There are a range of home loans available in Australia, so it can be hard to understand their
features and whether they are right for you. This guide explains all you need to know.
Variable loans are loans that are subject to interest rate fluctuations. Whenever your bank
increases or decreases interest rates, you will end up either paying more or less for your loan,
depending on what the bank has decided to do.
A typical owner-occupied mortgage is taken out over 25 or 30 years, although you can reduce the
overall term by making higher or more frequent payments. Mortgages are either based on principal
(the amount you borrowed from the bank) and interest (the amount you pay back for having
borrowed that money) loan repayments, or interest-only repayments (generally available for 1-5
years for owner occupied loans and 1-10 years for investment loans) where none of the principal
component of the loan is paid down.
Fixed loans allow you to lock in a specific interest rate over a set period of time, generally between
one and five years. This loan is popular among borrowers who want to ensure their repayments
don’t rise. The main risk is that if variable rates fall, you are locked in at a higher rate. The cost of
breaking a fixed rate loan contract can be substantial, and there can be financial penalties for
making additional payments.
The real estate market can be tough for young adults, but as a parent you may be able to lend a
helping hand. We tell you how.
A parent-to-child loan is when a parent lends their child money. This is a formal, legally binding
arrangement, administered by an independent third party. At the start of the loan period, both
parties agree to terms including repayment amounts, a schedule and a process to manage
If your child doesn’t have enough security for a mortgage, you could provide a family guarantee.
This is where you use some of the equity in your own home as part of the security. For example,
your equity might cover 20% of the security, and your child’s new property would be the other
80%. It’s also known as a guarantor loan.
This can be a temporary arrangement until your child has paid down the loan to an acceptable
Finding the perfect property isn’t always easy. Despite the number of homes for sale, the
unpredictable nature of the market can make househunting exhausting.
If you’ve tried property websites, newspapers and real estate agents’ windows without success,
here are five more unconventional strategies to try.
1.Do a letterbox drop
This is a strategy most real estate agents use to win listings, but there’s nothing stopping you from
taking the same approach.
If there are particular streets you like, or you’re looking for a specific type of property, try writing a
personalised letter to individual property owners saying you’re interested in buying their home. If
you’re lucky, you’ll spark the interest of someone who’s been thinking of selling. They may be
attracted by the prospect of a quick, straightforward sale. Make sure your letter includes your
contact details and emphasises that your interest is genuine.
2.Knock on doors
If you’re feeling confident, try knocking on the doors of homes you’d love to own. Timing is
everything with this strategy – if luck is on your side, you could meet a home owner who’s keen to
sell without the effort of an agency campaign. However, not everyone appreciates a face-to-face
situation, so keep it nice and walk away if someone isn’t interested.
When it’s time to renovate, everyone wants to save money. It’s fine to be hands-on for some
tasks, but there are a few projects that are definitely not DIY friendly. Here’s a guide to what you
may want to do yourself and what you should leave to the professionals.
What to do yourself
A fresh coat of paint can give you a strong return on your renovation dollar. Painting is a job almost
anyone can take on themselves, although it can be messier and more time-consuming than you
The key to a successful paint finish lies in the preparation. Take the time to clean, sand and tape
as necessary. Also, choose the right paint for the job and invest in good-quality equipment. Don't
skimp on brushes and rollers – a professional job looks professional because they use the right
Handy hint: a water-based paint can help make the clean-up more bearable.
You can lift the appearance of your home’s outdoor areas with new paving. Laying bricks or
square pavers is a simple task, although you do need to set aside enough time to complete each
Paving is a multi-step process, from preparing the pathway and cement through to laying the
pavers. Try consulting one of the numerous online paving tutorials, or visit your local hardware
store for advice.
If your home has wooden flooring, you can bring it to life with a sand and polish. Hardware and
equipment-hire stores rent out machines for home use. However, achieving a perfect finish is
trickier than it looks. If you’re not confident on the tools, another DIY approach is to lay your own
floating floor, or even stick down self-adhesive vinyl floor planks or tiles.
What to leave to the experts
Wondering how to pay off your home loan sooner? We look at some things you could do.
Australian home loan interest rates remain at historic lows, and the opportunities for paying off a mortgage early are better than ever. Used in conjunction with low rates, here are some extra steps that can speed up loan repayments and reduce your loan balance.
Make higher repayments
One of the easiest ways to quickly reduce the balance of your mortgage is to make larger loan repayments. The minimum repayments required on a loan are calculated on the amount owing and the prevailing home loan interest rate. Repaying more than the minimum can cut the overall term of the loan and save you thousands of dollars in interest. A mortgage repayments calculator will quickly show what savings can be achieved.
Some lenders may charge you an early payment cost for paying your loan in advance. This is
particularly the case with fixed-interest loans, so it’s always best to check up-front. These costs can be large.
Make more frequent repayments
Home loans are often structured so that you make monthly repayments. But making fortnightly
repayments instead can reduce the term of a loan and save interest. By making fortnightly
repayments, you are paying the equivalent of half of your monthly repayment every two weeks.
This allows you to make the equivalent of one extra monthly repayment per year. Extra repayments
will ensure the loan balance is lower at the time of the month the interest is calculated.
