Cheaper Home Loans

Property owners are borrowing huge amounts to sustain fast property price growth, and recent data shows that only 36.2 percent of Australian households are debt-free up until the third quarter of 2010. This low percentage signifies that more Australians are living beyond their means.

While the household debt-income ratio is growing, the percentage of Australians that own their property outright is also at a five-year low of 37.5 percent. These numbers fuel the claim that Australia is in a property crisis. Escalating property debt is a point of concern that must be solved as soon as possible.

The average financial position of households was also in decline in the third quarter. People losing their jobs would be a frightening prospect at this point as financially many are already tightening their belts.

The Reserve Bank of Australia shows that the household debt-income ratio reached 159 in the second quarter of 2010. Ensuring you have the right home loan at this point and are paying the lowest possible rates on your home loan is particularly important at times like this.

Economists are predicting an increase in the RBA interest rate of 1.25 percent, households will be heavily affected by a surge in mortgage repayment prices. Households might struggle to keep up with higher repayments if they are in a position where they have just enough money to live.

Though the increased debt is a point of concern, a steady labour market makes debt a noteworthy problem but not a worrying one.

Maintaining your super fund is something you must think about at every stage of your life. If you are in your 20s, you must take control of it to secure a better future. During these early years of your working life you have time on your side, making it the perfect opportunity to research and choose between investment options in super funds.

Having a growth investment plan this early can make a significant difference to the super that you can get while you are working. Though they tend to be more volatile in the short term, growth assets like property and shares have larger potential for growth over the long term.

If you are in your 30s, you must make the most out of your income. During this life stage, you already have an established career making your salary and income tax much higher. Therefore, it is time to make this work for you and not against you. Sacrificing a portion of your salary can minimise your salary tax and increase your retirement fund too.

Before making a regular salary sacrifice contribution, you must check with your employer to ensure you are able to make such a contribution to your super fund. Salary sacrifice can be done via regular monthly payments or through a one-off payment that can be taken from your annual bonus. You can also consolidate your super, co-contributions and spouse contributions to boost your retirement fund.

If you are in your 40s, you must boost saving for your retirement by sacrificing an even bigger part of your salary to maximise your chances of achieving larger retirement income streams and to lessen your taxes.

In place of investing your money outside the superfund where you will be paying a high tax rate, you can devote it to your super to gain more funds that you can invest again. You can still contribute your annual bonus as a one-off payment as well as co-contributions and spouse contributions.

While you are in your 50s, you are approaching retirement age. To increase your retirement fund, you can redirect your money to your super fund via salary sacrifice or personal post-tax contributions. You can still conduct one-off payments or make use of spouse contributions or co-contributions to raise your joint retirement benefits.

Between ages 55 and 60, you can ease into retirement without sacrificing any income through the transition to retirement rule. Once you have reached your preservation agme, you can still work either full-time or part-time while supplementing your income with income from your super savings.

To reap the benefits of the transition to retirement rules, you must transfer a portion of or your entire super benefit to a non-commutable stream of income. This means that the stream of your income cannot be transferred into a lump sum payment until you permanently retire, reach the age of 65 or fulfill other condition that they may have.

Finally, your retirement funds need to last you approximately 25 years or so and therefore, you must make sure that your super benefit will last that long. Having some growth assets in your portfolio can boost your retirement fund while allowing you a continual income.

There was a time when self-employed individuals had a hard time applying for a home loan due to the lack of stable income. Times have since changed and there are now loans for the self-employed that do not require much paperwork. However, these loans incur higher interest rates as they hold high risk for lenders.

Lenders usually require two years worth of steady income in a self-employed set-up for the loan to be untagged as risky. This is enough proof that monthly repayments can be sustained despite irregular cash flow. Otherwise, a self-employed loan will be classified as risky and will carry a higher interest rate.

Usually, loans for self-employed borrowers fall under the non-conforming type. An example of this is the no-document loan wherein only a proof of income is needed for the loan to be finalized. There is also a honeymoon or low-introductory loan wherein its interest rate for an introductory period of six months to one year is lower than the normal rate.
Loans for the self-employed usually have features of both the standard variable and fixed rate home loan. Borrowers can loan as much as 80% of the value of the property and it has several useful features such as the fund redraw, mortgage offset and repayment flexibility.

Self-employed borrowers usually use the money that they borrow to expand their business or even make investments in other businesses or properties. Lenders have a limit of $2.5 million for the amount that a self-employed customer can loan. If they can repay the loan amount regularly, it will serve as a positive note on their credit history.
However, self-employed borrowers must know that the interest rate for this type of loan is calculated on a rate for risk system. Therefore, the higher the risk, the higher the interest rate will be. Also, this type of loan is not usually available for refinancing. Nevertheless, it is the only type of loan that self-employed individuals won’t have problems dealing with.

eChoice can cater to self-employed customers who are seeking home loans. To learn more, visit the  Home Loans for the Self Employed section.