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As property prices continue to rise, purchasing in a centrally-located or sought-after area is out of reach for the average working millennial. Instead, many are opting to rent rather than buy as it means not having to compromise their inner city or beachside lifestyle. But for those who are still eager to enter the market, there is a way to get the best of both worlds.

‘Rentvesting’ is the term coined for when you purchase a property for investment purposes in an affordable location and continue to live and rent in the area of your choice. An example of how the market is evolving, it is a wealth creation strategy that is popular among the younger generation due to the flexibility it offers in comparison to being an owner-occupier.

“Millennials aren’t interested in purchasing a property in the outer suburbs and then having to commute into the CBD,” says an MFAA accredited finance broker. “Rentvesting allows your rental income to cover the mortgage expenses, so you can keep living the lifestyle you want without it costing you any money.”

For this strategy to work, you’ve got to be a good saver and there needs to be a focus on delayed gratification, advises the broker. “It’s all about living within your means. Don’t spend big at the start while you’re building it up. Step away from the mentality of negative gearing and tax minimisation and buy neutrally, or ideally, a positively geared property as this provides higher rental yields.”

A recent Mortgage Choice survey highlighted an increase in ‘rentvesting’ from 21 per cent of investors to 37 per cent over the past twelve months alone. But while this strategy may appear ideal to many, it’s not suited to everybody.

“It’s still a foreign way of thinking,” says the finance broker. “In the past, the great Australian dream was to buy a home on a quarter acre block and then do everything you can to pay that down as fast as possible in the hope of living debt-free. ‘Rentvesting’ is quite the opposite. It says we’re okay with good debt as long as we stick to our budget and keep using the money to invest further. You’ve got to have an open mind and be comfortable with debt.”

To ensure you have the means to make ‘rentvesting’ work for you, contact us for advice on good debt and other strategies that will allow you to maintain your current lifestyle.

 

 


Reducing the life of your loan isn’t difficult; there are many simple things you can do to cut years off your mortgage. Here are some tips that will help you be mortgage-free sooner than planned.
Small extra repayments
One of the most obvious ways to pay off your home loan quicker is to make extra repayments. Depositing lump sums, such as a tax return or work bonus, will always be beneficial, however it doesn’t always take large amounts or windfalls to make a substantial difference – planning for regular, small cash injections can have a great impact over the life of a loan.
“Let’s say we give an extra $50 a fortnight on a $500,000 loan, that saves you $32,000 of interest over the life of the loan which in turn will save you just over two years,” explains the finance broker. “That’s only $25 a week.”
Switch your payment intervals
If you find that you don’t have the discipline to make extra repayments, then simply switching your payment structure can also help save years off your mortgage, as well as simplifying your finances if you are paid fortnightly.
“Because there are 12 months in a year but 13 four-week cycles, by switching your payment intervals from monthly to fortnightly, you are essentially paying off an extra month per year,” says the finance broker.
Make sure you have the right type of loan
Ensuring your loan allows extra repayments without penalty will let you to make the most of bonuses or funnel small extra payments to reduce the loan principle more quickly, saving on interest immediately, while an offset account will use your savings or living expenses to reduce your principal, while still allowing you to access these funds from a transaction account.
“I’ve set the mortgage on my investment as interest-only but I make the principle and interest payment equivalent by putting surplus rental income into an offset account,” says the finance broker. “Because interest is calculated daily but charged monthly, any money sitting in the account will help reduce the loan.”
Although you may have to pay extra fees for the offset or redraw account, these may well be lower amounts than the interest saved. Talking to a finance broker is the easiest way to work out whether this option is financially sound.
Paying off your home loan faster isn’t difficult; however, it does require financial discipline and expertise in ensuring the right loan features are in place. Contact us so we can match you to your perfect loan.

 

 

 

 

How to speed up your home loan approval

Asking how long it takes to get a loan approved is like asking how long a piece of string is. Every application is unique, so the time between your first contact with your bank or broker and approval can never be predetermined. There are, however, some things you can do to help hurry your application along.

