Australia continues to represent a huge investment property market. According to a February 10 release by the Property Council of Australia, there are a whopping 2 million Australians who own rental real estate.
When dealing with such costly assets, people will want to understand every angle and aspect of their mortgage
As the market continues to grow, albeit at a more controlled pace than before, many of these investors will get into huge amounts of debt when taking out a loan. When dealing with such costly assets, people will want to understand every angle and aspect of their mortgage so they can make well-informed decisions that will benefit them.
With that in mind, there are several home loan terms that not everyone is familiar with. However, being aware of these present interesting opportunities that could potentially make dealing with your investment property mortgage easier. Let's take a look at a few of them:
1) Split home loan
Anyone who has borrowed before knows that a loan can be obtained at a fixed or variable interest rate. However, according to McCrindle's 'How much do Australians know about their home loans?' report, just under 40 per cent of mortgage holders confidently knew what a split home loan was. This type of setup is when your home loan interest rate is a combination of both, allowing you to absorb some of the advantages of both interest rate types.
2) Comparison rate
When working with a mortgage broking professional and looking at different products, the first thing you might look for is the interest rate. However, there are many hidden fees and costs that often surprise borrowers and could make identifying the real cost of a loan somewhat vague. The comparison rate accounts for all of these and give a truer representation of what you'll end up paying.
Unfortunately, only 35 per cent of people in the McCrindle study knew the difference between the two.
3) Redraw facility
Every borrower knows that the quicker you pay off your loan, the less it'll cost. However, the question people ask themselves when it comes to making additional repayments is, 'What if there's an emergency and I suddenly need those funds?'
A redraw facility acts as a terrific solution to this, allowing you to make extra repayments on a variable rate home loan. However, you can still withdraw this excess should you find themselves needing it. According to McCrindle's study, only 57 per cent of mortgage holders understood this, which means that there could be many who aren't aware of or making use of this feature.
4) Offset accounts
McCrindle's report shows that only 53 per cent of mortgage holders knew what an offset account was. As another way to add flexibility to your loan, this feature allows you to put money into a specially linked account that will offset against your remaining loan balance. As a result, the interest you pay will be reduced without you needing to make additional repayments.
A large number of Australians found dealing with money to be stressful – regardless of their financial situation.
ANZ's Survey of Adult Financial Literacy found a few common attitudes among Australians. For instance, a large number of Australians found dealing with money to be stressful – regardless of their financial situation. Many people also admitted to being impulsive when managing money and their finances.
Investors are no exception to this, and understanding these terms could be one big step toward controlling your finances in a controlled, anxiety-free way.
On that note, getting property investment advice from the experts is something that could help immensely. Not only will you be able to understand the steps available to you but you'll have someone to speak with if you have any questions regarding tricky-to-understand elements like some of those mentioned above.