Your top ten loan questions answered…
In addition to the top ten, I have an extensive library of Michele’s Tips. So if you have a loan or property question that isn’t answered below, email me at firstname.lastname@example.org and I will answer your enquiry personally.
Every lender has their own terms and conditions, and this is intended only as a general guide to understanding these topics. Contact me to discuss your individual circumstances.
- How much can I borrow?
How much you can borrow depends on three individual factors that must be taken into account. These factors are capital, capacity and cashflow.
Capital is all about your existing assets (cash or properties as investments). How much deposit you want to put towards your property and whether or not you have demonstrated a genuine ability to save.
The lender will consider your income and all your financial commitments. If you have credit cards, their limits are usually assessed as if they are fully drawn.
When it comes to cashflow, a lender will want to know about your spending habits and budget in order to arrive at a realistic repayment amount.
Email or call me on 0425 784 296 if you would like to make a time to discuss how your personal property goals align with these three considerations.
- Should I fix my interest rate?
The answer to this question hinges on your own individual circumstances and goals which must be taken into consideration with the type of fixed rate loans currently on offer.
I’ve put together a little questionnaire below to help you formulate your position.
Why not take a moment to work through the questions, then talk to me about your answers? In conjunction with our overall assessment of your individual needs, these questions will help us to decide what the best course of action for you is.
- On a scale of one to ten, how upset would you feel if variable rates went below the rate that you fixed?
1 = not at all worried, 10 = kicking yourself
- On a scale of one to ten, how upset would you feel if variable rates rose, and you hadn’t fixed?
1 = not at all worried, 10 = kicking yourself
- Which one of these two has a higher rating out of 10?
- Will you still have the property at the end of the fixed rate term?
- On a scale of one to ten, how important is it for you to know for certain what your repayments will be for the term of the fixed rate?
1 = extremely important, 10 = not at all important
- On a scale of one to ten, how likely are you to want to make additional repayments over the fixed rate term?
1 = extremely likely, 10 = not a chance
Read my tips on fixed rate loans
Email me if you’d like to receive my monthly interest rate update.
- What are the first steps to get ready to buy a property?
The very first step is to start saving. It sounds simple enough, but these days saving money can be hard work.
The key to saving is to set goals. If you need help getting started, feel free to call me on 0425 784 296. I’ve got some handy ideas that may assist you in working out your savings goals.
Once you’ve saved enough for the deposit and other costs, email or call me make an appointment to discuss how you can start your buying journey.
Read my tips on Steps to buying a property
- What other expenses do I need to save up for when buying a property?
Apart from saving for your deposit, you need to plan for other costs. These include:
- Lender application and/or establishment fees
- Building and contents insurances
- Debt protection insurance
- Government charges (stamp duties, registration and land transfers)
- Conveyancing costs
- Property inspection costs (pest, building etc)
- Property maintenance issues that you will need to attend to as soon as you take ownership
Email me if you would like more information about these costs.
- Do I have to live in a property to be eligible for First Home Owners Benefits?
To be eligible for First Home Owners Benefits, you must live in your home for more than half of the first year.
If you bought an investment property after 1 July 2000 that you’ve never lived in, your eligibility for one or more of the First Home Owner Benefits will not be affected. You would still be eligible to apply for the benefit on the purchase of a property you intend to live in.
Read my tips on First Home Owners Benefits
- How can I make extra repayments into my loan, and still have access to the money if I need to in future?
There are three types of loans that you can use to effectively use extra money to reduce your interest expense each month: a redraw loan, an offset loan and a line of credit.
Each of these has different costs, benefits and methods of using them most effectively.
No one type is the right solution for everyone, as it will depend on what the loan is used for, your control over your personal budget, your risk profile, and the fees and charges associated with the loan.
To find out what type of loan will best suit your current and future financial goals, please call me on 0425 784 296.
Together we’ll discuss your needs and goals to ensure that we choose a loan type with features that exactly meet your needs.
- How can I use the equity in my home to buy an investment property?
Your equity is the difference between the value of your home and the balance of your loan. Your current lender will always keep part of the equity as security for the loan, but the remaining balance could be used by you to borrow to purchase an investment property.
If you have enough accessible equity, you may even be able to borrow the investment property’s whole purchase price, plus costs – maximising the tax effectiveness of your loan and reducing how much of your own cash you have to contribute.
If you’re thinking of using the equity in your home to buy an investment property, you need to know where you stand.
Email me your property address and I’ll send you a free Property Profile Report.
This report provides detailed electronic assessment of your current property, so we can start analysing how much equity you have and how you could use it to invest in future property.
- How can I access the equity in my house to do renovations?
Your equity is the difference between the value of your home and the balance of your loan. You may be able to access your equity by either increasing your loan with your current lender or re-financing with another lender.
The process and costs will be different for cosmetic renovations (e.g. painting, carpets, adding a pool) than it would be for structural renovations such as an extension.
To find out how you can access the equity in your home, please call me on 0425 784 296 to make an appointment.
- What fee do you charge for your advice?
As a part of my ‘customer for life’ philosophy and under the National Credit Consumer Protection legislation, I have an obligation to discuss and explore your financial, budget and personal goals with you.
The details of this discussion will be captured in my Client’s Needs Analysis.
I will then provide you with a written recommendation of a loan or loans that will be suitable for you, and include a personalised loan structuring recommendation.
The fee for provision of this mortgage advice is $0!
If you’re happy to proceed with one of the loans I’ve recommended, I will manage the whole process on your behalf. This includes liaising with the lender, conveyancers, real estate agents and any other parties involved in the process.
The lender will pay me a commission for managing the process, which is why I don’t charge you a fee.
Please email me if you’d like to know more or call me on 0425 784 296 to make an appointment for our one-on-one obligation-free mortgage advice session.
- What is negative gearing?
A negatively geared investment property is one where the costs of owning and maintaining it (loan interest, council rates, maintenance etc) are higher than the income received as rent. The net outgoings create a loss that is usually an allowable tax deduction.
The way that your overall loans are structured will depend on your other financial and tax requirements. Important considerations include whether or not you have other debts and whether or not they are tax deductible.
Read my tips on Negative Gearing
There are certain ways to structure your overall debt position that will help your accountant easily distinguish the tax deductions possible.
I’m happy to work with your financial planner or accountant or to ensure that your loan structure meets your taxation and financial planning requirements.
If you don’t have a financial adviser or accountant and would like to find a professional to help you, I have a great network of advisors that I can recommend. Feel free to email me if you’d like some contact details.