Although very rare, same-day loan approvals are possible depending on the lender’s criteria, the complexity of the deal and turnaround time. “In my experience, this has been possible when the client’s lending position is straightforward in terms of employment, asset and liability position,” says an MFAA accredited finance broker. “Also, if a valuation wasn’t required due to a low Loan to Valuation Ratio (LVR) and both parties were happy with the contract price.”

If you’re not prepared, it could take up to a month. The most common reason for a delay is a lender’s turnaround time to assessment, especially when some lenders have competitive offerings and experience larger application volumes, but a lack of preparation can cause this delay to snowball. “When there are such delays and then a lender must organise a valuation or request further information, this can lead to a lengthy process time,” the broker says.

A good finance broker will help you take all the necessary steps to ensure fast home loan approval, but there are simple ways you can help hurry the process along before your first meeting with your broker.

Disclose all information

To avoid back and forth requests, which can delay your application, ensure your lender has a thorough understanding of you as an applicant including appropriate identification of all borrowers. Provide all the supporting and necessary documents upfront to your broker and convey as much detail as possible in relation to your requirements and objectives and have good, current information on your financial position. The broker will need to not only have your full financial details but will also need to take reasonable steps to verify it.

Skip the valuation queue

Not all applications require a valuation, depending on the property and lending institution, and forgoing this step can save a considerable amount of time. You can also save time by having a valuation completed prior to your application, if it’s accepted by your chosen lender – but check with your broker first.

To ensure your application avoids any unnecessary delays, speak to your finance broker or Contact Us for more information.

When selling one property and purchasing another, the funds from the sale may not be available in time to use for the purchase deposit.  There are typically two options in this scenario: a bridging loan and a deposit bond.

Bridging loan

A bridging loan is a short term home loan designed to allow you to initiate the purchase of a property before you have sold your previous one.

Loan terms are often between six and 12 months and bridging loans generally have a higher interest rate than traditional home loans.

This can be a great option but carries some risk. It’s important to know that you will be able to make the repayments even in a worst-case scenario where your old house doesn’t sell as quickly as you’d hoped or where property values may change unexpectedly.

It’s important to talk to a broker and ensure that you have the capacity to service the loan for the period of time required.

Deposit bond

A deposit bond is a tool that, upon agreement with a vendor, can replace the requirement of a cash deposit when purchasing a property.

This can be a relatively cheap method of initiating the purchase of a property usually without the need to liquidate your other assets.  The cost of a bond can vary depending on transaction complexity and the term being sought.  In a simple transaction, it is likely to be approximately 1.3% of the amount of the deposit.  For example, for a deposit guarantee to the value of 10% of a property price for an individual purchasing an established property in NSW and repaying that guarantee within 6 months on a $50k deposit for a property purchase of $500k, the fee will be about $650.*

A deposit bond is issued by an insurer to the vendor of the property for either the full or partial deposit required.  At settlement, the purchaser must pay the full purchase price including the amount of deposit.  At this point, the deposit bond becomes void.

If the purchaser fails to complete the purchase of the property, the vendor can give the deposit bond to the insurer who will provide them the entire value of the deposit bond.

The insurer will then seek reimbursement of the deposit bond from the purchaser.

Deposit bonds are generally a fair bit cheaper than a short-term loan, but it’s important to talk to a mortgage broker to compare the two, taking into account your requirements and objectives and your financial situation.

Make sure you speak to your Finance Broker or Contact Us discuss which option is right for you.

*this is an estimate

Is the key to saving a home deposit as simple as giving up smashed avo toast for breakfast? Well not quite, but spending less does make a difference.

On top of a budget, a savings plan and strategies such as a high-interest savings account, an effective way to save is to reduce or eliminate expenses.

Start by understanding your spend

It can be easy to lose track of how you’re spending money, especially due to cashless payments and credit cards.

Many online banking systems include tools to categorise debits and make a budget – take advantage of them. Or download an app that helps you track your personal expenses on the go, like ASIC’s TrackMySPEND.

