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LOAN PRODUCTS

In Australia, there are a number of ways to structure your home loan repayments. Finding the best option may save you time and money on your mortgage. Here is some information to help you choose the repayment structure that works best for you.
 
 

Variable Rate Loans

Variable interest rate loans are all about flexibility. Essentially, with a variable rate loan, the interest rate moves up or down as the market moves. This means your loan repayments may also change month-to-month. If the interest rate drops, then your repayments may drop as well. However, in the event of an interest rate rise, your repayments could also increase. Many variable rate loans come with additional features, which can reduce the amount of interest paid over the life of the loan. For example, a variable rate loan with a 100% offset arrangement links your loan account to your savings account. Any funds held in your savings account are offset against the borrowed amount, reducing the interest you have to pay. Many variable rate loans offer flexibility in terms of increased payments, allowing you to pay off your loan faster if you have additional funds available.

Fixed Rate Loan

A fixed rate loan is one where the interest rate is fixed for a limited period, and immune from any movements in the market. The most popular choices are three and five-year fixed interest loans, although options ranging from one to ten years are available. Fixed rate loans allow you to make steady, regular repayments. They’re great for borrowers on strict budgets, or if you’re entering into a mortgage at a time when interest rates are likely to rise. In the event of a drop in interest rates, being locked into a fixed rate may mean your repayments are higher than they otherwise would be. It’s also worth noting that breaking a fixed rate loan can potentially cost thousands of dollars in fees. Additionally, many banks will charge you a fee for making extra payments towards the loan during the period it has been fixed.

Split Rate Loans – a foot in each camp

A split rate loan is when you break your mortgage into two loans – one with a fixed rate and one with a variable rate. It’s something of an ‘each-way bet’. A split loan offers borrowers protection from rate rises (with the fixed portion of the loan) alongside the advantage of rate drops (with the variable portion of the loan). Most banks will allow you to split your loans from the outset, without having to pay for two separate loan applications. Choosing the right kind of loan depends on your personal situation, earning capacity and long-term goals for your property. Speaking with a mortgage broker can help you to figure out the best way forward, and could help you save money along the way.

Low rate or 'no frills' home loans

Who doesn’t want to save on the amount of interest they pay for their home loan?

It’s easy to see why low interest home loans are taken out by many customers.

Essentially a ‘no frills’ home loan, a low interest or basic home loan has the lowest associated running costs because it simply has fewer bells and whistles. The good news is that in return for a basic product, you pay interest at a lower rate than that applied to most other home loan options, allowing you to make extensive savings on your home loan repayments.

There are distinct advantages and disadvantages with this type of loan. As the name suggests, the interest rate is consistently lower than for other home loans. However, as the interest rate is variable, you will be vulnerable to broader interest rate changes, just like any other borrower. Facilities such as a loan redraw facility can be available with a no frills home loan, but the option of making extra repayments to reduce your mortgage faster is usually available – and this can make a significant difference long-term.

MPA recommends that before you choose a basic loan, you weigh up the pros and cons versus a product with a range of features, such as credit cards and linked accounts.

That said, low rate home loans are a consistently popular product among home buyers and remain an extremely affordable option.

To find out if a low rate home loan is the option for you, speak to one of our qualified MPA brokers today. We can assess your individual needs and circumstances and locate the product that will best work for you.

Building or Construction Loans

Financing a new build is different from buying an existing home. Construction loans consist of payments for the different stages of the build until your house is complete.

It might sound a little complicated, but you don’t have to work through it alone. With an MPA broker, you can find a home loan to suit your personal needs, and have the help of a home loan professional throughout the home loan process.

For help finding the loan that is right for you, talk to an MPA broker today.

Low / Alt Doc Home Loans

Documentation or Low Doc Home Loans are home loans that require less than the usual amount of documentation required to prove one’s income. They are typically designed for the self-employed or casual workers and provide a source of finance that would otherwise be unavailable.

Low Doc Home Loan Advantages

  • Lower requirements for proof of income.

  • May overlook non-existent or poor credit ratings.

Low Doc Home Loan Disadvantages

  • Given the added risks to the lender, low doc loans typically come with higher rates of interest when compared to the more standardised home loan products.

  • Larger deposits of greater than 20% may be required by the lender.

 

Most Suitable For

  • Self-employed.

  • Casual workers.

  • Those with variable incomes.

Non-conforming home loans

What if you don’t meet the lending criteria of your local bank? A non-conforming home loan might just be the solution.

Perhaps you’re a self-employed home buyer, lacking the traditional borrower’s paperwork? Maybe a couple of missed loan repayments have left you with a ‘tarnished’ credit history? Or maybe you just don’t meet all of a lender’s criteria?

While scenarios like this can be frustrating, there are other options.

A non-conforming loan assists borrowers who have a poor credit rating to obtain a home loan approval. It allows a borrower to re-enter the market for whatever specific reason – in most cases these types of loans can be refinanced into a normal conforming loan at a later date.

