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How to Compare Home Loans & Features

Which home loan is right for you? How can you tell when there are so many different lenders, loan types and features available?

It can be confusing, particularly if you are a first-time buyer. Fortunately, we’re here to help explain things, so let’s dive in.

Interest rates versus comparison rates

Interest rates are one of the factors that determine the cost of your mortgage and repayments. Even a small difference in interest rates can have a huge impact on how much interest you’ll pay over the course of the loan.

However, rather than just going with the lowest interest rate, it’s important to consider the comparison rate when comparing loans.

The comparison rate is an indication of the true cost of a loan once the interest rate and fees are included. It’s usually expressed as a percentage, making it easier for you to compare the real cost of different loan products.

Loan types

Principal and interest

With a principal and interest loan, you’ll be paying off both the principal (the amount you borrowed) and the interest.

People buying their own home usually opt for this type of loan, as it helps you pay down your mortgage until you eventually own the property.

Interest-only

An interest-only loan allows you to pay the interest you owe on the loan for a fixed period – usually one to five years.

At the end of the fixed period, the loan usually reverts to a principal and interest loan. Some people choose to refinance to another interest-only period at that point.

People buying an investment property often start off with an interest-only loan because the interest is tax deductable. However, interest rates on these types of loans are usually higher. And because you’re not paying down the principal during the fixed period, you will likely end up paying more interest over the term of the loan.

Variable home loan

With a variable home loan, your interest rate will fluctuate. If rates go down, your repayments will decrease, but if they go up, so too may your repayments.

One positive is that often with these types of loans you can make extra repayments, thereby saving on interest and potentially paying off your loan sooner.

Fixed home loan

A fixed-rate loan is where you lock in your interest rate for a period (usually one to five years). The key benefit is that you’ll know exactly how much your repayments will be and can budget accordingly.

However, there may be restrictions on maying extra repayments and if you want to end the fixed-rate period early (if you sell, for example), you may be up for exit fees.

Split home loan

Want the best of both worlds? With a split loan, you can fix a portion of your loan and keep the rest variable.

This option allows you to budget for the fixed portion and lock in a competitive interest rate, while enjoying any interest rate drops on the variable component and being able to make extra repayments.

Loan features

There are all sorts of loan features that can potentially save you money in interest and shave time off your loan term.

An offset account, for example, allows you to offset any savings in a transaction account against the balance of your home loan. Say you owe $300,000 and there’s $50,000 in your offset, you’ll only pay interest on $250,000.

A redraw facility gives you the flexibility to make extra repayments on your home loan and potentially save on interest, but still gives you access to the funds.

Deciding what’s right for you

The bottom line is there are no one-size-fits-all loans for everyone. The right home loan for you depends on your specific financial circumstances and goals.

Talk to us and we’ll line you up with a competitive home loan that meets your needs.

Discover what our clients think of us.

Housing investor loan cap ‘reaching end of useful life’: APRA

The banking regulator has signalled it could ditch its 10 per cent cap on lending to property investors as the measure is “probably reaching the end of its useful life”.

Smaller lenders have criticised the 10 per cent cap for holding back competition.

The marketplace would welcome APRA addressing the cap’s current settings in order to improve competition, which will ultimately benefit the consumer.

Under pressure from regulators, banks have also in recent years overhauled their systems for assessing customers’ incomes, their debts, their cost of living, and their sensitivity to higher interest rates.

Now is the perfect time to seek professional advice if you are considering property investment.

Carl Thompson – Commercial Lending Specialist, Strategic Investor Group

Competition heats up among lenders for first home buyers and investors

Softer conditions in home lending are prompting the country’s banks, whose loan portfolios are dominated by residential mortgages, to target growth opportunities in specific customer segments, including property investors and first home buyers.

Under the Australian Prudential Regulation Authority’s rules to dampen the housing market, no more than 30 per cent of new bank home loans can be interest-only, and banks’ housing investor loan books can grow no faster than 10 per cent.

The big four banks are now all well below these caps after various moves to increase interest rates and tighten credit.

Now is a great time to invest in property and source a great financing package in a highly competitive marketplace.

Carl Thompson – Commercial Lending Specialist, Strategic Investor Group

Getting started in property investment

Some people get overwhelmed when considering a property investment and quit before they even begin. Reality is, property investing is relatively straightforward, especially when you partner with the right professional.

