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Managing home loan repayments

Managing home loan repayments

If only our home loans would pay themselves off or repayments were so minimal they barely make a dent in our bank accounts. Unfortunately, for most of us that is not the case, so let’s take a closer look at these pesky home loan repayments.

Home loan payments, or repayments, are the amounts of money a borrower agrees to pay their financial institution to repay a mortgage.

Home loan payments are typically made at a scheduled frequency such as weekly, fortnightly or monthly, depending on what the borrower and lender agrees upon.

Increasing the frequency of your home loan payments, such as moving from monthly to fortnightly, may reduce the overall interest paid on a home loan, but this will depend on how a lender calculates interest. For more information on this, contact your lender.

The size of a home loan payment is determined by a number of variables such as the size of the loan, the rate of interest paid, the loan term and the repayment type – that is, interest and/or principal, among other things. By tweaking one or more variables, the size of the home loan payments may be adjusted.

Let’s tweak the loan term as an example. For a $300,000 home loan repaid at a rate of 6 percent over 30 years, home loan payments may be around $1799 per month. By reducing the loan term to 25 years, home loan payments may increase by $134 each month, saving the borrower more than $67,000 in total interest.

Switching to a lower interest rate home loan may have a similar effect. Using the above example and refinancing to a lower rate of say, 5.5 percent, may seem insignificant. But on the contrary, the potential long-term savings are evident: reducing the rate of interest by 50 basis points could save a borrower more than $34,000 over 30 years, which is not small change!

Try using a home loans calculator to see how much you could potentially save on your home loan by adjusting the repayments or rate. Finally, compare home loans to see if your lender is competitive with the market – it could be the best return on your time you’ll get all year!

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Learn more about home loans

How do I apply for a home improvement loan?

When you want to renovate your home, you may need to take out a loan to cover the costs. You could apply for a home improvement loan, which is a personal loan that you use to cover the costs of your home renovations. There is no difference between applying for this type of home improvement loan and applying for a standard personal loan. It would be best to check and compare the features, fees and details of the loan before applying. 

Besides taking out a home improvement loan, you could also:

  1. Use the equity in your house: Equity is the difference between your property’s value and the amount you still owe on your home loan. You may be able to access this equity by refinancing your home loan and then using it to finance your home improvement.  Speak with your lender or a mortgage broker about accessing your equity.
  2. Utilise the redraw facility of your home loan: Check whether the existing home loan has a redraw facility. A redraw facility allows you to access additional funds you’ve repaid into your home loan. Some lenders offer this on variable rate home loans but not on fixed. If this option is available to you, contact your lender to discuss how to access it.
  3. Apply for a construction loan: A construction loan is typically used when constructing a new property but can also be used as a home renovation loan. You may find that a construction loan is a suitable option as it enables you to draw funds as your renovation project progresses. You can compare construction home loans online or speak to a mortgage broker about taking out such a loan.
  4. Look into government grants: Check whether there are any government grants offered when you need the funds and whether you qualify. Initiatives like the HomeBuilder Grant were offered by the Federal Government for a limited period until April 2021. They could help fund your renovations either in full or just partially.  

Can I take a personal loan after a home loan?

Are you struggling to pay the deposit for your dream home? A personal loan can help you pay the deposit. The question that may arise in your mind is can I take a home loan after a personal loan, or can you take a personal loan at the same time as a home loan, as it is. The answer is that, yes, provided you can meet the general eligibility criteria for both a personal loan and a home loan, your application should be approved. Those eligibility criteria may include:

  • Higher-income to show repayment capability for both the loans
  • Clear credit history with no delays in bill payments or defaults on debts
  • Zero or minimal current outstanding debt
  • Some amount of savings
  • Proven rent history will be positively perceived by the lenders

A personal loan after or during a home loan may impact serviceability, however, as the numbers can seriously add up. Every loan you avail of increases your monthly installments and the amount you use to repay the personal loan will be considered to lower the money available for the repayment of your home loan.

As to whether you can get a personal loan after your home loan, the answer is a very likely "yes", though it does come with a caveat: as long as you can show sufficient income to repay both the loans on time, you should be able to get that personal loan approved. A personal loan can also help to improve your credit score showing financial discipline and responsibility, which may benefit you with more favorable terms for your home loan.

How do you determine which home loan rates/products I’m shown?

When you check your home loan rate, you’ll supply some basic information about your current loan, including the amount owing on your mortgage and your current interest rate.

We’ll compare this information to the home loan options in the RateCity database and show you which home loan products you may be eligible to apply for.

 

Does the Home Loan Rate Promise apply to discounted interest rate offers, such as honeymoon rates?

No. Temporary discounts to home loan interest rates will expire after a limited time, so they aren’t valid for comparing home loans as part of the Home Loan Rate Promise.

However, if your home loan has been discounted from the lender’s standard rate on a permanent basis, you can check if we can find an even lower rate that could apply to you.