How is interest calculated?
The calculation of interest is determined by lender and loan contract. Generally the interest cost of your loan is calculated daily on the outstanding balance of your loan. An example of how daily interest is calculated on a $400,000 loan with a Standard Variable Rate of 7% p.a. is as follows:
($400,000 x 7%) / 365 = $76.71
What’s the difference between a Fixed Rate and a Variable Rate?
A Variable Rate can change anytime and will affect your regular repayments.
A Fixed Rate has been set at a certain rate, so it stays the same for the entire fixed rate period.
What is the length of a mortgage?
A mortgage length can be any period up to 30 years. Generally, the shorter your loan period, the higher the loan repayments.
What documentation will I need to apply for a home loan?
In order to submit your home loan application, you will need supporting documentation confirming your identity and substantiating your income:
Recent pay slips
BAS (if applicable)
In some cases we may ask more documents if requested by lenders.
What is Lenders Mortgage Insurance?
Lenders Mortgage Insurance (LMI) is insurance that protects the lender in the event that you default on your home loan. It is paid as a once off insurance premium or fee when your loan is advanced and does not affect your interest rate.
As a general rule you will need LMI if you are borrowing over 80% of the property value with a normal home loan or over 60% of the property value with a low doc loan.
What other costs are involved in a home purchase?
It is recommended that you budget roughly 5% of the purchase price, on top of your deposit, to cover fees and charges associated with property purchase:
Loan application/settlement fees
Lenders Mortgage Insurance (LMI)
Stamp duty (if applied)
Connection fees – phone/gas/electricity/water
How do I know if I am eligible for the Stamp Duty concession?
Stamp duty is a state government tax based on a property’s selling price. Each state or territory has different rules and calculations, some states offer discount/exemption for first home buyer. Along with stamp duty concession, first home owner grant is also available. Please contact us for details.
How do I know if I am eligible for the First Home Owner Grant?
As a basic rule, you are eligible if you are an Australian citizen or permanent resident, buying or building your first home in Australia, with the intention of occupying it as your principle place of residence within 12 months of the settlement and living in it continuously for at least 6 months.
What is the First Home Owner Grant?
The First Home Owner Grant scheme is a one-off payment of to assist eligible first home owners with purchase or construction costs.
From 1 October 2012, the $7 000 First Home Owner Grant will be replaced by the $15 000 First Home Owner Grant (New Homes) Scheme.
First home owners who purchase or build a new home where the eligible transaction commencement date (contract date) is on or after 1 October 2012 will be eligible for the $15 000 grant. The grant will reduce to $10,000 on 1 January 2016 for eligible transactions which have a commencement date (contract date) on or after 1 January 2016.
The $7 000 first home owner grant for established properties ends on 30 September 2012 and will not be available where the eligible transaction commencement date (contract date) is on or after 1 October 2012. For up to date on first home owners grant please contact us.
How much do I need to save for a deposit?
The deposit required depends on the type of home loan and, the lender you select. As a general rule, if you are an owner-occupier you will require 5-10% of the purchase price as a deposit,but the better the deposit, the great it is.
Which home loan is best for me?
There are hundreds of products in the market, and it is mainly depends on your needs and circumstances. Please contact us and we shall assess your situation, and present you the best suitable loans that suits you the best.
How much money can I borrow?
The amount you can borrow, commonly known as your borrowing capacity, will differ from lender to lender and also depends on income.
Do you charge any fees?
No. Our service is free, and we only get paid after the loan settled.
What is a Contract of Sale?
The contract of sale is a legal contract involving the sale of a property from seller (vendor) to buyer (purchaser) for an agreed sum.
What is conveyancing?
Conveyancing is the process where a property is legally transferred from one party to another. It’s usually done either by a solicitor, a conveyancer, or by buying a do-it-yourself conveyancing kit.
What is an offset account?
An offset account is a transaction account linked to your mortgage, where cash in your transaction (offset) account reduces the amount of interest payable in your mortgage account. This helps you pay off your home loan quicker.
What is a Line of Credit loan?
It is a flexible loan allowing you to draw down and repay smaller and larger sums at any time up to the approved limit. These loans have an agreed term and repayments are interest only based on the amount you have drawn down at the time.
What is Redraw?
Redraw is the term used to describe the ability to withdraw money (from additional payments you have made), when you need it, from your Variable Rate Home Loan.
Redraw is the difference between your current balance and what the balance would have been if you hadn’t made any additional repayments.
What’s the difference between P & I and Interest Only repayments?
Principal and Interest are when you pay a portion of the loan balance in addition to the interest charged over an agreed period. This is to ensure the loan is paid back over the term of the mortgage. Loan repayments will include part of the loan and part of the interest on the loan.
Interest Only is when you’re paying the interest of the balance with no principal over an agreed period.
Can I make extra payments to my mortgage without penalty?
Yes! Extra payments to your mortgage can be made without penalty costs and it is also depends on the product you choose.
How long will it take to repay?
This depends on how much you borrow and how much your repayments are.
