Your home as a springboard
Increasingly Australians are opting for flexible mortgages that allow them to pay off more of their mortgage and redraw it later, either as a home equity loan or to pay for renovations.
If you own your own home, you can gear against your house at the same rate as your mortgage. Usually the interest rate for a home equity account is cheaper than a margin loan by about a little less than one percent.
The big plus of a home equity account is that you don't get a margin call. However, a home equity account does not provide regular statements and tax reporting about your shares or managed funds that come through from the margin lenders.
Increasingly the family home is being used to build wealth. Some adventurous investors such as Jan Somers, have bought numerous residential houses for the long term and utilised the tax advantages of negative gearing.
"Along the way we could enjoy some really significant taxation advantages," says Jan. She worked on a buy and hold philosophy and within five years had accumulated a property portfolio worth millions of dollars.
She has written her investment strategies in a number of books. The latest, More Wealth from Residential Property, outlines that investing in residential property can build wealth in 10 to 15 years.
Check out all the home loans on the market and find the right one for you using our find a home loan tool using information from Cannex.
The application for the mortgage finance, Australia borrowers will see is very easy to do. You could be in your new home in sixty or less days if the process goes smoothly. You'll need to have the home evaluated by a certified Australian appraisal. After you apply for the loan, you'll have to wait for the underwriter to okay your application. After the underwriters are done working on the loan papers, you might need to complete additional paperwork and then your loan will be okayed for the last stages. Once you have everything finished, you will meet with a mortgage finance Australia officer and close the mortgage loan. This entire process could take as long as two months.
It's time in, not timing the market
The crucial lesson for investors is that if the share market is volatile, don't try to time it. It is better to retain some exposure to markets at all times.
Studies of the Australian share market over the past 20 years from 1984 to 2005 show that most of the long-term gains on share markets are made or lost in just a few trading days each year.
For example, if you invested $1000 in Australian shares in December 1983, 22 years later it would have grown to $12,968, making an annualised return of 12.35 percent, according to IFSA.
But if you invested the same amount over the same period except for the 10 biggest days in the market, it would have grown to $8240 or an annualised return of 10 percent, and if you missed the 20 biggest days you have just $6304 or an average of 8.7 percent each year.
Studies show that investors make money from stock selection rather than market timing. Your strategic long-term asset allocation should be diversified across all the major asset classes. This limits the overall risk of your investments.
Use a mortgage calculator to figure out how much you could reduce your loan time by making some extra payments every month. This is always decent to see if you are interested in taking on a thirty-year loan. You will be able to make an extra payment to cut your loan time down. A lot of people will use the calculator before applying for a loan to ascertain what the payments would be for a particular home. You will be able to also use the estimator to see how your home loan is affected every time you make a monthly payment.
Borrow to invest
A rising share market has lured investors back to margin lending as a tool to rev up their wealth accumulation.
Gearing or borrowing to invest in shares or managed funds makes good sense when you believe the share market is on the up and up. The problem with a margin loan for tumbling shares or managed funds is that gearing magnifies your losses.
If you have a margin loan, make sure you do the following:
• Choose your risk strategy to fit your level of comfort
• Diversify your investments
• Set your level of gearing according to your risk level
• Don't let your interest build up or capitalise. Pay it off ever month.
Check out all the margins loans on the market and find the one that's right for you.
When you talk to a mortgage finance Australia officer, he or she will make certain you're locked into the current rate of interest before the rates change. This is beneficial for someone looking for a mortgage and has to wait for approval. A fixed rate of interest will mean that you are locked into that rate for the full term of your loan. You'll save money on your mortgage finance Australia home mortgage and be able to enjoy your new home.
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