If you’ve been the unfortunate victim of a house fire, there are several things that you are going to have to do. If you suffered a severe house fire, one of the biggest things you are going to have to do is find a new place to live. In the immediate aftermath of a house fire, you may need to stay with friends or relatives or in a hotel or apartment. But after things settle down, you will need to look for a long-term housing solution.
Unfortunately, banks, financial institutions and even the government doesn’t care that your life’s savings, your investments, and even your retirement could be put on the line when you try to buy a home. It’s up to you to protect your wealth and the best way to do that is to learn what the banks and financial institutions are really offering.
Common Financial Instruments To Be Aware Of
Fixed interest rate home loans
If you choose to fix your interest rate, it will not change during the fixed rate period and your repayments will remain the same. Fixed rate home loans can work if variable interest rates rise, or during an uncertain economic climate. However the disadvantage is, fixed rate loans usually have limitations on extra repayments, and include exit fees should you break the fixed rate contract before the fixed rate expires.
Variable interest rate home loans
Variable interest rate loans are subject to interest rate increases and decreases in line with a benchmark or index that periodically changes. There is a choice of many variable rate loans with each offering a range of different features, benefits and of course, fees.
Split housing loans
Split or combination housing loans bring together the benefits of variable and fixed interest rates into a single loan. This feature allows you to customize your loan to reduce the effect of interest rate changes. The loan can be split in many ways; however a 60% variable and 40% fixed or 50/50 split is most common. Should you need the security of a fixed rate, but want the flexibility of a variable rate, then a split loan may provide a suitable solution.
Bridge home loans
If you have found an ideal property, but need to sell an existing property, bridge financing may be a suitable option. A bridge loan can be used (if it is not possible to achieve simultaneous settlement) to cover the finance gap between the purchase of the new property and the sale of the old one.
Line of credit
A line of credit is a flexible transactional mortgage that allows you to access your funds through a variety of methods including credit card or check. A line of credit is an option for those wishing to access the equity in an existing property for investment or renovations but usually carries higher interest rates than standard loans.
Low doc home loans
Low documentation loans are designed specifically for self-employed borrowers who are unable to disclose their income. Instead of providing tax returns or extensive financial statements, borrowers can sign a form stating their income. Low doc loans are available as fully featured home loans or lines of credit but often at higher rates than standard loans.
Ways to Pay Off or Reduce Mortgage Payments on a Fire Damaged House
Here is something else to keep in mind when you are considering how to finance your new home when you already have a mortgage payment. Most of us are familiar with the more common ways to pay off or reduce your mortgage payments on a fire damaged house:
- You could pay your mortgage off quickly with a lump sum payment
- Or you could pay fortnightly instead of monthly
- You could make higher repayments
- Or consolidate your debts
- You could abandon minor luxuries
- Or switch loans and lenders with more accommodating interest rates or packages
Additional Strategies Banks Don’t Want You to Know
Then there are strategies the finance industry doesn’t want you know! Here are some of those:
Using offset accounts to your advantage
Instead of putting your spare cash into an interest bearing account where you earn very little interest and pay tax on the interest you earn, you can transfer any spare money you have into an offset account. The additional cash works to offset the interest you are paying on your home loan.
Splitting your loan
If you are the type of investor who worries about interest rates increases but you don’t want to be tied down by a fixed loan, you can fix part of your home loan and set the balance of the loan with the variable rate of interest.
Using your existing equity
Many lenders will allow you to use a portion of your equity for investment providing you can service the new debt. As long as you are being advised and guided by a reputable finance specialist, this type of investment is usually a safe strategy to start planning your financial future.
Refinancing and investing the difference
You could refinance and reduce your monthly repayments, but rather than increasing your lifestyle or even paying down your mortgage, it is sometimes wiser to reinvest the difference.
Finding alternate lenders with cheaper rates
There are many second tier lenders who provide excellent products and rates. With a strong property market and low interest rates, there are plenty of alternate lenders with low fees and very competitive products.
A common mistake to avoid is setting and forgetting your loan
There is always the temptation to let your mortgage roll along, make your payments as they fall due and think as little about it as possible. This could be a BIG mistake.
Remember, things change so by staying up-to-date on your loan and what is happening with the market and with your own financial situation can allow you to find opportunities to save money or pay it off sooner.
The Easiest Way to Get Rid of Your Old Home With a Mortgage
One of the fastest and easiest ways to start over after a house fire is to sell your fire damaged house to We Buy Fire Damaged Houses. We have built a reputation for offering excellent prices on fire damaged properties. We also buy fire-damaged houses as is, so you don’t have to go through a lengthy repair process.
To see if your home qualifies for a free quote, fill out the short form below.