December 2019 Newsletter
The month we discuss the various benefits that refinancing your home loan can provide and the outline differences between an Owner-Occupied and Investment Loan.
The Benefits of Refinancing Your Home Loan
If you weren’t thinking of refinancing your home loan, you may want to think again. With the help from our team, you could save hundreds by refinancing your loan. Below are a few benefits to refinancing that you may want to consider.
Reduce your monthly loan repayments
If you refinance to a home loan with a cheaper interest rate you will be able to reduce your monthly payments and your overall mortgage balance, saving you thousands of dollars in interest.
Improve your new home
With the extra funds available to use from lowering your interest rate, you can fund the cost of any renovations or constructions you would like to make on your property without taking out another loan.
Consolidate your debt
One of the options you have when you refinance is to be able to consolidate all of your debts into one loan which makes it easier for you to manage multiple payments.
Potential tax benefits
By refinancing to another loan and using the savings to invest you can potentially take advantage of potential tax benefits such as negative gearing and depreciation benefits.
Due to all the potential benefits of refinancing your home loan, it is a choice worth considering. A mortgage broker will help you unlock these benefits by finding you the best home loan for you possible.
The Differences Between Owner-Occupied and Investment Loans
When you buy a home whether it is classified as owner-occupied or investment depends on your intentions behind buying the property. If you are planning to sell the property for a profit on what you originally bought it for or rent it out, then it would be an investment property. If you were planning to live in the home, you bought then it would be an owner-occupied home loan. It’s straightforward but each classification has important implications for applying for your home loan.
Each type of home loan has varying level of interest rates with investment loans usually being the more expensive of the two. Additionally, investment loans also have higher closing and ongoing fees. So overall, they tend to be the more expensive home loan choice.
Banks are becoming more reluctant with approving investment loans, so the requirements are often stricter when applying for one. The most important thing is to be able to show you have enough funds set aside to pay off the mortgage. How much you’ll need depends on a few factors such as the number of repayments, the amount you’ll receive from rent, your debt to income ratio and the potential appreciation of your property.
Because of the increased expenses and requirements with applying for an investment loan, it can be tempting to try and get an owner-occupier loan even if you aren’t planning to live in the property. Unfortunately, because of the higher risk involved for the lender, loan agents are well trained to determine if you’re committing occupancy fraud so it’s not worth the risk.
It’s important to understand what your intentions are when you purchase a home, so you know which loan to apply for and the differences between the two.
Thanks for reading