Commonwealth Bank of Australia and National
Australia Bank are aggressively attempting to build market share in
lucrative home loans with new offers to their broker networks.
CBA has told brokers it will beat any advertised one to five year
fixed rate home or investment loan interest rate from major rivals
Westpac, ANZ or St George.NAB is offering brokers a discretionary pricing offer, a variable rate of 4.32 per cent for new Homeplus principal and interest variable rate loans where the lender is an owner-occupier with an 80 per cent loan to value ratio (LVR).
Rates on a Homeplus principal and interest loans between $250,000 and $750,000 with an 80 per cent LVR are around 4.64 per cent.
“Competition is alive and well in residential lending. They are fighting for market share. These new offers look competitive but borrowers need to check fine print on rates and fees,” said Christopher Foster-Ramsay, managing director of Capital Home Loans, a mortgage broker.
For example, many lenders charge a large break fee for exiting a fixed rate, especially if rates have fallen since it was taken out.
Brokers are expecting Westpac and ANZ to launch counter-offers.
CBA’s major competitor across the various fixed rate terms is likely to be NAB, according to an analysis of rates by Canstar, a researcher that provides comparative rates.
CBA’s current rate on a five-year fixed investment loan for $500,000 of 5.04 per cent with a 80 per cent LVR is higher than NAB and Bank of Melbourne, which is a division of Westpac.
For the equivalent residential loan, CBA’s 4.74 per cent is equivalent to ANZ and higher than NAB.
“Borrowers need to think outside the Big Four,” said Justine Davies, a Canstar commentator. “It’s a great marketing campaign but there are cheaper amongst smaller lenders.”
For example, lowest five year fixed rates on offer from smaller lenders are around 4.39 per cent.
NAB’s 4.32 rate is also a competitive rate compared to the other majors. But more than 10 smaller lenders, such as Homestar, Bank Australia and Queensland Police Credit Union are advertising rates below 4 per cent, according to Canstar.
Fourteen lenders have recently increased loan-to-value ratios or slashed investor rates by up to 30 basis points.
But borrowers face tougher scrutiny of their capacity to repay, such as reviews of income from all sources, other debts, expected rental from investment properties and the impact of higher rates on family markets.
When it comes to home loan
contracts in Singapore, it's hard to escape the number of terms that
get thrown in our face that look like complete gibberish. These are
usually accompanied by lengthy pages of terms and conditions that most
of us can't be bothered to read through.
While you may not need to understand every word stated in the documents, you should at least get a grasp of the list of 10 basic home loan terms below so that your home loan broker/banker knows you've done your research and will think twice about glossing over the details.
Since buying a home is probably one of your biggest life expenses, it pays to know what you're dealing with when you apply for a home loan. Understanding these terms will give you a clearer picture of the actual cost of the home loan and help you find out which type of home loan will be best for your own situation.
Here are 10 basic home loan terms that you need to know:
1. Approval-In-Principle (AIP)
Approval-In-Principle (AIP) is the approved home loan amount that the bank agrees to lend you when the time comes, based on your credit score and income.
Keep in mind that an AIP isn't a loan in itself, it's basically a guarantee from the bank that it will extend you a loan.
An AIP is really important because it can give you (and your real estate agent) an idea of the amount of money you are eligible to borrow. This way you can focus on properties that you can afford and not waste time viewing others that are out of your budget.
Another good reason to get an AIP before applying for a property is because this way you won't lose your booking fee. To secure a property you need to pay a deposit of 1 per cent of the purchase price, this is called a booking fee. If you're not able to get a loan for the property and can't buy the house, you will lose the booking fee.
You may think that 1 per cent is not a big amount, but let's see an example to get a clearer idea of what it could end up costing you. Let's say you purchase a flat that costs $500,000, the 1 per cent booking fee is $5000. If for some reason the bank refuses to give you a loan, you won't be able to buy the property and you'd lose $5000!