What is the difference between fixed and variable rates?
A fixed interest rate does not vary for the fixed rate period, so payments remain constant for this period.
A variable interest rate may rise and fall in line with interest rate changes in the market place. Your loan payments will change accordingly to reflect this change in interest rate.
Can I really own my home sooner than long 30 years?
Yes, with the correct skill and loan structure we’ll show you, completely free, a step by step plan how to minimize your mortgage, save thousands of dollars in interest and own your home sooner. If you like we’ll also show you how to use the equity in your property to start an investment.
How will you decide which lender to use?
Once we analyse your needs based on the information you have provided then we present you with the best production option where you decide, in conjunction with advice you receive from us. We will discuss your loan needs with you and make suitable recommendations, then arrange formal application and obtain loan approval. You can also check out different loan options under LOAN TYPES.
What are the Costs of Refinancing?
Refinancing can be useful, potentially allowing you to access the equity you have in your property, get on top of debt or save money. However, there are also potential costs (both direct and indirect) that you should be aware of before you decide to refinance. To find out whether refinancing is the right option for you, please CONTACT US.
How much equity do I need for a refinance?
The amount can be lend depends on the type of loan you request, your current loan and financial circumstances.
Should I choose the lender with the lowest interest rate and costs?
There are primarily two things to consider when choosing one lender over another: the quality of service being provided and the cost of services provided. Quality of service is especially important to those who have never purchased a home. First time homebuyers will likely have many questions regarding the financing process and available loan options. A good lender should be able to get you through the financing process leaving you confident that you made a sound financial decision.
I’ve had credit problems in the past. How does this impact my chances of getting a home loan?
Obtaining a home loan is possible even with extremely poor credit. If you have had credit problems in the past, a lender will consider you to be a risky borrower to lend to. To compensate for this added risk, the lender will charge you a higher interest rate and usually expect you to pay a higher down payment on your home purchase (typically 20-50% down). The worse your credit is, the more you can expect to pay for an interest rate and a down payment.
What does it mean to lock the interest rate on a mortgage loan?
Due to the nature of interest rate movements, mortgage rates can change dramatically from the day you apply for a mortgage loan to the day you close the transaction. If interest rates rise sharply during the application process, it could make a borrower’s mortgage payment larger than he/she previously thought. To protect against this uncertainty, a lender can allow the borrower to ‘lock-in’ the loan’s interest rate, guaranteeing the borrower the prevailing loan rate for a specified period of time (often 30-60 days).
Should I refinance if I plan on moving soon?
Most lenders will charge fees to refinance a loan. If you plan to stay in the property for less than a couple of years, your monthly savings may not get a chance to accumulate and recoup these costs. Let’s say a lender charged $1,000 to refinance your loan, but it resulted in a monthly savings of $50. It would take 20 months (1,000 divided 50) to recoup the initial costs before you start to realize some savings. Some lenders will charge a slightly higher than average interest rate on refinance loans, but waive all costs associated with the loan. The attractiveness of these loans will depend on the interest rate you are being charged on your current loan.
Rates Are Low. Is Now A Good Time To Refinance?
When interest rates fall, a homeowner should definitely call a lender about refinancing, but he or she should discuss their entire financial situation and goals before making any final decision. Is your goal to lower your monthly payment? Debt Consolidation? Buy that second home? Ask us to provide a couple of refinancing scenarios for you, showing how your loan term length, monthly payment and your total interest expense on the loan will change. After looking at these scenarios, it will be clear whether or not you should spend the money to refinance.
Should I refinance?
Sometimes it makes sense to refinance. Sometimes it doesn’t. The decision to refinance is rarely based solely on interest rates. For instance, you have to take into consideration things like how long you expect to be in the home; how much equity you have in the home; what your closing costs will be; would refinancing include the paying of points?; will your lower payments more than make up for the closing costs, fees. Catmandu Finance can help you decide if refinancing makes sense for your situation and to choose the best program for you.
How do I claim a tax deduction on my rental property?
There are several ways depending on your employment status. For instance, if your a PAYG wage or salary earner you could arrange for your employer to deduct less tax from your pay every pay period [section 21]. Alternatively, you could simply receive a lump-sum rebate at the end of each tax year.
What if I become unemployed or to sick to work?
Your loan should be set up with a 3-month buffer to give you breathing space in case of unemployment. Should your job prospects not improve you would simply sell the property. Personal trauma insurance will protect your income if you have an accident or are too ill to work.
Do I need a large deposit to purchase an investment property?
When you bought your first home, you had to come up with a cash deposit of up to 20% of the purchase price, and also be able to afford the monthly mortgage repayments. If you have owned your own home for a few years, you will have built up quite a bit of equity in your property. You will have paid off some of the loan, and there’s a good chance that your property has increased in value too.
Instead of finding a cash deposit, the Lender (subject to approvals) will allow you to use the equity built up in your home as security on your investment property
Is property investment for high income earners or the wealthy?
