs.
It is now possible to have the advantages of both. That is the security offered by a fixed loan with the flexibility of a variable loan. This is called a 'split home loan' which is part fixed and part variable. This allows you the flexibility so that if interest rates rise, only a portion of the loan is affected. However, if you wish to make reductions from the principle, then the reductions can be taken off the variable portion of the loan. Many of our customers see this as having the best of both worlds.
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Check Your Current Loan.
Did you know that on average home buyers refinance their home loans approximately every four to five years? If you have owned your home for two years or more it is probably the best time to review your mortgage options.
Over the years your needs and priorities may change and ideally your home loan should change to reflect these changes.
This is where we can help. At One Stop Finance, we can offer you a free home loan check to assess whether your home loan is still the most suitable loan for your needs.
You may now be in the position to:
- Reduce your repayments
- Pay off your loan sooner
- Purchase an investment property
- ‘Top up’ your home loan or
- Restructure your financial commitments
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Loan Costs
Make sure you know all the costs associated with entering into a new loan. These costs include conveyancing costs, application fees, valuation and legal fees, and if necessary, mortgage insurance and extra life insurance premiums.
Make sure you also know all the costs associated with an early discharge of the loan. These days, very few people actually have a home loan for 25 years. In fact, due to people upgrading their property, refinancing as well as early repayment, the average home loan now lasts between 4 to 7 years.
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Fortnightly Repayments
Paying your loan installments more frequently than on a monthly basis can produce savings for you in terms of the interest and an overall reduction in the term of the loan. Most lenders will permit fortnightly or weekly repayments. The effect of more frequent payments is to progressively reduce the loan principal each time a repayment is made, thereby lowering the interest accruing each month.
Consolidate Your Finances
Significant savings are available by consolidating all your finances. The days of having a home loan, a personal loan or overdraft, a car loan, a savings account, a cheque account and owing money on credit cards are over.
Financially, it is far more effective to consolidate all your loans. As home loan rates are significantly lower than those for personal loans, overdrafts and credit cards, but significantly higher than savings and cheque account rates, it makes sense to consolidate everything into your home loan account.
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Minimise Your Mortgage
By effectively structuring your finances, you can significantly reduce your mortgage. Arranging part of your salary to be credited directly to the loan, making additional repayments, setting up an interest offset facility or a line of credit product, are all options that can have very beneficial results.
By sticking to a workable budget, in conjunction with some of the above options, you can repay your loans much more quickly and save vast amounts of interest.
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Pre Application Checklist
One way to make the refinancing process quick and simple is to ensure you have all the necessary documentation before you apply for a new loan.
Below is a list of the minimum documentation required if you are refinancing your loan.
Income
PAYG
- Three of your most recent pay-slips plus your last two Group Certificates or Tax Returns.
- Current letter of employment with your start date and salary (only needed if you started your job this financial year).
Self Employed
- Copies of the past two years Tax Returns for both yourself and your business.
Commitments
- Other loan repayment statement for previous three months.
- Current credit card statements for previous three months.
- Details of personal guarantees.
Other
- Latest rates notice.
- Last 12 months loan statements.
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