Mortgage Blog

Redraw Facility - Paying extra pay’s your loan down:   Not necessarily, if you have a redraw facility attached to you’re home loan and you pay extra funds into it, the extra funds sit in the redraw and are available for you to redraw.

The extra funds paid into the account do impact on the amount of interest you pay but the extra funds are not actually being paid off the principle of the loan. If you want to pay extra off the principle you need to contact your Bank or Lender and increase the actual monthly repayments.

 Assets are the same as income:   No matter the strength of your assets (for instance how much property you own or gold bricks you have hidden under the mattress), what makes the difference is your capacity to repay the loan through ‘regular substantiated income’, such as payslips and group certificates.When it comes down to servicing, a Bank or Lender will only lend as much as people can afford to repay. The amount of income earning capacity you have, will ultimately determine how much you can borrow. It’s the credit card balance, not the limit that counts:  When it comes to credit cards it’s not about the balance on your card or cards, it’s the total credit available that counts. Having a large range of credit does not necessarily equate to a good credit history. The same applies to ‘Lines of Credit’.

A fixed rate is always safer than a variable:  Every home loan is different – so too are the needs of each individual and family. What is important to remember is that fixed rates are calculated by capital markets over the period you sign on for, whether that be for three, five or seven years. If variable rates go down during this fixed period, you could end up paying a higher interest rate compared to the standard variable.  

When making the decision to fix, it is worth reviewing your budget, mortgage plan and strategy. Once a loan is fixed, if you suddenly decided to sell your home and or want to change back to a variable loan, you will be faced with break costs which can amount to thousands of dollars. Making your repayments minimum and monthly is the best strategy:  Not true. In fact, the interest on a home loan is calculated daily and is charged monthly, so the more regularly you make repayments, the less interest you pay over the life of the loan.    

A bad credit history doesn’t matter if you eventually pay it off:  Your credit history, records any missed or defaulted payments on such things such as credit cards, interest free contracts and mobile phone plans. A patchy credit history can haunt you – even if it is very old or just a one off small amount. There are two major credit reporting agencies that record all of these debts and lenders consult these agencies before they complete your loan application.

100 per cent home loans = no money upfront  Most people think that a 100 per cent home loan means that they do not have to pay any money upfront – however, this is not true. A 100 per cent home loan does cover the property purchase price, but does not extend to the additional upfront fees involved in buying a home such as legal fees, Lenders Mortgage Insurance, purchase & mortgage duty. Cheapest is the best:  A ‘cheap as chips’ interest rate may be a good incentive to sign on the dotted line, but beware – in many cases these loans may have higher fees and less flexibility, costing you more money over the life of the loan. A standard variable loan at a slightly higher rate with flexible features, such as the ability to make additional and lump sum repayments, can save you more money in the long run.

Personal debts can be rolled into a new home loan:  So you have a car loan and credit card debts, and you want to roll all of these into your home loan?  Makes sense, as the interest rate on your mortgage will be lower than your current rate.  But, first home buyers are not usually able to just throw all their debts together like this.  Usually you have to build up equity in the property and then use this equity to service the additional debt.

Start by paying just the minimum amount:   Many first home owners pay only the minimum monthly repayment, as they adjust to the new financial commitment.  However, at the start of the loan you are really only paying interest so by paying more than the minimum, you quickly reduce the amount of interest and principle on the loan.  As interest is calculated daily, repaying twice a month instead of once per month can also save you thousands in interest.

Refinancing saves you money:   Perhaps you have just bought your first home, and you are enjoying all the benefits of your own home.  Your first time mortgage is going well, but perhaps you fixed your rate six months ago and now rates are coming down, or maybe you want to switch to a different lender.  Refinancing sometimes costs money. In the way of exit fees for existing home loans, and settlement fees for the new loan.  However, the market is quite competitive currently and some lenders are giving all the power to the home owner.  Shopping around and refinancing your home loan can save you thousands over the life of you loan, but can also end up costing you more, so talk your possible choices through with your mortgage broker before making your decision.  Mortgage Insurance protects the borrower:  More commonly known as Lender’s Mortgage Insurance, this form of insurance protects the lender, not the borrower. The less deposit you are able to pay at application, the higher the premium you pay to compensate risk. Generally if you have more that a 20% deposit you are not required to pay Lender’s Mortgage Insurance.  

 

 

 

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By: David Hastie

Source: Sunday Herald Sun February 28, 2010 12:00AM  A PLAN to move the Australian Formula 1 Grand Prix to a purpose-built, $200 million race circuit at Avalon is being considered in an attempt to keep the event in Victoria.  

The Sunday Herald Sun has seen documents that pave the way for a new permanent venue after the contract to host the race at Albert Park expires in 2015.  The Confederation of Australian Motor Sport has been granted funding to conduct a feasibility study to build the state-of-the-art complex near Avalon Airport.  

The move would improve Victoria’s chance of retaining the Grand Prix beyond the current contract as well as providing a facility that would enable the state to run the race under lights.  The proposed motorsport complex would be built on some of the 1821ha of land owned by trucking heavyweight Linfox. Linfox director Andrew Fox told the Sunday Herald Sun his family was prepared to foot the $200 million to build the circuit, meaning taxpayers would not be left to shoulder the cost.  A move to a permanent track would save taxpayers the estimated $32 million each year it costs to assemble and dismantle Albert Park’s temporary circuit.  

CAMS chief executive Graham Fountain said his organisation was given about $130,000 last year by the FIA to complete a facility master plan.  He confirmed CAMS was working in partnership with Linfox.  ”We, as part of the feasibility study, will be looking at a whole range of options and opportunities for a potential venue at Avalon,” Mr Fountain said.  “Whether or not Avalon will or will not be an international grade circuit remains to be seen. But certainly it is one of many considerations as part of the master plan process.” The study will be carried out by industry experts from the UK and could begin within months.  While the Government is aware of and supports the study, Sports Minister James Merlino, who met with Mr Fountain earlier this month, said: “A decision to relocate the race is ultimately up to Government, regardless of CAMS’s findings.” GLinfox last year completed its own feasibility study to build a motorsport complex on the land.  Mr Fox said his wish was for Government to utilise the motorsport facility as a driver education centre for young drivers when not in use for competitive racing. 

“You can build a permanent facility that beyond doing a three-day event can also house driver training where the Government should be putting funds for trying to eliminate accidents of P-platers and L-platers on Victorian roads because that is money well spent,” Mr Fox said.  “I’m happy to put the capital up on behalf of the family at Avalon and build a world-class standard.  “We’re building a start-of-the-art facility for the soccer and that’s unchartered waters yet we’ve had the Grand Prix here for so many years.  “Yes, you’ll never be able to replace the views of Albert Park, but you can still build one of the best race tracks in the world.”  

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