Property remains one of the most popular investments for Australians on average as well as high incomes. It is very important to seek the advice of a qualified finance professional before investing. “It’s not how much you earn that counts, it’s what you do with what you earn” we as mortgage consultant can help you to choose right product.
What are the best types of properties to buy?
The best types of properties to buy are much like what are the best areas to buy. The best types of properties to buy are ones that give you significant equity right at closing. That means that you are buying it for cheaper than the rest of the local market would value that piece of property for. The best types of properties to buy are the ones that offer the largest discounts with a fixable solution to why they were sold to you for that cheap. That can be any type of property.
What Is The Difference Between Being Rich And Being Wealthy?
There are several ways to look at it. We’ve chosen one of the more popular definitions: The rich are defined by their jobs. They earn a lot and often spend a lot on their lifestyle. If they lose their job, they soon lose their riches.
Financial wealth can considered as not related to a job. It is wealth that produces a combination of appreciation and cash flow no matter what type of job you hold, if any. Building wealth, therefore is about gathering un-earned income. We teach property ownership as one of the methods of long term wealth building.
Why Invest in Real Estate Now?
Lenders have more flexible guidelines to get you approved. Also, the population is still growing. Lastly, our significant aging population puts a significant amount of seniors back into the rental pool, as they often no longer want to care for a house and yard but still have the disposable income from their retirement plans. Our goal is to help you build your wealth through investing in real estate and have you fulfill on your legacy by offering you only the best investment opportunities available.
In plain terms, negative gearing allows people to borrow money to purchase an income producing property, to claim a tax deduction for many expenses they incur running that income producing property, including loan interest. You tax rebates, along with your rental income are used to pay off your loan, with the tiniest in amounts coming out of your own pocket.
The end result … down the track, the tax man and your tenants will have paid most of your running costs for you and your property will have more than doubled in value, so you can now sell it and earn a tidy profit, or use this system to accumulate multiple properties to use the rental income as part of your retirement portfolio.
In the early stages of investing in a negatively geared property, your costs like interest and so forth, are higher than the rental income you receive, so your property is negatively geared.
Apart from negative gearing, there are two other types of gearing situations which offer you even more benefits.
Firstly, there’s neutral gearing which happens with the costs incurred “running” your income producing property match the income that the property generates. And then there’s positive gearing, where the income from your property actually exceeds the costs of running the property.
Negative gearing is the first step for most investors because, through the HUGE tax deductions offered, it is by far the most affordable, so it enables you to purchase multiple properties for a low up-front and ongoing cost.
Once your loan has reduced, and your property has increased in value, you’ll start to experience neutral gearing. This process is greatly accelerated with Mortgage Reduction.
Then down the track your portfolio will be positively geared which is the ultimate goal for many investors, enabling you to retire on a very comfortable income, much higher than you’d expect through superannuation.
Once I Purchase A Place, How Do I Go About Getting It Rented?
We’ll be there to guide you. Let us please help you.
What Is Typically Involved In Beginning Real Estate Investing?
Buying an investment property is no more or less complicated than buying your own home.
The process is basically the same:
- Choose your investment
- Make an offer
- Purchase Agreement:
What Types Of Investments Are Best?
The two factors that make investment property valuable are:
- The cash flow they produce and
- The appreciation they produce
There is often a balance reached between these two factors based on immediate versus long term goals. We typically ask people to “buy and hold”. Whether your property is cash flowing or not, it will typically appreciate much better than most any stocks, bonds or mutual funds could ever do.
What benefits does my insurance policy include?
Here are some of the benefits you may be eligible for under your TAL insurance policy:
- Death: a lump sum payment to your family or estate when you die.
- Critical illness: a lump sum paid to you if you’re diagnosed with a critical illness, such as cancer or heart disease.
- Total and Permanent Disability (TPD): a lump sum paid to you if you’re permanently unable to work, such as losing your eyesight or because of illness.
- Income protection: a portion of your salary is paid to you as income if an illness, injury or accident prevents you from working.
This is a general guide only. You can find out exactly what you’re eligible for by reading the terms and conditions of your insurance policy, which are in your policy document.
We can also let you know your exact level of cover and answer any questions you may have.
What is a waiting period?
A waiting period is the amount of time before your benefits begin to accrue.
You choose your waiting period when you take out an insurance policy, and we start paying your benefit one month after this waiting period ends.
As an example, let’s say you have a 90-day waiting period. If you were injured and stopped work on 1 April, your waiting period would start on 1 April and end on 29 June. Your benefits would then start accruing on 30 June, with the first benefit being paid on 29 July.
What happens after I submit my claim forms?
Once we’ve received your claim forms, a claims case manager will contact you to discuss your claim and answer any questions you may have. Your TAL case manager will then start assessing your claim, managing it right through to the final assessment.
How will I receive my benefits?
If you have provided your bank account details to us, we will pay your benefits into this account, otherwise we will send you a cheque.
Do I pay tax on my benefit payments?
Any benefits you receive from your policy are usually assessable for tax purposes. We recommend that you seek independent taxation advice from an accountant or the Australian Tax Office.
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