Home-loan specialist

By Heidi Armstrong

Buying off the plan
Q:I've got myself into a bit of a situation and was wondering if you can give me some advice. I am a single male who earns $90,000 a year. I have a good credit rating and I am not in debt.
In August last year, I put a 5% deposit down on an off-theplan unit worth $347,000 and signed a contract to buy it.
The unit is due to be finished in May this year and I intend to rent it out at $350 per week. My solicitor has told me that I need to get a loan now and I am having some trouble getting approval as the property is off the plan and I will be borrowing 95% of the loan.
Can you please give me some advice about how to approach this situation? Or names of companies that could help me ASAP? I live in Mount Isa in Queensland, which is only a small town, so I'm limited as to where I can apply.
Much appreciated, C.

A:I completely understand your situation. Buying off the plan can pose challenges that differ from the regular purchase of a property already completed.
For some buyers, these challenges not only relate to the 'loan to value ratio' = as in your case = but also include predicaments that can arise with falling prices.
Guidelines for off-the-plan purchases vary between lenders. However, depending on where the property is, some can provide funding to 95% of the contract price provided settlement occurs within 12 months of contract exchange.
If you settle after the 12-month window, it's possible you will be limited to borrowing 90% of the valuation figure = and that's likely to be the case across the majority of lenders.
To assess your situation fully, more detail on the purchase would be required, as there are many considerations to be taken into account for a successful approval. Talk to your broker or lender about your options.

Tracking mortgage savings
Q:I like to keep up with the progress of my extra weekly mortgage repayments, so I find the Your Mortgage calculator at www.yourmortgage.com.au very useful. However, I want to know if I can work out how increasing payments down the track affects the overall time saved. For example, I pay an extra $250 on top of my weekly repayment now, but in three years' time we may be in a position to double that. How can I include that in the calculation to forecast the total interest and years saved?
Kind regards, Kate

A:Hi Kate, I have been trying to find a calculator that would allow you to change your additional repayment at various stages of the loan, but to no avail. Lenders have access to such devices as part of their loan sales proposition, but unfortunately I have not been able to unearth one that gives you the calculation quickly and easily.
However, there is a way to solve the problem. The best way to identify the savings to the term and the interest components of your loan is to use the Your Mortgage 'Advance Mortgage Repayment Calculator' in two stages. This can also be found
online at www.yourmortgage.com.au
First of all, complete a calculation applying the $250 per week extra repayment, then take the balance of the loan at month 36 and complete a new calculation using an additional $500 per week.
Simply add three years to the overall term on the second calculation and this gives you a result.
It's a little convoluted I know, but it is the best option for you in the absence of a specific tool to help you.
It sounds like you are on the right track in terms of understanding the benefits of additional payments on your home loan.
You'll save an incredible amount of interest with your current strategy - keep it up!

Exit costs
We have a Westpac mortgage of $341,000 with a split option: $41,000 is variable and $300,000 is fixed.
What would be the costs to change the fixed loan portion to a lower rate? Is there a calculation to work this out? And would breaking a fixed loan be expensive? We've had this one for a year now. Thank you, Mark.

There are many people in this very situation at the moment, usually fixing all or part of their loan with the expectation that interest rates would remain high. For you, the only way to find out the true cost of breaking the fixed portion of your home loan is to approach your lender.
Break-cost calculations vary from lender to lender;however, you should know that it is likely to be high. Your lender will explain how the break cost is calculated and how much it is. You could also look at the contract you signed at the time of fixing your loan as this may give you more information.
In your question you don't mention how long your fixed term is for but, if you find it is too expensive to break the loan contract, my advice would be to pay as much as you can off the variable portion.
Most fixed loans don't allow extra repayments (you can ask your lender about yours), so by paying extra off the top of the variable loan you can reduce the amount of interest you are paying overall.
Approach your lender, Mark, and discuss your options - good luck!