If you have an AIP this won't happen to you, because you already know that the bank will lend you the money! Property agents also take you more seriously if you have an AIP, and some might refuse to work with you if you don't have one.
2. Early Redemption
Early redemption is when you pay off your home loan before the scheduled loan term. Banks generally don't like this because it means that you end up paying less interest over time.
For this reason, you will usually have to pay a penalty fee if you want to pay back the loan earlier than the agreed term.
Make sure to ask the bank or financial institution that you're getting the home loan from if there is a penalty fee for early redemption.
3. Mortgage Insurance/Mortgage Reducing Term Assurance (MRTA)
Mortgage insurance covers the outstanding loan should the borrower die or get struck by an unfortunate event that leaves him with a total permanent disability (TPD) before the home loan is fully repaid, thus protecting the borrower's family from losing the home.
A mortgage insurance called Home Protection Scheme is compulsory for all HDB flat owners who are using their CPF to repay their housing loans.
Private property owners can have a choice on whether they want to take out a mortgage insurance (also known as MRTA or home loan insurance) with a private insurer.
- See more at: http://business.asiaone.com/property/news/10-essential-home-loan-terms-you-should-know#sthash.DAf5czUL.dpuf
While you may not need to understand every word stated in the documents, you should at least get a grasp of the list of 10 basic home loan terms below so that your home loan broker/banker knows you've done your research and will think twice about glossing over the details.
Since buying a home is probably one of your biggest life expenses, it pays to know what you're dealing with when you apply for a home loan. Understanding these terms will give you a clearer picture of the actual cost of the home loan and help you find out which type of home loan will be best for your own situation.
Here are 10 basic home loan terms that you need to know:
1. Approval-In-Principle (AIP)
Approval-In-Principle (AIP) is the approved home loan amount that the bank agrees to lend you when the time comes, based on your credit score and income.
Keep in mind that an AIP isn't a loan in itself, it's basically a guarantee from the bank that it will extend you a loan.
An AIP is really important because it can give you (and your real estate agent) an idea of the amount of money you are eligible to borrow. This way you can focus on properties that you can afford and not waste time viewing others that are out of your budget.
Another good reason to get an AIP before applying for a property is because this way you won't lose your booking fee. To secure a property you need to pay a deposit of 1 per cent of the purchase price, this is called a booking fee. If you're not able to get a loan for the property and can't buy the house, you will lose the booking fee.
You may think that 1 per cent is not a big amount, but let's see an example to get a clearer idea of what it could end up costing you. Let's say you purchase a flat that costs $500,000, the 1 per cent booking fee is $5000. If for some reason the bank refuses to give you a loan, you won't be able to buy the property and you'd lose $5000!
If you have an AIP this won't happen to you, because you already know that the bank will lend you the money! Property agents also take you more seriously if you have an AIP, and some might refuse to work with you if you don't have one.
2. Early Redemption
Early redemption is when you pay off your home loan before the scheduled loan term. Banks generally don't like this because it means that you end up paying less interest over time.
For this reason, you will usually have to pay a penalty fee if you want to pay back the loan earlier than the agreed term.
Make sure to ask the bank or financial institution that you're getting the home loan from if there is a penalty fee for early redemption.
3. Mortgage Insurance/Mortgage Reducing Term Assurance (MRTA)
Mortgage insurance covers the outstanding loan should the borrower die or get struck by an unfortunate event that leaves him with a total permanent disability (TPD) before the home loan is fully repaid, thus protecting the borrower's family from losing the home.
A mortgage insurance called Home Protection Scheme is compulsory for all HDB flat owners who are using their CPF to repay their housing loans.
Private property owners can have a choice on whether they want to take out a mortgage insurance (also known as MRTA or home loan insurance) with a private insurer.
- See more at: http://business.asiaone.com/property/news/10-essential-home-loan-terms-you-should-know#sthash.DAf5czUL.dpuf
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