Everyone loves his own home as it stands for their peace and shelter. But when you’re in debt, what are you supposed to do? Should you use your real estate property as a piggy bank? With the Australian credit card debt levels increasing gradually, most Aussies are wondering about the prospects of leveraging their home equity in order to repay their unsecured debts. The people staying in Australia can certainly tap their home equity and use it to repay their debts and this is one of the wisest options that they have at their disposal. Read on to know more on these kinds of loans.

What is home equity?

When you take out a home mortgage loan, you’re supposed to repay the loan in monthly installments of interest rate and principal amount. If your home value is $300,000 and the outstanding mortgage loan balance is $250,000, then your home equity is $50,000. Now if you tap your home equity, you can use the proceeds of the loan for repaying your unsecured debt or even for renovating your home.

Should you consolidate your unsecured debts within a home loan?

With the present debt situation in Australia, most debtors are thinking about ways in which they can repay their debt without hurting their credit score and paying a huge amount as interest rates. This is the reason why they’re resorting to the home equity loans in order to repay their existing debt. However they must make sure that they make timely payments on these debts as their home is used as collateral.

What are the benefits of taking out home equity loans in Australia?

When you take out home equity loans, you must be educated on the benefits of taking out one. The home equity loans are secured loans that can be taken out in order to either meet your high interest debt obligations or to renovate your house. Here are some benefits that you must take into account.

Interest rates: The interest rates on the loans will be much lower than that of the unsecured debt consolidation loans. Though they’re much higher than that of the first mortgage loans, yet you can benefit by taking out one. With lower interest rates, you can get soothing monthly payments in a particular month.

Longer repayment plan: The repayment plan for this loan would be much longer and thus you can repay the loans in affordable monthly payments. When you’re in credit card debt, the biggest trouble that they face is the outrageously high monthly payments. This can be beneficial for a high interest debtor.

Tax benefits: Secured loan debt is called a good form of debt and therefore the interest rates that you pay on such loans are tax-deductible. This is an added benefit as they can save their bucks in the long run.

Therefore, when you’re in debt in Australia and you don’t have any way out, tap the equity that you’ve accumulated on your real estate property. However, manage your personal finances simultaneously so that you can repay the home equity loan on time.

Managing your debt and keeping loan repayments under control is crucial in tough economic times. While there are several routes you can take to manage your finances and keep debt under control – one of the most popular options people look at is making use of the equity in their home.  If you want to look at mortgage refinances as part of a strategy to bring your mortgage under control, then there are several important points to consider. You may chose to either refinance or drawdown the equity in your home to pay debts like credit cards, car loans or other loans.

How to handle mortgage debt: What the average person needs to know

When borrowers refinance their loan to access the equity or a better interest rate, the home is often re-valued to determine the amount of equity available in the property. This can then be part of the refinance package. Alternatively, the borrower may refinance in order to access lower interest rates; they may even look at shifting to a fixed interest rate or a variable interest rate depending on their needs.  In doing this borrowers are able to either remain with their current lender, or move to another lender.

Is refinancing a good option for you?

Each individual should weigh up which of these options is most suitable for their particular financial needs and monetary situation. If opting to refinance a property, the borrower may be able to shift to a lender with a smaller interest rate, opt for a smaller monthly payment over a longer period of time, or even increase their borrowing capacity. The borrower may look at a fixed rate home loan, which as the name suggests is a loan that is provided at a higher rate. This may be slightly higher than the variable rate at the time, but if the rate goes up dramatically then there are significant benefits.  A variable interest rate home loan changes as the bank home loan rates change, and this may be a good option during periods of economic stability.

Using a broker or tackling debt yourself?

A mortgage broker is a good option if you want to organise your home loan refinance, helping both those with bad credit and borrowers with good credit who want access to a number of different lenders.

While it is possible to organise a loan for yourself, a broker can give you a more competitive selection of home loan options. It is not unusual that borrowers approach their bank first, but if you are looking for the best option for your house loan this is not automatically the ideal solution. Using a mortgage broker can in fact deliver much better results, as they are able to access better rates, improved terms and a wider range of choices for the borrower.

Your home loan is really important – it is likely to be one of the largest debts you will have in your lifetime. Buying a home is important for your personal and financial security, which makes getting the loan right a crucial part of the purchase. When you use a mortgage broker you not only have access to a better deal, you will also have someone who will save you time and take the stress out of securing a home loan. The mortgage broker can answer questions for you and do a lot of the hard work on your behalf.

You should consider using a mortgage broker if you wish to gain access to an industry insider with a vast knowledge of the market and the expertise to help you secure a loan that best suits your particular circumstances. A mortgage broker can advise you on your options and help you identify which lenders are best suited for your particular needs. They can also save you time and stress by steering you away from lenders who are likely to overlook someone in your particular circumstances.

