One of the biggest purchases that you will make in your lifetime is a home. This means that you will likely have to finance the purchase of a home with a mortgage loan. One of the things that you have to understand about mortgage loans is that they come attached with interest rates that can sometimes increase over time.

Since the life of a mortgage loan is so long, the amount that you are paying in interest alone is substantial. Refinancing your mortgage loan can be a great way for you to get access to lower interest rates and to get access to cash that you might need to maintain your home.

Before you consider refinancing your mortgage loan, it is important for you to know when the ideal time is to do so. Also, we recommend speaking to your YFG lending specialist to help guide you through this process.

Here are some of the most important things to consider when you are deciding when to refinance a mortgage loan:

Has Your Credit Score Gone Up?

Your credit score does matter when you are trying to refinance your mortgage loan. This means that you often want to wait to refinance your home until your credit score has had enough time to improve. You will get access to the lowest interest rates if your credit score has gotten better since you first obtained your mortgage loan. Taking a look at your credit report will allow you to see just how much your credit score has improved and if you will actually be able to get access to a much lower interest rate when you refinance your mortgage loan.

Debts Have Been Paid

If you have paid off some other debts since you first got your mortgage, it might also be a good time to consider refinancing. You might have paid off a car loan or student debt since you first obtained your mortgage loan. This means that your debt to income ratio has improved over time. This will help you get a much lower interest rate on your mortgage when you refinance the loan. As long as you have paid off some debt, it won't hurt to look into refinancing and see if it is the right option for you.

Fixed Rate

You might also decide that you want access to a fixed rate mortgage loan instead of variable. If you are looking for more stability, you can choose to refinance for a fixed rate that stays the same.

In part 3 of our series on home loan types, we’re going to take a long look at low doc loans. More to the point, we believe that it is well worth investigating not only the particulars of these loans, but why they have made a return to our markets.

There are some unique advantages to these loans. However, by the same token, there are also some drawbacks that you’ll want to keep in mind.

What are home low doc loans?

A home Low doc loan is designed to appeal to self-employed individuals, in addition to those who own a small business. In particular, home doc loans can be particularly useful to those who are financially self-sufficient, but who perhaps do not have the financial information that is generally expected of those who seek a home loan. What does this mean exactly? Well it’s all in the name! The “low doc” name for low doc loans actually refers to low documentation, meaning the applicant will be held to a different documentation standard than those seeking more traditional loans.

Over the past few years, low doc loans have become extremely popular with individuals throughout Australia. Industry figures suggest that these loans are currently taking up approximately ten percent of all the mortgage loans that are currently being written.

It is not difficult to understand why these loans are so popular. For one thing, an increasing number of people are turning to career paths that are difficult to document in the ways associated with more mainstream career choices.

You will want to keep in mind that these loans tend to have higher deposit demands. Furthermore, you can also expect to have to deal with higher interest rates than the current average. These elements will be due to the fact that those seeking home doc loans are generally unable to provide the same degree of security to the lender, as those seeking the more mainstream loan options.

There are a few other conditions with low doc loans that you should try to keep in mind:

• You must be able to prove that you have been self-employed in a particular industry for at least 1 year. Your ABN or Certificate of Incorporation might be required.
• You will need to present the lender with your Business Activity Statements for the past twelve consecutive months. These must be verified through the ATO.
• 80% of the property value is the maximum amount that can be borrowed.
• You must confirm your income has been GST registered for at least 12 months.

 

In the second part of our series on home loans, we’re going to take a look at construction loans.

You’re going to find that there are many avenues in which these loans are available to people just like you. However, as is the case with any other type of loan, you’re going to want to be aware of the particulars.

For example, before any credible lender will grant you a construction loan, you’re going to want to satisfy a few issues beforehand. Step 1 is that you’re definitely going to want to make sure you have a builder committed to your project.

What is a construction loan?

As the name might suggest to you, a construction loan is designed exclusively for those who are planning to build a house. A construction loan breaks down into fairly simple terms.

Once you have purchased land, you’re going to do your research to find a contractor or construction company. After choosing your contractor/construction company, everyone will work to not only create a clear idea of what is going to be built, but how long it is going to take to complete the project.

Armed with blueprints and a time frame, your next step will be to contact a lender for the construction loan.

In some circumstances, a lender will be willing to extend the construction loan to assist in the purchase of the land in question. However, you will still want to bring a contractor, blueprints, and a time frame to any consultation you may have. The lender will want to have complete confidence in what you are proposing to do.

Keep in mind that this loan is strictly temporary. They work when variable loans are drawn down to make sure your contractor is paid in stages. In other words, you are allocating small sums of money that will continue to pop up, over the course of the life of the construction project. One of the nice elements to this loan type is the fact that the contractor is not going to be paid for work they haven’t done. This is a smart way to protect the borrower from assuming any financial losses through the construction timeframe.

In terms of repaying the loan, you’ll want to note that this loan is interest-only, payable on the loan amounts that have been drawn upon.

On completion of the construction project, the loan will switch over to a permanent principal and interest sort of mortgage. These are just the basics and we always advise you to seek the expertise of a YFG Lending Specialist consultant.