What does success look like to you? Property investors generally invest in property to secure their financial future or to be free to do what they want, when they want it.

Understanding the property market is the key to making the right investment decision.

Strategic Investor Group exists to create your unfair property advantage with advice regarding location, investment strategy, debt structuring and property acquisition.

Carl Thompson – Commercial Lending Specialist, Strategic Investor Group

Congratulations to Strategic Property Group!

Strategic Investor Group is starting 2018 with a bang!

We are thrilled to announce that Strategic Property Finance has been recognised as one of the country’s top performing mortgage brokerages in Australia for this year securing a place in the highly competitive list of  The Adviser’s – Top 25 Brokerages for 2018.

The ranking was revealed in the February 2018 edition of The Adviser, Australia’s top publication for Australian mortgage and finance brokers. This was also determined by scores in five (5) key areas:

  1. Total book size
  2. Total loans settled
  3. Total volume of loans settled
  4. Book size versus years in business
  5. Average broker volumes

Annie Kane, editor of The Adviser, said, “Each year, The Adviser’s Top 25 Brokerages benchmark ranking celebrates the success of Australia’s top brokerages. This year we saw a significant increase in non-franchise brokerages making the list, but with the top end of the table still dominated by major franchise players, it goes to show that there is no one-size-fits-all model and that success comes in many shapes and sizes. “

Our mission is to create an environment where advice, finance and property buying teams work together to create true value for our clients and the ability for them to realise the property market’s true potential. Being recognised and to be ranked among the very best in the country is a fantastic recognition on this delivery.

We would like to extend our gratitude towards The Adviser and Mortgage Professional Australia recognising our efforts and congratulate all of the brokerages who made the list.

Investor Mortgage interest rate payments rise despite no hike from the RBA

Australia’s banking and finance system delivers higher profits to only a few and rips off its most loyal customers, a Productivity Commission report has found.

The commission found loyal customers were “ripe for exploitation”, with one in two people still banking with their first bank. Only one in three have considered switching banks in the past two years, accepting interest rates on home loans up to 0.4 per cent higher than new customers.

Banks responded to orders from the Australian Prudential Regulation Authority to curb interest-only mortgages by raising interest rates – not just for new loans – but for all existing investor loans.

Now’s the time to seek professional advice and review your property investment strategy and mortgage interest rate.

Carl Thompson – Commercial Lending Specialist, Strategic Investor Group

First home buyers on the rise

First home buyers increased their share of housing demand this quarter, hitting the highest level since 2011.

Overall, first home buyers accounted for almost two in five sales in new housing markets and around one in three in established markets.

Most of the first-time buyers were owner-occupiers rather than investors.

It is a trend expected to continue over the year ahead, with first home buyers, owner-occupiers and local investors tipped to increase their share as foreign demand continues to fall.

Now is a great time to obtain market-leading advice on your property investment strategy.

 

Carl Thompson – Commercial Lending Specialist, Strategic Investor Group

Area X-Ray – Was your last property purchase average?

Strategic Investor Group’s Area X-Ray classifies over 180 suburbs within a target 20km radius of Sydney’s CBD based on 16 key growth criteria. Suburbs are rated A, B or C based on this assessment.

Over the past 12 months, all categories within Area X-Ray have outperformed the broader Sydney market.

 

Carl Thompson – Commercial Lending Specialist, Strategic Investor Group

Global Monetary Tightening

Australian banks’ “continued reliance” on wholesale funding from overseas institutions may see pressure on local interest rates.

One reason is “global monetary tightening”, especially given the European Central Bank (ECB) is starting to wind back the massive monetary stimulus which it pumped into the European economy since the global financial crisis.

In addition, Fitch expects the US Federal Reserve to lift interest rates four times this year.

America’s official rate is currently sitting in the 1.25-1.5 per cent range, so even one rate hike would mean US rates would be more competitive than Australia’s (currently at 1.5pc).

Stable customer deposits are the Banks preferred funding source.

Should the Banks be unable to raise sufficient deposits they will need to access the more expensive option of global wholesale funds.

Carl Thompson – Commercial Lending Specialist, Strategic Investor Group