Mortgage Minimisation
Most Australians will need to borrow a significant amount in order to be able to purchase their home. It is essential to implement mortgage minimisation strategies to ensure the debts are managed in the most effective way.
There are many different types of home loans available today, each of which has their own unique features, such as redraw and offset account facilities.
You can choose between an interest rate that is either fixed or variable and you can decide whether you want to repay only the interest expense or both the interest and some capital. Details on these types of loans are provided below:
| Type of Loan | Explanation |
|---|---|
| Fixed rate home loan | Offers a fixed interest rate for a set period of time (usually 1 to 5 years), during which time the repayments will remain the same. |
| Standard variable home loan | The interest rate on these types of loans may change, which may affect the repayment amount. |
| Interest only home loans | The repayments that are made only cover the interest expenses associated with the borrowing, so your loan balance will remain unchanged. |
| Principal and interest home loans | The repayments that are made cover both the interest expenses associated with the borrowing and also a portion of the borrowed amount. This will result in your loan balance gradually reducing. |
The sooner you repay your home loan the better, because once your loan is repaid you will no longer have to make regular repayments. This will free up some additional cashflow that you can use to either:
- Implement a wealth creation strategy,
- Increase your lifestyle spending, or
- Prepare for your retirement.
First Home Owners Grant
The First Home Owners Grant (FHOG) is a Government initiative that has been created to help first home buyers meet the costs associated with the purchase of their first home. By providing a supplementary payment the government has made it significantly easier to buy your first home.
The exact details of each FHOG will vary between each state and territory, but you may also be eligible to receive a stamp duty transfer exemption. This will further assist you in meeting the costs of purchasing your first home.
To be eligible to receive the grant you must satisfy certain qualifying criteria in relation to the following matters:
- Your residency status.
- Your age.
- Any previous residential property ownership.
- The occupation of the home you plan on using the grant to purchase.
Each state and territory has their own specific set of qualifying criteria, therefore it is advised that you contact your financial planner for further information about this valuable grant.
Further information can also be obtained from the Australian Government’s Department of Family and Community Services website http://www.facs.gov.au.
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