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Australia has nicknames or phrases and one of them is ‘the lucky country’. That could be for several reasons, one of which would surely include home ownership. The great Australian dream is home ownership and it’s a fact that a huge percentage of Aussies are homeowners. If you’d like to join them or improve your financial status, this article gives you advice on raising funds for real estate.

Different types of home loan

The first thing to understand is that home loans vary; that they are not all the same. They obviously vary in length, in size and in repayments. But they also vary in type. You can have home loan interest rates to buy a home or to refinance a home you have already bought. A home loan could even be for a home yet to be built.

Then there are first home buyer loans where the government gives the successful applicant thousands of dollars to help get them started. Or perhaps you are already a homeowner but would like to purchase another property. In this case you are deemed an investor and can equally apply for a loan to purchase your second or subsequent home. Be aware though that investors attract a different form of taxation such as capital gains.

One of the most important aspects of any home loan is the rate of interest you pay. This will vary for home loans in Australia with the banks able to set their rates up or down. Usually the banks are guided by any decision made by the Federal Reserve Bank which sets the official interest rate and is independent of the government.

Are you a gambler? A home loan can have a fixed or a variable interest rate. As you would know from the media coverage, changes in interest rates make front page news. If you opt for a variable interest home loan, you will pay more when the rates rise but less when they fall. A fixed interest rate may be higher to start with but you’ll be pleased when rates rise and you are sitting pretty. That’s just another factor you need to consider in choosing the best home loan rates for your home loan. Tomorrow Finance is an online mortgage broker and home loan information provider and can help you find the cheapest loan.

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Apart from the obvious aspect of repayments, these loans attract other costs. To establish the loan the bank will usually charge a fee. And if you wish to vary the loan, there may also be a charge. For example let’s say you come into a windfall and choose to pay out your home loan rates. Good luck to you but the bank will lose many thousands if you still have years to run on your loan. To compensate there will almost certainly be a penalty fee for paying out the loan at an early time.

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The financial market in Australia is de-regulated. Banks are not controlled by governments and they, the banks, operate in a competitive and a commercial market. Banks don’t hesitate to try and woo customers from their competitors. All this means you can and should shop around,

Remember a home loan is arguably the biggest financial decision you will ever make. The average loan is 25 years. In most cases every borrower will be paying off their debt for decades. But the conditions which apply to your borrowing are not the same. There are so many ways the bank can arrange your finances.

For example the insurance on the actual building may be a prerequisite for the bank providing you with the funds – that’s only natural as they want to protect their investment. But then there’s the insurance on the contents of your house. Your bank may be able to offer an excellent deal on that cover as well. Little things can make a difference. It’s sometimes called the fine print and if you don’t understand anything, ask for help from someone who knows about these things.

There’s no need to rush your decision. You would do well to make a list of the various loan options. Write down the pros and cons of each home loan and think carefully before choosing.

Which bank?

Now one of the banks uses that term in what they hope is a clever piece of advertising but the question remains. Which bank will you choose? Will you choose fixed rates or variable rates?

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There was once a time when to win a home loan you needed a good track record with your bank. You saved with them for years and, as a reward, if you were lucky, they granted you those funds. That’s all changed. Now it’s a competition. Banks promote themselves. They run ads in various media outlets spruiking their rates, service and special packages. That can only be good for borrowers provided they do their homework.

The big 4 as the banks are known - the ANZ, CBA, NAB and Westpac - are well-known in the Australia home loans market. But there are other smaller banks and they too work hard to win the attention of the borrowers. The best advice is to look at as many options as possible.

The Australian Home Loans Market

If you’re looking to buy property you’ll know that prices rise, fall and plateau sometimes without warning or even rhyme or reason. Some people sit back and wait until the market falls and see property after property sold before their eyes. Then when they decide to ‘jump in’, the prices have risen again. In other words, anyone who tells you they can predict the real estate market is never going to put their house on it. Sometimes the best time to buy is now.

Your best bet is to make a list of what you want in terms of your real estate. List such things as area, facilities, number of rooms, etc and then determine your budget. If you can only afford a certain amount then bidding for places which are out of your league will only be frustrating.

Make yourself known to estate agents in your favoured areas and tell them your budget and requirements. Let them do the searching for you. Then when a property becomes available, you will already have done your homework and be ready to buy your slice of the great Australian dream.

This guide is general information only and is not product advice. If you need advice on your circumstances you should seek professional financial advice. 

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