KIS Mortgage Solutions FAQ's

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Frequently Asked Questions
Michelle responded to reader's questions in the Port Stephens Examiner's "Ask a Professional" feature. Here are just a few!

Q: When interest rates rise or lower what do I have to do? Do they automatically change my monthly repayments or do I have to phone to get them changed?
A: Whenever interest rates change your lender will advise you of your new repayment and what date it is effective from. In an environment where interest rates are dropping such as now, if you can afford to continue to make the same repayments each month or week, you can arrange with your lender to continue to debit the existing amount from your account, instead of reducing the repayment to the lower amount. This will result in you paying extra on your home loan which will not only reduce the interest you are charged but also allow you to repay your home loan faster.

Q: I am confused about the term negative gearing. Can you please explain this term?
A: Negative gearing is a taxation benefit received as a result of owning an investment property. Without going into too much detail, it is basically when the amount it costs you to own an investment property, such as loan interest, council rates, maintenance, property management fees etc, is higher than the amount of income (rent) you receive on that property. The difference is offset against any tax paid on your other income. It is best to discuss this with your accountant as he will take your individual circumstances into account.

Q: I need to keep my costs down, can you organise interest only mortgage?
A: Interest only loans are available for most people taking out a loan however it is important to remember that whilst this type of repayment keeps your costs down, you are not making any reductions in the amount you have borrowed. You are in effect not repaying your debt. This is not recommended for owner occupied purchasers unless it is part of a long term plan to change to principal and interest repayments at a later date. For investment purchasers they tend to take the interest only option as any principal reduction cannot be claimed as a tax deduction

Q: What types of home loans are available?
A: There are a wide range of loan options available, with the most common being either a variable rate, a fixed rate or a line of credit. A variable rate fluctuates with the market and is the most flexible of the options. It lets you make additional repayments at any time, a redraw facility and an offset account. A fixed rate protects you from future interest rate movements and also gives you the comfort of knowing your repayments are not going to change during the fixed rate period. Most lenders allow you to make extra repayments however do not allow you to redraw these funds until your fixed rate matures. A Line of Credit facility works very much like a big credit card, in that you have a limit with you paying interest on the actual amount owed as the balance decreases. This is a great type of loan to use in addition to a credit card; your salary is credited to the loan, and your expenses are paid on your credit card, with the credit card balance being repaid at the end of each month. When considering which one is right for you, discuss with your lender or broker what features and benefits would suit you best.

Q: I want to consolidate all my personal debts into my home loan and I have a perfect repayment history on my debts for the past 3 months only. Can you help me? What is the Process??
A: I would love to help! Consolidating personal debt into your home loan is a good option as it can reduce your monthly outgoings, however you should keep in mind that you will inevitably pay more interest on those consumer debts as a home loan is traditionally over 30 years, whereas personal debts are over a much shorter period. Having said that it can improve your budget by reducing the total amount of outgoings, and allow you to gain control of your debts. Just make sure those credit cards are closed or you could find yourself in further debt if you re-spend the limits on credit cards. The maximum loan amount is generally 90% of the value of your home. It will involve a new loan application with your financial position to be assessed, with payslips etc required as well as statements on all facilities held. I can shop around to get you a great deal to save you interest and combine everything into the one facility.

Q: What are some of the great things you’ve heard back from previous borrowers?
A: I love getting feedback from clients, good or bad, as it helps me to improve the way I assist future clients purchase a home of their own. I always tell clients to be honest no matter what! Thankfully most of it is good so I must be doing something right! I have a very high percentage of clients referred to me by existing clients which is the best feedback of all. Some testimonials I have received say things like “you are wonderful at what you do”, “thanks for helping us achieve our family goal of getting a home of our very own”, “thanks again for your wonderful friendly and efficient service”, “thanks for making it all so easy, no jargon, no jibberish just great friendly help”.

Q: Is it a good idea to fix my loan rate at the moment or stay with variable?
A: This is a very debatable topic at the moment as some people feel rates will drop even lower and you may miss out on a potentially lower rate. The main thing is to think about why you would want to take a fixed rate. If it’s to protect yourself from any future interest rate changes, which also locks your repayment helping with your budgeting, then locking now would be a great idea. Rates are historically low so it’s a good time to consider your options. Bear in mind a fixed rate locks you into your home loan for that period of time. It may cost you to break the fixed rate term if your circumstances change and you need to discharge your loan.

Q: If I choose to fix a loan what is the best length of period to fix for?
A: How long you lock in for is totally dependant on your personal circumstances, and what your plans are for the next few years. Typically the lender will allow you to fix for up to 5 years, so have a think about what your future may hold before deciding how long a fixed rate term to take. Is there chance you may want to sell? Will you be transferred with work? Do you think you’ll want to upgrade in the next few years? These are the type of questions you should be asking yourself, and the answers will help you determine how long to fix for.

Q: Is it best to pay off extra on my home loan or look at other investment options?
A: As a Mortgage Broker I am not qualified to give advice on this matter. My recommendation is to seek professional advice from an accredited financial adviser who will look at your individual circumstances and advise what is best for you for the long term.