Home Equity Line of Credit

Last years interest rate increases are keeping Australia’s housing market in a down slide and every one looked for best home loans Australia. While it is a dream of many Australian’s to enter the housing market and to become home owners, the reality is that it is just not affordable at this time for many people. Australian first time home buyers taking home loans in February was the lowest since June of 2004. The number of mortgages granted in February was the lowest in ten years. This shows, not only are applications for home loans down, but those that are being approved are even lower. On that same note, the number of home building permits approved in the past year is down 22 per cent over previous years. This means not only are fewer people applying for home loans, but there are just fewer new homes in general, both contributing to the housing slump.

House Rents
The decline in the housing market is making Australians reconsider home ownership as a viable investment. They are seeking to invest their money elsewhere, as well as consider rental as a more suitable option for living. Housing rentals in the capital cities of Australia have seen huge increases so far this year. However, with the increase in people entering the rental sector, demand is driving up rental prices. In Sydney, 40 per cent of renters are paying more then $400 per week for home rents. In the more isolated Pilbara rents as high as $1650 per week can be seen. With these rental prices skyrocketing, it is making renting in the city impossible for low-income families. It is also taking much longer for people to find suitable housing and therefore those in a time crunch are settling for homes that are less desirable or out of their price range.

Govenrment’s Role Till Now!
The housing crisis, including decrease in home ownership and increase in home rents, is prompting some people to think that the government should get involved and consider initiatives to ensure good quality house rentals and affordable housing. The International Monetary Fund has suggested that state and federal government’s intercede to help increase interest in the failing housing market.

There has been an overwhelming focus from the government on home ownership. Grants are available for first time home buyers as a way to encourage people to enter the housing market. However, the IMF has suggested that it might be better to put more focus on affordable housing, especially for low-income individuals and families. The focus by the government on home ownership rather then quality rentals, may be contributing to housing price swings. They suggest that a more level tax across owner- occupied and rental housing could help decrease the focus on home ownership alone.

Future Involvement
Some people think that the government is already too involved in the housing market and should stay out of it. Either way, there needs to be more options available to low-income families for affordable, quality home rents. For those with low income and less access to transportation, living in the cities near work places, stores, and public transportation makes the most sense. However, these are the areas that have the highest house rents. Government intervention and tax incentives might be the way to go to ensure affordable living options for this population. This will make best home loans rates Australia in public favor.

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Home buyers have a wide range of choices when it comes to getting mortgage quotes. Despite the currently less than ideal lending situation, it’s still possible to get good deals on mortgage refinance and other similar loan products. It’s surprising how many people are simply oblivious of thier options. It’s only when the situation get truly do-or-die that they search for what their options are and often this means it is already too late, as many of the options are now inaccessible.

You can find a wide range of financial Products depending on your personal situation – too many to cover in a single article so we’ll just look at a couple of the most critical

Cash–Out Refiance

Cash-Out Refinance is in realityin fact a way of increasing the size of your Home mortgage, but in a beneficial way. When you take out a cash-out refinance you have the possibility to gain the benefit of lower interest rates than you may currently have, and in addition to this you can release the accumulated equity you may have in the home and realise it as cash in your hand. This is then tacked on to your existing mortgage loan balance, and attracts the same mortgage rate. The largest benefit to cash-out refinacing is that you can use the cash released to pay for renovations and improvements to the dwelling (thereby increasing it’s value) or pay off expensive liabilities like credit cards, unsecured loans, auto loans and bank overdrafts. When done correctly refinancing with cash-out can actually result in dropping your costs each month than you are paying at the moment and can settle the liabilities that are restricting you right now. Cash-out refinancing also has the benefit of not being a 2nd mortgage, which means the interest rate is dramatically lower than a second mortgage would be.

HELOCs

A Home Equity Line of Credit (HELOC) is a variety of home mortgage, usually a Second Mortgage, that allows a flexible facility to the mortgage holder by allowing them access to the accumulated equity they have in the home in the form of cash. A HELOC operates similarly to a bank overdraft – you can draw upon it (up to a pre arranged limit) easily and you are only charged interest on the amount of money you’ve drawn down if you don’t use it you don’t pay a cent. This is a great way to make use of the equity you have in your house and use it for anything you require right now. As you only pay interest on the amount outstanding, it means you can quickly pay back anything you use as your budget allows. A HELOC is not intended as a long term arrangement however and at an arranged period of time it must be repaid in full. Typically Line of Credit interest rates are higher than normal home Mortgage refinance but not greatly so.

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