Advantages:

  • Assists clients who would not normally be eligible for a home loan

Disadvantages:

  • Higher interest rate compared to a conforming home loan

A non-conforming lender will look beyond traditional lending criteria, meaning you may well be able to secure a home loan after all. At MPA, we understand that life is not all black and white and there may be reasons – beyond your control – as to why you might not meet the standard lenders’ criteria. We have access to a range of non-conforming home loans that offer you the opportunity to fulfil your home buying dreams.

A non-conforming loan can mean a fresh start, with the chance to re-build your credit rating and get your financial future back on track. On the flipside, it will probably come at a higher price and you will be looking at higher interest rates and fees. These are all important considerations.

 

Using our extensive database of home loans and lenders, an MPA broker can identify the home loan to meet your individual needs and requirements.

Refinancing Your Home Loan

When was the last time you reviewed your home loan? Refinancing or changing loans is often done to get a cheaper interest rate or a wider range of features. It could equate to significant savings and also allow you to pay off your home loan quicker. Best of all it is easier than you think.

Why refinance?

There are lots of reasons. Here are just a few.

·       Get a cheaper interest rate. Savings can be a big motivator. 

·       Change the type of loan like a sharp fixed rate, a variable interest rate, an interest only loan or a line of credit.

·       Get more loan features like an offset account, ability to pay extra, fee free ways to access your redraw.

·       Consolidate debt and pay out smaller debts with higher interest rates like credit cards and personal loans.

·       Access equity for other things you want to do like renovations, go on a holiday or buying a car.

·       Invest elsewhere. Use your equity to invest in property, shares or managed funds.

Refinancing costs and savings

If you are thinking of refinancing you need to work out if the interest savings over a few years outweigh the costs.

·       Fees to close your existing loan

·       Setup costs for the new loan

·       Government registration fees

·       Lenders Mortgage insurance

Mortgage insurance is a major reason why people don't refinance. If your loan is still above 80% of the value of the property, it will be levied again as it is lender specific. If the costs are too high in comparison to the savings, it may make more sense to stay with your current lender.

Commercial & Business Loans

If you are looking to purchase a commercial property for owner occupancy or for investment purposes, MPA can help. We can source lenders that use the commercial property itself as security or residential property as security (or a combination of both). Often if residential property is used as security, interest rates are the same (or close to) as residential loans.

If you have an established business and need to consider your borrowing power for expanding the business or finance a new initiative to allow your business to grow and expand, we are in a position to support your business goals and work with you in selecting the correct financial solution for your businesses circumstances.

Lines of Credit Home Loans

A Line of Credit home loan (also known as an Equity home loan) allows you to borrow back (up to a specified limit) against any equity built up in your property, using the property as security for the loan. They enable you to access quickly the equity in your property, which you can then use for making investments, property renovations and more.

Interest on a line of credit is charged only on the funds that have been used/drawn down. In effect, a Line of Credit home loan is like having a credit card with a super large limit, except that your property is used as security for the loan.

For example, you purchase a property for $500,000 inc all fees/duties using a $100,000 deposit and borrowing $400,000 - giving you initial equity of $100,000. Ten years later, your property is now worth $700,000, and you have reduced your home loan down to $250,000. You now have $450,000 equity in your property. Assuming you meet your lender's criteria, you decide to take out a line of credit home loan with a limit up to 80% (80% of $700,000 is $560,000) of the equity in your property. This means you borrow up to $310,000 ($560,000 - $250,000). You then use $25,000 of this line of credit loan to purchase shares; interest will only be charged on the amount drawn down - in this case, $25,000.

Low Deposit / Guarantor & Family Pledge Home Loans

Saving enough for a suitable deposit is a tall order these days. The median house price in Perth is now around $500,000 and with higher prices comes the requirement for larger deposits. For example, if you are looking to purchase a $500,000 house, then (assuming you're a full doc borrower) a lender will typically let you borrow up to 80% of the property value without having to pay Lenders Mortgage Insurance. In this case, you'll need a $100,000 deposit + enough funds to cover any purchase costs as well. Building up this deposit amount can be tricky, so what are your low deposit options in Western Australia?

Here are your options:

Low Deposit Home Loans - 5 to 20% Deposit 

If you can't save 20%, don't panic. There are several lenders who will still lend up to 95% of the property value, but they will charge you Lenders Mortgage Insurance. Lenders will perceive you as increased risk of defaulting on your home loan if you have to borrow more than 80% of the value of the property and as such they will require you to pay LMI. This only protects the lender (not you) in case you default on paying your home loan repayments, but it is a tool that can get you into property sooner and with a lower deposit.

Guarantor home loans - 0% Deposit 

If you're lucky enough to have a close family member with substantial equity in their home, then you could ask them to act as a security guarantor for your home loan. If they agree, then the lender will use their property as additional security and this will enable you to borrow in some cases up to 100% (+ fees) of the property value without the need for a deposit. Another great benefit of having a security guarantor is that this eliminates the need to pay LMI as well.

