Save over $34,000 on your home loan

Save over $34,000 on your home loan

RateCity shows you why you shouldn’t give up on your dream of owning your own home while the housing market plummets.

June 23, 2010

Is it your dream to own your own home? Well, don’t despair, the day where you sign on the dotted line and the keys are handed over to you may still be in your sights.

The Australian Bureau of Statistics (ABS) recently released figures showing the number of home loans for new and established owner-occupied properties written in April is the lowest level it has been in over nine years. Since April 2009, the total value of mortgages on owner-occupied properties has dropped by $3.27 billion to $13.71 billion.
The report also showed investment-housing loans increased in value since April 2009, however the total value of housing commitments overall remains lower than the previous two years.

“[Last year] saw a lot of incentives for first home buyers to enter the market –  the lowest interest rates in a generation and extra federal and state government grants most importantly. These things had the effect of bringing forward purchases that otherwise would have happened in 2010, and so we’re seeing the after-effects now,” RateCity’s CEO Damian Smith said.

“There is also no doubt, however, that the rise in interest rates over the last nine months has scared off many home buyers, with repayments for a $300,000 mortgage having increased by almost $300 per month since before rates began to rise in September 2009.

“But just like the old adage of selling straw hats in winter, these trends also offer an opportunity for some prospective buyers.

“If you have saved your deposit, have researched the home loan market thoroughly, worked out your budget and have left yourself a 2 percent buffer in case rates rise in the future, then you may be able to take advantage of the slowdown in the housing market before the real estate season picks up again in spring.”

Despite interest rates remaining static, home buyers will still need to be careful when entering the property market.

“As well as the 2 percent buffer, a good guide is to make sure your repayments are less than 30 percent of your income,” Smith said, “which is about $1000 per month for a $60,000 salary and a loan size of about $150,000, otherwise you will be under mortgage stress.”

He said selecting the right home loan will make a massive difference to your repayments and you could save thousands of dollars in interest.

For instance, RateCity’s top standard variable rate home loan (current as at June 18, 2010) is 6.39 percent with State Custodians, which is 64 basis points below the current average standard variable rate of 7.03 percent. This difference on a home loan of $300,000 you could save $115 per month, $1380 per year or over $34,500 over the life of a 25-year loan.

 

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Learn more about home loans

How do I refinance my home loan?

Refinancing your home loan can involve a bit of paperwork but if you are moving on to a lower rate, it can save you thousands of dollars in the long-run. The first step is finding another loan on the market that you think will save you money over time or offer features that your current loan does not have. Once you have selected a couple of loans you are interested in, compare them with your current loan to see if you will save money in the long term on interest rates and fees. Remember to factor in any break fees and set up fees when assessing the cost of switching.

Once you have decided on a new loan it is simply a matter of contacting your existing and future lender to get the new loan set up. Beware that some lenders will revert your loan back to a 25 or 30 year term when you refinance which may mean initial lower repayments but may cost you more in the long run.

What is a building in course of erection loan?

Also known as a construction home loan, a building in course of erection (BICOE) loan loan allows you to draw down funds as a building project advances in order to pay the builders. This option is available on selected variable rate loans.

How much information is required to get a rating?

You don’t need to input any information to see the default ratings. But the more you tell us, the more relevant the ratings will become to you. We take your personal privacy seriously. If you are concerned about inputting your information, please read our privacy policy.

How is the flexibility score calculated?

Points are awarded for different features. More important features get more points. The points are then added up and indexed into a score from 0 to 5.

How long does NAB home loan approval take?

The time required to get your home loan from NAB approved can vary based on a number of factors involved in the application process. 

Once you have applied for a home loan, a NAB specialist will contact you within 24 hours over the phone to take down relevant information, including your total income, debts (existing loans, credit cards, etc.), assets (car, shares, etc.), and your monthly expenses (food, utility bills, etc.). Your lender might also ask for information related to the property you want to purchase, including the type of dwelling and preferred postcode.

NAB will then verify all your information and check your credit score, and if the details stack up, you should be given a conditional approval certificate. This certificate stipulates how much money NAB is willing to lend you and is typically valid for 90 days. 

Once you have your conditional approval, you can start browsing for properties that you like and that fit within the budget that NAB has provided. After you find a suitable property, you’ll need to give a copy of the signed deed to NAB, following which you should get full approval and access to the funds. This process can take up to 4-6 weeks. 

What is a fixed home loan?

A fixed rate home loan is a loan where the interest rate is set for a certain amount of time, usually between one and 15 years. The advantage of a fixed rate is that you know exactly how much your repayments will be for the duration of the fixed term. There are some disadvantages to fixing that you need to be aware of. Some products won’t let you make extra repayments, or offer tools such as an offset account to help you reduce your interest, while others will charge a significant break fee if you decide to terminate the loan before the fixed period finishes.

How much deposit do I need for a home loan from NAB?

The right deposit size to get a home loan with an Australian lender will depend on the lender’s eligibility criteria and the value of your property.

Generally, lenders look favourably on applicants who save up a 20 per cent deposit for their property This also means applicants do not have to pay Lenders Mortgage Insurance (LMI). However, you may still be able to obtain a mortgage with a 10 - 15 per cent deposit.  

Keep in mind that NAB is one of the participating lenders for the First Home Loan Deposit Scheme, which allows eligible borrowers to buy a property with as low as a 5 per cent deposit without paying the LMI. The Federal Government guarantees up to 15 per cent of the deposit to help first-timers to become homeowners.

What is breach of contract?

A failure to follow all or part of a contract or breaking the conditions of a contract without any legal excuse. A breach of contract can be material, minor, actual or anticipatory, depending on the severity of the breaches and their material impact.

How will Real Time Ratings help me find a new home loan?

The home loan market is complex. With almost 4,000 different loans on offer, it’s becoming increasingly difficult to work out which loans work for you.

That’s where Real Time RatingsTM can help. Our system automatically filters out loans that don’t fit your requirements and ranks the remaining loans based on your individual loan requirements and preferences.

Best of all, the ratings are calculated in real time so you know you’re getting the most current information.

How often is your data updated?

We work closely with lenders to get updates as quick as possible, with updates made the same day wherever possible.

What factors does Real Time Ratings consider?

Real Time RatingsTM uses a range of information to provide personalised results:

  • Your loan amount
  • Your borrowing status (whether you are an owner-occupier or an investor)
  • Your loan-to-value ratio (LVR)
  • Your personal preferences (such as whether you want an offset account or to be able to make extra repayments)
  • Product information (such as a loan’s interest rate, fees and LVR requirements)
  • Market changes (such as when new loans come on to the market)

Does Real Time Ratings' work for people who already have a home loan?

Yes. If you already have a mortgage you can use Real Time RatingsTM to compare your loan against the rest of the market. And if your rate changes, you can come back and check whether your loan is still competitive. If it isn’t, you’ll get the ammunition you need to negotiate a rate cut with your lender, or the resources to help you switch to a better lender.

Remaining loan term

The length of time it will take to pay off your current home loan, based on the currently-entered mortgage balance, monthly repayment and interest rate.

What is a valuation and valuation fee?

A valuation is an assessment of what your home is worth, calculated by a professional valuer. A valuation report is typically required whenever a property is bought, sold or refinanced. The valuation fee is paid to cover the cost of preparing a valuation report.