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The benefits of using a loan calculator when borrowing in Australia

Check out Austral's comprehensive loan calculator tools

Most people in Australia, while keen to purchase a first home or investment property, are often unsure about how much they are able to borrow. A loan calculator is a quick and easy way to determine your borrowing capacity in Australia. A loan calculator will generally be quite easy to use and will provide you with the amount you can borrow and the monthly interest compounding and monthly payments against that loan amount.

The other benefit of a loan calculator is its ability to determine how much faster you can repay your loan if you are in a position to either:
(i) make a regular additional payment – for example you might increase the minimum repayment required under your mortgage by $100 per month. The loan calculator will show you how this can significantly reduce the term of your loan.
(ii) make a one-off lump sum payment – for example you may receive a bonus from your employer, an inheritance or gift of money and decide to apply this to reduce your outstanding loan balance. What impact will this have on the loan term? A loan calculator will give you the answer.

A loan calculator offers further advantages in that if it can provide you with calculations for different loan terms. In Australia, if you want to ascertain how much you would need to pay, to pay off your loan in say 15 years as opposed to the standard 25 or 30 year loan term, then you can easily change the term of the loan in the loan calculator and within seconds the loan calculator will provide you with the revised monthly instalment.

Recently, borrowers in Australia have been concerned about the effect that a rise in interest rates might have on their ability to make their loan repayments. Again the loan calculator allows you to enter a number of interest rates and calculates the amount by which your monthly instalment will increase. For example if you settle your loan when interest rates are at 7.75% p.a. what will be the impact of a Reserve Bank increase of 0.25%? By entering the rate as 8% in the loan calculator you will quickly ascertain how much more you will be required to pay each month.

A good loan calculator will also enable you to enter the frequency of your loan repayment and again show you how this will reduce your loan term. For example while most loan repayments in Australia are on a monthly basis you can choose to repay your loan on a weekly of fortnightly basis. A loan calculator will calculate the amount of the weekly or fortnightly payment for you.

By exploring the various fields within a loan calculator you can quickly determine how much you can borrow in Australia, the impact that additional repayments or rate changes will have on your loan and the effect of changing the frequency of your loan repayments.

A good loan calculator can provide you with a significant amount of information by which you can not only determine how much you can borrow in Australia but also how you can budget to repay your home loan faster.

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Austral is a member of the Mortgage & Finance Association of Australia (formerly MIAA), the professional body for the mortgage industry.

PH: 02 9299 1833 / FAX: 02 9299 1874

TODAY: Saturday, 4th July, 2009

Private Ruling Authorisation Number 81797 - APRIL 2008
April 2008 Private Ruling Authorisation Number 81797 http://www.ato.gov.au/rba/content.asp?doc=/rba/content/81797.htm Facts: The taxpayer sought to claim as a deduction the capitalised interest on additional borrowings used to meet the shortfall between the rental income on his investment property and the interest, rates and maintenance costs he paid in relation to the property. The taxpayer advised the ATO that he did not want to use his personal income to repay his private home loan debt or reinvest in other income-producing assests.

PUBLIC TAX DETERMINATION DT2008/27
DECEMBER 2008 Public Tax Determination TD2008/27 http://law.ato.gov.au/atolaw/view.htm?locid=TXD (then follow the prompts) TD 2008/27 has now clarified the position for the public generally. The factors that will determine the deductibility of interest are:

My Choice
Austral has recently expanded its product offering through its My Choice loan initiative. My Choice provides borrowers with access to a wide range of lenders and loan products for residential, commercial and equipment finance, so no matter what your need our friendly and experienced staff can assist you.

NAB BOSS TO IGNORE RATE CUTS - APRIL 2009
RESERVE Bank interest rate cuts will no longer have any significant influence on home mortgage rates, a bank chief said yesterday.

WEALTH MAXIMISER - INVESTOR ASSIST UPDATE - JUNE 2008
The ATO has recently published an edited version of a Private Ruling on its website: http://www.ato.gov.au/rba/content.asp?doc=/rba/content/81797.htm A taxpayer and client of Austral Mortgage, applied for the private ruling to seek confirmation from the ATO that if there was a shortfall between his investment income and his investment outgoings then that shortfall could be capitalised under the home and investment loan & line of credit structure noted in his application.

WEALTH MAXIMISER UPDATE - MAY 2008
Ever since the High Court decision in Hart's case, taxpayers have been seeking clarity from the ATO on the deductibility of capitalised interest in certain loan structures. On 16th April 2008 a favourable Private Ruling issued to an Austral client that provides insight into the ATO's current thinking on the subject.

WEALTH MAXIMISER UPDATE - FEBRUARY 2008
Wealth Maximiser Update 12th February 2008 - We have advice from the ATO that it is well advanced on a binding Tax Determination regarding the deductibility of capitalised interest on a line of credit facility. Borrowers with both a home loan and an investment loan should consider including a capitalising line of credit within their loan structure or at least ascertaining from their lender that they could access such a facility by way of a simple variation of their existing mortgage.

Trans Tasman Finance
Did you know that Austral has a wholly owned subsidiary, Gem Home Loans Limited, in Auckland NZ - we are able to assist with organising mortgage finance for you should you be considering buying property in NZ.

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