Low Deposit Home Loan Advantages

  • Get onto the property ladder fast by avoiding the time required to save for a deposit - this can be useful if property prices are increasing fast.

  • Guarantor home loans generally eliminate the need for you to pay Lenders Mortgage Insurance.

 

Low Deposit Home Loan Disadvantages

  • Remember, the smaller the deposit, the more you have to borrow - meaning larger home loan repayments.

  • Lenders often charge higher rates of interest to those borrowing at higher Loan to Value ratios (LVR - simply the loan divided by property value).

  • You will likely be required to pay for Lenders Mortgage Insurance. (excluding Keystart or Guarantor home loans)

Bridging Home Loans

Are you concerned about how you’re going to finance your new home if your old home doesn’t sell in time? You've found the perfect new home but you’ll need to sell your existing home first, well don’t stress as there is a solution known as a bridging home loan.

How does bridging finance work?

A bridging home loan can simplify the transition between properties and enable you to purchase your new home while waiting for the sale of your existing one to be settled. It generally works by covering your financing requirements if the sale and purchase settlement dates of your properties differ.

Bridging finance can sometimes be available for periods of up to 12 months. Repayment requirements will vary depending on the lender, but in most cases payments will be interest-only.

You may even not be required to make any repayments during the interim period, but it is always wise to do so to keep your loan obligations in check.

When can I use a bridging loan?

Bridging loans are an excellent option in a number of circumstances when moving, whether it is to an existing property or for anyone wanting to build a new home. It saves you the hassle of having to move into temporary rental accommodation and then have to move all over again when the new home is built. This is not only painful and expensive, but it can be avoided as a bridging home loan lets you stay in your own house until your builder completes it. Once they’ve finished, you move in and then put your old home on the market.

Bridging Finance - key considerations

In some cases, people may find it more difficult to sell their existing home than they had previously anticipated, meaning the interest they end up paying on the bridging loan builds up considerably. Some applicants may also find they don’t quite have sufficient equity in their homes to qualify for this type of loan.

Our professional mortgage brokers can help you learn more about bridging home loans and whether it is the right option for you, so give us a call to discuss your options today.

Vehicle & Personal Loans

Looking for a new car?
Looking to purchase a piece of equipment for your business?
Do you need a Personal Loan?

You have come to the right place!

Whether you need some cash for a new car, home improvement, world holiday – whatever your needs are, MPA can help you see your dreams and needs come true.

There are a range of options to choose from to suit your needs.

Things to consider for a personal loan:

  • How much can you afford to pay and how often?

  • Ensure the amount you want to borrow doesn't compromise your lifestyle

  • Will you get a secured or unsecured loan

  • Should you go for a fixed (fixed repayments to protect you from interest rate rises – also means you lose out on interest rate drops) or variable interest rate unsecured loan (you have more flexibility and can make extra payments and your interest rate moves with the market)

 

Secured Loan:

A secured loan means that the loan itself is secured by an item – eg if you are buying a car, the loan may be secured by the car itself. Generally a secured loan has a slightly lower interest rate as there is less risk to the lender. This does mean that if you default on your repayments for a period, you may have to give up the car to cover the debt you are no longer able to pay.

 

Unsecured Loan:

An unsecured loan means that there is no security taken by the lender on your loan, this may mean a higher rate of interest. If you default on this loan you can impact your credit rating and or face penalties.

 

You can also discuss with us Commercial hire purchase loans and salary packaging opportunities. You can borrow from $5000 to $50,000 on a personal loan and pay it over from 1 to 7 years. The quicker you pay it off, the lower your interest will be on the term of the loan. Generally these loans can be applied for quite easily and you can get your money fairly quickly.

Equipment Finance

If you’re running a small business, time is money. You may need new equipment to grow your business, or have an urgent need for replacements to ensure continuity of service. And time spent trudging through processes and documentation is time you can’t afford. Your skills are in running your business and providing service to your clients, so it makes sense to let someone else manage your finance requirements.

We’ll keep it simple. We will let you know exactly what information we require and we’ll handle the rest. So you can get on with running your business and keeping your clients happy.

Self Managed Super Fund

Running your own super fund offers control of how your nest egg is invested. But there are strict rules to follow, and this is an area where good advice is essential.

Super-leveraged property investment is an ideal way for you to grow and accelerate your retirement nest-egg. If you have a self managed super fund or are considering establishing your own super fund, you are now able to use these arrangements to help you buy a residential or commercial investment property.

Your SMSF can buy property (residential or commercial real estate) but does not have enough funds for the full purchase. The SMSF can make an equity contribution on the property and borrow the remainder of the funds to complete the purchase.

For help finding the loan that is right for you, talk to an MPA broker today.

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