Find savings in the essentials

Some costs can’t be avoided – but many everyday expenses can be reduced. For example, you could:

  • Move in with your parents/relatives, or move into a cheaper rental or share house (short-term discomfort can pay off in the long term).
  • Implement tactics like meal planning, making grocery lists and buying in bulk to save money on food. Set aside a budget for eating out/take-away and stick to it.
  • Shop around to reduce your regular bills – you may get better value if you switch, or tell current providers you intend to switch. Seek discounts for taking out multiple policies with one insurer.
  • Use the car less: take public transport; carpool with colleagues; or try walking or riding. You’ll be amazed at how quickly it all adds up to savings.

Make sure you’re paying off debts or credit cards completely each month or as much as possible, to avoid the added expense of paying interest.

Reduce common overspending

If you spend excessively on things like buying clothes, going out or expensive hobbies, it may be unrealistic to cut the expense entirely. Set a weekly or monthly limit and reduce that limit over time.

A survey of more than 1000 Australians showed that 73 per cent have a problem with overspending. In particular, people tend to go overboard when Christmas rolls around.

To reduce gift expenses, be like Santa: make a list (and a budget). Buy only planned items within your allocated budget – then stop! Ask your family for support; it’s easier to put a cap on gift values if everyone else does too.

Another common way Aussies overspend is on holidays. CommBank research has shown that a third of holidaymakers spent more on their trip than planned. Do your research and set a daily budget.

Costs that could be eliminated

Look for opportunities to eliminate costs. Cancel unused services. Update your internet or mobile plans if you’re always paying for excess data.

Ask yourself: are you really using that gym membership? Are you getting value from your subscriptions? Remember, every wasted dollar is money you could be spending on your own home.

Purchasing a property is a thrilling yet nerve-wracking experience, which is why it can be handy to surround yourself with a network of support and expertise. Here are the different parties who may be involved in your home-buying process and how you can use this valuable knowledge base to answer your questions.

Real estate agent

Unless you’re working with a private vendor, meeting a real estate agent is inevitable when it comes to purchasing a property. Hired by the vendor, or seller, their role is to market and communicate about the property, advise on preparing it for sale and negotiate with potential buyers.

Insurance companies

Risk management is vital in such a high-value purchase and long-term financial commitment. Insurance, including mortgage protection and property insurance, will help you avoid being hit with a major financial burden should anything not go according to plan. Many finance brokers can deal with insurance as well or will recommend an insurance broker who can.

Conveyancer

The legal aspect of a property purchase is taken care by a licensed and qualified conveyancer. If they are a solicitor, they can also provide legal advice. Their role is toprepare the documents to ensure that transfer of ownership of the property has met the legal requirements in your state or territory.

Valuer

Knowing the value of a property is a vital factor in a loan application, so a valuer can play a huge role in the home-buying process. A lender will often engage an impartial valuer to ensure that the buyer and the lender will know what loan amount may be warranted. The value is based on the property and location, as well as the current market.

Pest and building inspectors

Without the services of pest and building inspectors, a homebuyer’s worst nightmare – finding out the property they have bought requires costly renovations or pest treatment – may come true. Organising a pre-purchase inspection is essential. If the property requires structural, wiring or repair work, these inspections can stop you from making a costly mistake or, if the property is still your dream home but just needs a little work, can provide a valuable bargaining chip.

Lenders

If you need money to make your purchase, you will need a lender, whether it’s a major bank, a second-tier or non-major, or a specialist lender for more difficult funding proposals.

Finance broker

Brokers act as a liaison between you and the lender. They will find out about your finances and your property goals, and search for and negotiate a loan product that matches your needs. Not only will they do the legwork and ensure your loan is processed as smoothly as possible, but they are there to guide you throughout the entire process.

For quality service and support throughout your home-buying experience, ensure your professionals are accredited with peak national industry bodies such as the MFAA. MFAA accredited finance brokers are held to the highest industry qualification, experience and ethical standards. Contact us for more information.

Why does my broker ask for so much documentation?

No one likes paperwork; however, providing your broker with the right documentation will save you time and money.

What information will your broker ask you to provide?