If completing a pile of paperwork to find the perfect loan is overwhelming – then the broker can help manage this side of the mortgage process for you. A good mortgage broker can take the headaches out of securing a mortgage, assisting with handling the paperwork and saving you time. You should also consider using a mortgage broker if you wish to reduce the expense and possibly the interest rate you need to pay for your home loan or home refinance loan. The reason for this is that they are will have access to options that are not available to the general public. Using a mortgage broker means you get access to an exclusive package that you wouldn’t otherwise be able to, which can work out very well for you as a borrower.

Hiring a mortgage broker will mean access to lower application fees and interest rates – which is ideal whether you are taking out your first mortgage or refinancing for a better deal on your existing home loan. Since many of the deals a mortgage broker can offer aren’t available if you deal directly with the lenders, you should give serious consideration to using a broker.

There are a number of advantages to having a mortgage broker act for you, but the main benefit to using a broker is that they will be able to look at what is available across the whole market. This means a broker can weigh up your needs against the options available. This can be a great way to go, because it means you can be sure the loan you have is ideal for your circumstances.

If having a mortgage broker sounds perfect for you – but you’re not sure where to begin – then you have several options. You could search for a mortgage broker online, via the phone book or by asking friends or family for a referral. If you get someone that you think seems promising – you can take several steps to assess whether they are truly a good candidate to help you secure the loan for what is generally the biggest purchase people make – their home.

When you have one (or more) candidates, start by looking at their track record.  Are they licensed if that is required, are they independent or do they have an affiliation to particular bank or lending institution?  Consider these things as they can be an indication of the quality of service you will get, as well as whether the broker will have some bias due to an affiliation with one lender. If for any reason you feel that the broker is not suitable, you can remove them from your list.  Remember you will have to share personal information about your finances and personal situation, so you want to be confident that the person your share this with will treat your information in confidence and act with integrity.

Following that, take the list of brokers you are still considering and do some further background checking. Have they got satisfied clients?  Have they had any claims brought against them for any reason? Don’t hesitate to contact them and ask them some questions – this is always a good way to assess how they will treat you if you become their client.  You might ask them how long they have they been in business or what their fees are on their services. You may also have some questions that are specific for your own situation.

Buying your home or refinancing an existing property can be a stressful time. If you want to ease this, you can use a mortgage broker to help ease the process. A good mortgage broker can make things happen faster and help you secure the best deal. If you are searching for a home loan, then a mortgage broker a good option to make the experience an easier and simpler one.

Choosing the right mortgage is almost as important as choosing the right home. These days there are so many different types of mortgages available it’s hard to know which one is right for your situation.

One the other hand, just walking into your local bank branch and asking for a mortgage might not be the right choice either. Bank staff are trained to sell only mortgages available from their own bank, so how can you know they’re offering you the best available?

A qualified mortgage broker is continually trained and updated by each individual bank about their policies and lending products. This means your mortgage broker is able to compare what different banks are offering and then source the ideal home loan to suit your budget and your personal circumstances.

What Does a Mortgage Broker Do?

A professional mortgage broker will listen to your needs and spend time with you learning about your budget and your home loan requirements. Once he or she has a grasp on your financial situation they will identify the right mortgage – and the right lender – to suit you and your goals.

Your mortgage broker will then act as an intermediary to the bank, preparing your application for you and presenting all documentation to the bank on your behalf.

Mortgage brokers are specialists in their field of expertise. It’s their job to navigate through the confusing bank jargon, find those hidden fees and explain them to you so you understand the terms of the home loan you’re entering into.

Will a Mortgage Broker Know Which Bank is the Best?

Mortgage brokers are given access to all the rates and loan-types offered by the banks and lenders. This means they can quickly compare variable rates against fixed rate mortgages and show you the differences between them.

The truth is the ‘best’ bank out there is the one that best suits your situation, your budget and your requirements.

Your own situation might be better suited to a fixed rate. Some people are more suited to variable rates. Some investors don’t even want to pay off their mortgages, opting for ‘interest only’ payments. Everyone’s situation is different.

This is where mortgage brokers are important as it’s their job to know how to identify what solutions could work for you.

How Do I Choose a Mortgage Broker?

There are many mortgage companies in Australia to choose from. You should be careful to choose your mortgage company based on their industry accreditations and professional memberships.

Most banks require parent mortgage companies to be members of industry regulatory bodies, such as the MFAA or FBAA. Don’t be afraid to ask your mortgage broker for their qualifications and evidence of MFAA or FBAA membership.

How Much Does a Mortgage Broker Charge Me?

A good mortgage broker shouldn’t charge you anything for their services. They’re paid a commission by whichever bank they introduce you to. This means their service to you should be free of charge, while they charge the banks their upfront commission rate.