Use an interest offset account
Most lenders allow you to package a mortgage with an interest offset account. An offset account
allows you to reduce the amount of interest paid on your loan by offsetting the amount in the
(offset) account against your loan balance. Wages and other income can be deposited into your
offset account. Note that you don’t earn interest on the funds in the offset account, and that offset
is usually only available on variable rate loans.
Many mortgage brokers can help with your home loan and your business loan. There are several
types of commercial and asset finance, so make sure you know the differences. Then you can
decide which one will suit you.
What is commercial finance?
Commercial finance is an umbrella term for different kinds of business loans. They’re designed to
help manage your capital and cash flow.
Types of commercial finance
Business overdraft: Your financial institution allows you to overdraw your existing business
account up to an approved limit. You can only access the overdraft after your own funds have been
used. The lender charges interest on the overdrawn amount. Businesses often use overdrafts as
small loans, usually to cover cash flow gaps.
Line of credit: A long-term arrangement between a business and a lender, where the business
can access funds up to an approved limit. The business may borrow all or part of the money at any
time, but only owes interest and makes repayments on the amount used. Accessibility and flexibility
are key here.
Never renovated a property before? Here are four mistakes to avoid when it's home improvement
Mistake 1: Not doing enough research
Don’t start work without knowing the details. You need to research building materials and
tradespeople, and understand the legal and regulatory aspects of a renovation.
Find out how much materials and tradies cost. You can request several quotes to get a realistic
price range. You can also find out if there are discounts on offer – for example, for bulk-buying or
early payment – or opportunities to negotiate.
Before you start, ask your local council whether you need any permits. Fines for unlawful
renovation can be hefty, as can the cost to repair or rebuild.
Mistake 2: Failing to plan properly
Poor planning can cause big problems. Your budget or schedule could blow out, the property might
end up worse off, or you might not achieve what you really wanted to.
Planning should include these three elements:
If you're having trouble, consider hiring professionals. This may be an architect to provide
drawings, or a construction manager to juggle the different elements.
Mistake 3: Underestimating costs
First-timers often make the mistake of setting a budget – “we'll spend $50,000” – without knowing
what it will buy. Don’t fall into that trap. If you research building materials, you’ll be more likely to
buy the right quantities at the right price. If you make detailed plans, your trade quotes will be more
accurate. Good research and planning will help you create a realistic budget.
Remember to build some contingency ¬into your budget in case things don't go to plan. Adding 10
to 20 per cent to the final budget is a good rule of thumb.
Mistake 4: Hiring the wrong people
A new baby completely changes your life. Are you also prepared for how a new baby might affect
your chances of buying a home? Here are some things to consider before you submit your
When a lender assesses your home loan application, they look at your income, assets, debts and
expenses before deciding whether they think you can make the repayments. Those figures are
likely to change when you have your first child. That means your eligibility for a home loan could
Changes to your income
A lender needs to know that your income will cover your mortgage repayments, even while
someone’s taking time off work to be a new mum or dad.
If you’re the primary carer and you plan to leave employment temporarily or indefinitely, the loss of
your income will affect your household income. When you’re applying for a loan and planning to
take an employment break, you may need a letter from your employer confirming your return-towork
Both parents may be eligible for parental leave. In many cases the parental leave pay will be lower
than your regular income. To get an idea of what your new income will be, figure out how much
parental leave you plan to take. Also speak to your employer to find out whether they offer any
additional entitlements. A financial planner will be able to discuss your personal situation, including
any tax benefits you might qualify for.
Deciding where to go for your home loan is one of the most important decisions you’ll make. While
many prospective property owners will choose to use a mainstream lender, non-bank lenders also
have their advantages.
What are non-bank lenders?
Essentially, a non-bank lender is a lender that’s not a bank, credit union or building society. It has
its own source of funds, which it lends out with a margin for profit.
A non-bank lender may also be a company or individual who borrows money from a bank at
wholesale rates and then lends the money with a profit margin added.
Most mortgage brokers work with both banks and non-bank lenders.
Potential benefits of a non-bank lender
There are several benefits associated with taking out your home loan through a non-bank lender,
There are pros and cons for both big banks and non-bank lenders, so finding the right lender for
you is what’s most important. You’ll be the one making the repayments, so you need to be happy
with the rates, service and fees that are offered. Your mortgage broker is an ideal go-to person to
discuss your situation and what might be right for you.
A home loan is generally a long-term proposition, but in some situations it can make sense to
refinance your mortgage. Read this guide to the refinancing process, and speak to your broker,
before deciding whether it’s right for you.
Refinancing involves taking out a new mortgage and using those funds to pay off your existing
mortgage. Doing so can save money and result in significant financial gains over time.
Why you might refinance
You might want a lower interest rate.
The lending products market is highly competitive and interest rates can vary significantly between
banks. One of the most common reasons people choose to refinance their mortgage is to secure a
lower interest rate from another lender. This could assist you to pay off your home loan sooner,
potentially saving you thousands of dollars
That makes sense, but before taking any action it’s a good idea to speak with your broker. They
can not only look for a better interest rate for you but also help find you the type of lending facility
that suits your lifestyle. This may even mean renegotiating a better deal with your existing lender.
Either way your broker will help with the right advice.
Keep in mind that not all mortgage products are the same. A mortgage with a lower interest rate
may not have all the benefits of your existing loan.
The interest rates, fees and the features need to be carefully considered and your broker can help
you to navigate the options.