What happens to a fixed rate on expiry?

Most fixed rate loans will roll on to a variable interest rate at the completion of the term but your financial institution should contact you prior to the expiry to talk about the options available to you. The options could include: fixing again for another term, moving to a variable rate (make sure the rate is competitive) or choosing a combination of part fixed and part variable.

Lisa suggested that before making a decision you should do some comparative shopping to make sure that your current provider is offering you the best solution for your financial situation.

Can I get a 100% home loan?

According to our industry insiders, 100% home loans are a thing of the past. You’ll need to demonstrate between 5 – 10% deposit as genuine savings.

Is there different lending criteria for investment property loans?

The good news is no. The same rates and criteria will apply for an investment loan as with owner occupied. If the property is going to generate an income that rental income is taken into consideration as well. Most lenders will take 80% of the rental income into consideration if the property is residential. Some will take 100% of the rent into account.

How much stamp duty will I need to pay?

The answer varies depending on what state you live in, the value of your property and whether or not you’re a first home buyer. Try using an online tool like Mozo’s stamp duty calculator to see what you’ll be up for.

Does good rental history count towards home loan approval?

Yes, according to Lisa lenders are starting to look at this more closely these days. A good rental history helps to illustrate your ability to service the home loan debt.

How much is too much to borrow for a home loan?

The resounding advice from the experts is that you need to balance your home ownership aspirations with your lifestyle. Do your homework (do up a budget) and only borrow as much that will allow you to be comfortable with the repayments now and into the future.

Do you have a question on home loans or other money matters? Head to Mozo Answers, Australia’s largest money conversation.

But savvy borrowers who can act fast can beat rate rise pain by locking in one of the super low fixed rate home loan rates currently available from a number of smaller lenders.

Mozo’s team of rate chasers have chased down three home loan providers – Resi, Mortgageport, and AMP – offering three year fixed home loan rates under 7%.

What’s the savings?

Let’s look at a Commonwealth Bank customer paying the bank’s new standard variable rate of 7.81% on a $300,000 loan. If they switch to AMP’s Basic 3 Year Fixed Rate loan at 6.99% they could save $160 a month. Once discharge fees and introductory fees are taken into account, the customer would save $1,320 in their first year and nearly $2,000 each year after that.

In addition, there are more than 20 providers which offer three year fixed home loan rates at least 0.5% lower than the Commonwealth Bank’s new 7.81 standard variable loan rate.

The Top Fixed Home Loan Rates are:

With the market expecting the Reserve Bank to raise rates by an additional .25% – 0.50% over the next 12 – 18 months now is the time to take advantage of the competitive fixed rate deals while they last.

Compare all fixed rate home loans at mozo.com.au. Be quick!

My answer, as from an hour ago, is clearly yes…

The reason is that the Commonwealth Bank has just put its standard variable home loan rate UP! The NAB has said that rates are under review, and the other big banks are no doubt doing the same. This means that regardless of whether the RBA keeps cutting rates or not, the banks are clearly signalling that they are done with cutting theirs.

I also think that we are at, or very near, the bottom of the Reserve Bank rate cutting cycle anyway. There is light at the end of the economic doom and gloom tunnel, our resources driven economy continues to show signs of strength, our government continues to announce spending plans, and there is renewed optimism. All this points to a recovery of business activity and growth. In fact we are seeing it as well, with things like advertising rates going up in the last month with our own advertising. All this growth reemerging means the RBA can stop the rate cutting, probably now but perhaps a small additional cut or two at most.

Even before CBA’s move today, the banks have stopped passing on rate cuts. The last RBA cut was a Claytons rate cut, because the banks didn’t pass it on anyway (well only 40% of it to be precise). It was a clear message, they’re done going down. CBA’s move today is simply a continuation of that message.

It is also worth considering that picking the exact bottom isn’t necessary anyway if you take a long term view. Even if there is a little further to go (and if there is we can only be talking small drops, we’re already at the lowest rate level ever), over a long term view we’re so close to the bottom that long term decision making should be rewarded.

So all that says to me that it is a good time to lock in a fixed home loan rate while we’re at or near the bottom of the rate cycle. If you lock in a fixed rate for say 5 years, it’s hard to see how that won’t be a lower rate in 2014 than the variable rate will be by then. In all likelihood we’ll be back in booming economic times and the rate cycle will be up already or on the way. A decision you make today could lead to a pleasant experience reading your home loan statement in 5 years!

In fact I happened to see an email newsletter from March 2008, just over a year ago, and it advertised the My Rate Home Loan at 8.44%. My Rate Home Loans are now at 4.99%. If rates can come down that fast in a year, then think how much they could move up over the next 5 years.

And locking in a fixed rate today can get you rates well below this March 2008 level. For example with RAMS Home Loans you could get a 3 year fixed rate at 5.89% and a 5 year fixed rate at 6.49%. To lock in that sort of rate for that sort of time seems nothing but sensible to me.

Fix now before the banks move their fixed rates up. This is inevitable now in my mind, as they try to quickly adjust. Be savvy and move before they do.

So fix away and sleep well. Over the long term it will be a winning decision.

Compare fixed rate home loans with Mozo.com.au