When you ask to enlist the services of a broker, they will probably ask you for the following documentation:

  • Identification, including photo ID such as driver licence
  • Income verification documentation such as recent payslips
  • Birth certificate, if you are applying for a government funded first home owner grant

Depending on the lender or bank you would like your broker to apply to for your loan, you may also be asked to provide:

  • A recent PAYG summary
  • A notice of assessment from the Australian Taxation Office
  • Tax returns
  • Proof of your contribution toward the transaction, such as savings or deposit statements
  • Purchase contracts for a home loan, including building contracts, or plans if building

Why is this information important?

While it may seem that you are climbing the Mount Everest of paperwork, a broker will ask for all of this to ensure they are protecting you and that they get the best possible deal.

“Gathering various forms of documentation allows brokers to do a fact find, which is an important part of the loan process,” explains Mortgage Consultant Justin Lidgerwood from Mortgage and Finance Solutions.

This is the process by which brokers ensure that they match a client with a loan that helps them achieve their property goals, whether that is buying a home to live in, one to renovate and sell, or a long-term investment, and one that matches their financial positions. “Brokers do not want to put prospective loan clients into a situation where they cannot afford to repay their new loan commitments,” says Lidgerwood.

Will a bank ask for the same documentation?

If you apply for a loan with a bank that you do not currently have an account with, they will require much of the same information as a broker would.

Although borrowers may be able to avoid the paperwork by applying for a loan with their current bank (which will already have a lot of information on file), this means being constrained by the products that bank offers and risking missing out on a great deal.

“The benefit a broker has compared to an individual bank, is the broker has access to many banks and lenders across Australia,” Lidgerwood says. “Lending policies and pricing vary greatly across the lending market and some clients do not realise this, so why waste time going direct to a bank?”

It is also likely to mean missing out on having a broker match a loan to longer-term goals, rather than just a purchase price and interest rate.

Saving you time and money

Lidgerwood says a broker can usually tell a client within 10 minutes whether they have a chance of obtaining loan approval.

“Brokers have access to bank loan affordability and serviceability calculators, which show clients’ potential borrowing capacity,” he explains. “Depending on the size of the funding required, and the loan to valuation ratio, these days the banks are extremely competitive, and we can quite often get a better price deal than advertised.”

If a client is not yet in a position to obtain a loan or has a credit issue on their file, such as a default, having a broker on-side can be invaluable.

In a nutshell, a broker will shop around to get the best possible deal for you, their client.

MFAA accredited finance brokers are the experts in finding you a loan that matches not just your finances, but your future plans.

How to speed up your home loan approval

Asking how long it takes to get a loan approved is like asking how long a piece of string is. Every application is unique, so the time between your first contact with your bank or broker and approval can never be predetermined. There are, however, some things you can do to help hurry your application along.

Although very rare, same-day loan approvals are possible depending on the lender’s criteria, the complexity of the deal and turnaround time. “In my experience, this has been possible when the client’s lending position is straightforward in terms of employment, asset and liability position,” says a Mortgage & Finance Association of Australia (MFAA) accredited finance broker. “Also, if a valuation wasn’t required due to a low Loan to Value Ratio (LVR) and both parties were happy with the contract price.”

If you’re not prepared, it could take up to a month. The most common reason for a delay is a lender’s turnaround time to assessment, especially when some lenders have competitive offerings and experience larger application volumes, but a lack of preparation can cause this delay to snowball. “When there are such delays and then a lender must organise a valuation or request further information, this can lead to a lengthy process time,” the broker says.

A good finance broker will help you take all the necessary steps to ensure fast home loan approval, but there are simple ways you can help hurry the process along before your first meeting with your broker.

Disclose all information

To avoid back and forth requests, which can delay your application, ensure your lender has a thorough understanding of you as an applicant including appropriate identification of all borrowers. Provide all the supporting and necessary documents upfront to your broker, and convey as much detail as possible in relation to your requirements and objectives and have good, current information on your financial position. The broker will need to not only have your full financial details but will also need to take reasonable steps to verify it.

Skip the valuation queue

Not all applications require a valuation, depending on the property and lending institution, and forgoing this step can save a considerable amount of time. You can also save time by having a valuation completed prior to your application, some lenders will arrange up front valuations – check with your broker.

To ensure your application avoids any unnecessary delays, speak to an MFAA accredited finance broker.

