OCBA - Other financial considerations

Other financial considerations

Early repayments
Making lump sum payments or higher loan repayments will help you pay off your loan sooner. It is also possible to shorten the term of the loan by making more frequent or extra payments. While the term (or repayment period) of many home loans is 25 years, the trend recently has been towards shortening the term, for example, to 15 years. Depending on the type of loan, there may be restrictions on making unscheduled payments or increasing the number of repayments.

Interest rate rises
In calculating the size of the loan and repayments, the borrower should include a margin to allow for potential rises in interest rates. In the last two decades rates have been as low as 5% and as high as 17% percent.

Mortgage offset
This can save interest on your loan. Your mortgage is linked to a savings account into which your salary and other cash can be deposited and from which you withdraw to pay bills, credit card etc when these debts become due. For as long as money sits in the account, it is 'offset' against your loan and so reduces your interest bill.

Points to note - mortgage offset loan:

usually charge a higher rate of interest
may impose fees and charges for the offset facilities
may not fully offset the rate of interest on your loan. A 100% offset means your cash earns the same rate of interest as you pay on your loan. Many offsets are only partial.

First Home Owner Grant
The Federal Government's First Home Owner Grant scheme provides eligible first home owners with a non-means tested, one-off payment. The grant amount is $7,000 for first home buyers or those who build a new home or purchase a newly constructed home. This is regardless of the purchase price of the property.

A State Government payment of up to $4000 is also available for eligible first home buyers where the purchase is less than $450,000.

Your lender, solicitor or conveyancer may arrange the First Home Owner Grant applications for you. Eligibility criteria and application forms are also available from the Revenue SA website Revenue SA

Other incentives
From time to time, State and/or Commonwealth Governments offer incentives. These may be in the form of tax breaks on savings accounts, various measures for low income earners and so on. Contact Revenue SA or Housing SA for further information.

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