There are still ways to achieve the Great Australian Dream…For many, buying that home, whether it’s your first home or a subsequent one, feels just out of reach. For others, managing home loan repayments can sometimes become a struggle or simply just prevent you from doing some of the things you want to do.Now there is a new home loan available that can help you reduce your home loan repayments or even purchase a more expensive property than you may otherwise be able to afford. An Equity Finance Mortgage, (EFM) works in conjunction with a traditional home loan. Together they let you move some of the expense of a traditional home loan to later when you eventually sell your property.An EFM allows you to borrow up to 20% of the property value and you pay no interest and make no regular payments. Example: Jack and Julie want to purchase a home valued at $400,000.TRADITIONAL HOME LOANProperty Value = $400,000
Deposit = $20,000
Loan Needed = $380,000
Traditional Home Loan (95% of property Value) = $380,000
Lenders Mortgage Insurance Premium = $7,417
Monthly Repayments Required = $2,883ADDING AN EFM TO MAKE PURCHASING A HOME AFFORDABLEProperty Value = $400,000
Deposit = $20,000
Loan Needed = $380,000
EFM (20% of property value) = $80,000
Traditional Home Loan (75% of property value) = $300,000
Lenders Mortgage Insurance Premium = $4,652
Monthly Repayments Required = $2,276Adding an EFM reduces the monthly repayments
While an EFM shares in the capital growth of your property when you eventually sell, it also takes its share in the loss if the property has depreciated, so you don’t end up wearing the total loss. An EFM allows people toLook in areas to buy where they may have originally thought out of their reach.
Reduce their existing mortgage repayments to allow for other things, such as education, property renovation, holiday etc.
AN EFM OVER TIME.In return for the benefits available to you when you take out an EFM, because no annual percentage rate is applicable to your loan (unless you are in default) and you do not make monthly interest repayments during the term of an EFM, you must agree to share any increase in the value of your property with the lender.AN INCREASE IN PROPERTY VALUEFrom the previous example: To repay their EFM in year 6, Jack and Julie must repay $93,900 on top of the $80,000 they originally borrowed. They have made a capital gain of $104,850 and have $190,646 to contribute towards their next property purchase. They have gone from having 5% equity in their home to 30%. In addition, they have saved $43,696 in repayments as compared to a traditional home loan over the same period.YEAR 6Property Value at Sale = $634,750
Less Original Property Value = $400,000
Capital Appreciation = $234,750
Original EFM Amount (20%) = $80,000
Plus Appreciation Payment (40%) = $93,900
Total EFM Payment = $173,900
Traditional Home Loan Repayment = $270,204
60% of Appreciation for Jack and Julie = $140,850
Jack and Julie’s equity after repaying the EFM and traditional home loan = $190,646Of course individual circumstance may depend on eligibility. We recommend talking to a qualified EFM consultant for full details about this product.
Posts Tagged Insurance
Home Equity Refinance
Aug 13
There are various situations that arise when you need a quick loan without any hassles. For instance you may need some money to pay off your credit card debt or you may want cash to do a remodeling of your house. It is at these times home equity refinance is very helpful. It can provide you the much-needed money immediately without any problem. In traditional refinancing, there are umpteen numbers of applications forms that have to be filled and a wide variety of procedures and formalities. However, when you refinance via home equity, you can avoid all these tensions and hassles.
What are the closing costs for home equity refinance?
Zero. The best part about these loans is that there are no closing costs for them. Some financial institutions charge a small amount for processing the loan. But still this amount is meager and negligible when you compare it with the other loans.
Should you go in for private mortgage insurance?
No. Never opt for a private mortgage insurance as neither this is useful nor will this fit into your budget. If you borrow more than 80% of the value of your house as a loan, you are due to pay private mortgage insurance. But, you can avoid this payment if you go in for a home equity loan. Under this loan, you can borrow even up to 100 percent of the equity that you possess.
What are the ranges of interest rates for home equity refinance?
The interest rate of home equity loans is quite low. Thus, most people are not very surprised about getting a great deal. The reason for the low interest rates is the intense competition among the lenders. Shop around the market and get quotes from various lenders. Though local financial intentions are the best people to help you with home equity loans, certain huge national lending companies can also be of immense help and support to you. Read the agreement carefully, understand all the implications and then, take up the loan.
By: Sara Fredder
Are you considering becoming a Wedding Planner but unsure what finance you will need to start your business, this article will cover some areas in which you may need finance for as well as where you may be able to get the finance for if you don’t have the money yourself.
You following points are the places where you may need finance to help your wedding planner business startup: -
· Renting building space – to set your business up you may need a room or rooms in which you can meet and greet your clients and suppliers. You may also have products to sell to your clients, which you might want to display in cabinets or on shelves. If you have a place for clients to visit the business will seem more reliable as many clients don’t just want to view a website but also want to meet and visit their place of work.
· Stock and Equipment – you will need a computer and access to the Internet if you want to be a wedding planner. The Internet has lots of useful information, suppliers of everything you will need for a wedding. A wedding planner will need to buy files and folders to keep any information a couple give them and any other ways to keep information stored.
· Staff – wedding planners usually start their business off by themselves but if their successful and begin to get more and more clients they might want to employ a few staff to help carry out the research in the up and coming months and also make sure everything runs smoothly on the day.
· Insurance – you should take out insurance not only on the building your using but on the work you do, just in case someone isn’t happy and they file a lawsuit against you, always best to be careful and take precautions just in case.
· Marketing – every business needs some kind of marketing, if no marketing is done there’s more of a chance that you may fail as a business. You need to market your business in wedding magazines, newspapers, have your own website and market it well using search engines and also let any bridal shops and suppliers know who you are and give them leaflets to hand out to there clients if possible.
· Hidden Costs – the hidden costs may be transport costs, traveling from location to location from your base to the clients home, from their home to the church or reception. Your traveling costs could be quite a lot.
So now you know where you may have to spend money to get your business running smoothly. Now you may be worried where are you going to get the money from to start your business up. There are many different financial options for you to consider these are:
· Friends and Family
· Bank Loans
· Credit Card
· Home Equity
· Business Angels
· Venture Capitalists
Each different financial option has different good and bad points. Friends and family may not have all the money you need, if they do you really want to borrow from them? A banks loan charges high interest and you will need to show a detailed business plan, a credit card may not give you the whole amount you require so you would have to use more than one and this can be costly, using your home as equity can be a bad gamble if your business doesn’t take off, business angels and venture capitalists take a share of your business, they give you the finance you need and help you with making your business successful.
By: Jene Pedder