A conveyancer is a solicitor, but just deals with property, right? Wrong. The two are different, and it is important to have the right one on your team, to avoid paying too much while still getting the advice you need.

Buying property is one of the biggest decisions most of us will make in our lifetime – it’s something you want to get right.

Every Australian state and territory has different laws, forms, regulations, and taxes associated with purchasing property, so having either a solicitor or a conveyancer will help the whole process run smoothly.

A property purchase is one of the biggest financial commitments a person can make. It is therefore important to have professional advice about what you are buying.

Solicitors and conveyancers are familiar with all the procedures and, while it may seem to be just paperwork, when you are not familiar with all the procedures it can be very time consuming.

For a straightforward property purchase, a conveyancer can do the job. Their main responsibilities include giving advice and information about the sale of property, preparing documentation and conducting any settlement processes.

Although there is a licensing process for conveyancers, they do not have to be legal professionals. As a result, they are cheaper to hire. However, they can only provide information relating to property, so if you have additional legal questions, you might have to search elsewhere.

Conveyancers must cease to act for a person as soon as the matter moves beyond conveyancing. When this happens, the conveyancer must refer you to a solicitor for advice.

While conveyancers are limited to advising on your property purchase, solicitors can provide you with a wide range of legal advice in addition to your conveyancing needs, and may be necessary if your property transaction isn’t straightforward.

If there are other matters that affect the transaction like family law, asset protection, asset structuring, tax law or estate planning, you will not be able to receive advice from a conveyancer. If things get complicated with a conveyancer you will need to get a solicitor’s advice.

Solicitors are more expensive, but the investment may be worthwhile if you anticipate any legal issues – having this established relationship with a solicitor means you won’t have to scramble for one later.

Contact us at Glenavon Finance and we will be able to refer you to a conveyancer or solicitor with the experience and expertise you need.

Purchasing a property is a thrilling yet nerve-wracking experience, which is why it can be handy to surround yourself with a network of support and expertise. Here are the different parties who may be involved in your home-buying process and how you can use this valuable knowledge base to answer your questions.

Real estate agent

Unless you’re working with a private vendor, meeting a real estate agent is inevitable when it comes to purchasing a property. Hired by the vendor, or seller, their role is to market and communicate about the property, advise on preparing it for sale and negotiate with potential buyers.

Insurance companies

Risk management is vital in such a high-value purchase and long-term financial commitment. Insurance, including mortgage protection and property insurance, will help you avoid being hit with a major financial burden should anything not go according to plan. Many finance brokers can deal with insurance as well or will recommend an insurance broker who can.

Conveyancer

The legal aspect of a property purchase is taken care by a licensed and qualified conveyancer. If they are a solicitor, they can also provide legal advice. Their role is to prepare the documents to ensure that transfer of ownership of the property has met the legal requirements in your state or territory.

Valuer

Knowing the value of a property is a vital factor in a loan application, so a valuer can play a huge role in the home-buying process. A lender will often engage an impartial valuer to ensure that the buyer and the lender will know what loan amount may be warranted. The value is based on the property and location, as well as the current market.

Pest and building inspectors

Without the services of pest and building inspectors, a homebuyer’s worst nightmare – finding out the property they have bought requires costly renovations or pest treatment – may come true. Organising a pre-purchase inspection is essential. If the property requires structural, wiring or repair work, these inspections can stop you from making a costly mistake or, if the property is still your dream home but just needs a little work, can provide a valuable bargaining chip.

Lenders

If you need money to make your purchase, you will need a lender, whether it’s a major bank, a second-tier or non-major, or a specialist lender for more difficult funding proposals.

Finance broker

Brokers act as a liaison between you and the lender. They will find out about your finances and your property goals, and search for and negotiate a loan product that matches your needs. Not only will they do the legwork and ensure your loan is processed as smoothly as possible, but they are there to guide you throughout the entire process.

For quality service and support throughout your home-buying experience, ensure your professionals are accredited with peak national industry bodies such as the MFAA. As a Full Member of the MFAA we are held to the highest industry qualifications, experience, and ethical standards. Contact Us here at Glenavon Finance for more information.


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