12 Oct 2015
When was the last time you looked closely at your loan, the progress you are making on paying it off and how it compares to others in the market? Analysing your mortgage could mean savings for you, as well as the opportunity to pay it off more quickly, invest in other assets or reach financial freedom sooner.
Make smaller payments, more often
To cut the size of your payments, make more of them. This could even see you pay off your loan faster, and therefore pay less interest overall.
If you pay your mortgage monthly, consider changing to fortnightly repayments. For example, if your mortgage equates to $2400 a month, cut this in half and pay $1200 each fortnight. As well as having more manageable payments to make, by the end of the year you will have paid off $31,200 rather than $28,800.
Pay just a little bit extra
A minimum repayment is just that – for most loans there is no reason you can’t pay more, whether here and there or regularly.
By rounding up to a full number or contributing an extra $100 or even $10, you’ll significantly reduce your mortgage. It may also be worth considering putting all bonuses, tax returns and gifts into your mortgage.
Don’t decrease repayments when interest rates fall
Even if your repayments are lowered when fees and interest rates decrease, it doesn’t mean that’s all you have to pay and, by keeping your repayments at the same level when interest rates are lower, you will pay down more of the principle with each payment and make speedy progress on your loan.
If you can, use an offset account. A mortgage offset account is linked to your loan and the interest payable on the loan from month to month is calculated by deducting what is in your offset account from your current loan. For example, if your mortgage is $500,000 and your offset account has $10,000 in it, you will only pay interest on the remaining $490,000.
An offset account will save interest while still giving you access to your savings. It also means investors can preserve the tax deductibility of the mortgage.
Find a better deal
Ultimately, your mortgage needs to suit you and your circumstances, or you will wind up paying too much. If you think your current loan no longer matches your situation, speak to your finance broker. They will be able to find the right product for you, as well as negotiating appropriate rates on it.
Of course, it is important to make sure that your lender doesn’t charge fees for extra repayments, refinancing, or any other steps you take in an attempt to save on your loan. Your finance broker will be able to provide details and make sure you have a loan that lets you pay down your balance sooner.
If you would like to find out more about paying your mortgage off sooner contact us here – we have the expertise to make sure you aren’t paying too much and are in a loan that suits you.
06 Oct 2015
During the busiest time of year for property markets around the country, the Reserve Bank of Australia has decided to keep the official cash rate on hold at 2.0 per cent during its October meeting today.
Analysts were expecting the RBA to keep rates on hold at today’s meeting. Factors influencing the RBA’s decision to keep rates on hold include an easing of the Australian dollar, which has fallen by 14 US cents since the start of the year, and some volatility in global markets.
However a further drop in the Australian dollar would better support our export markets. Another rate cut could push the dollar down even further and help to drive tourism and employment growth, so many analysts are looking to see another rate cut before the end of the year.
The nation’s cash rate currently stands at a record low of just 2 per cent after the RBA slashed the rate by 25 basis points in both February and May this year. Now that property value growth in Sydney and Melbourne is starting to slow somewhat following APRA’s increased supervision of property investment borrowing, many analysts are speculating about a further cut of 25 basis points at the November meeting – we’ll have to wait and see!
There has been a recent drop to Owner Occupier home loan rates and we encourage you to get in touch now for a home loan health check if you haven’t done so in a while. We also have access to some of the market’s most competitive rates for property investment loans, so please do give us a call today.
24 Sep 2015
Before you take the leap into holiday-home investment, it is essential that you consider all angles. This means taking your heart out of the equation and giving thought to rental returns.
When deciding whether or not to buy a house or unit, you’d be best served to consider location first. In fact, location has a great deal to do with the success of your investment property if you will be renting it as a holiday destination.
“Sometimes people are torn between where they would prefer to holiday as opposed to looking at the logistics of what will rent better, and what niche markets they can target to provide better rental returns,” says Accom Holidays Director, Brent Pilkington.
You want to make sure that your property location matches up with market demand. Things to consider are travel time and expense, rental rates, as well as local attractions and activities.
“The best rental return properties on the coast are in busier suburbs, but often holiday rental buyers are looking at some of the peripheral suburbs that are quieter,” explains Pilkington.
“That’s when it’s ruled by their heart rather than their head, and they can end up with a property that may be popular through peak periods, but that delivers much more seasonal rent return.”
Pilkington suggests taking occasional markets into consideration too. “I think the key thing is to choose areas that are not just holiday locations. Somewhere that has other things going on besides holidays. This means that when it’s not the holiday season, there are still other reasons for people to visit the area.”
Once you’ve researched the options and decided on your holiday home you probably need advice from an expert in financing. Contact us here to find out more.
When taking the plunge into the world of home loans and property investment, the challenge often lies in knowing which expert to approach for help. Mortgage brokers and financial planners, although similar in their professional outlook, cater to different financial endeavours.
Mortgage brokers are qualified and must be either licensed or appointed to act as loan advisers. They have in-depth knowledge of loans and options suitable for a range of different financial situations. They negotiate with lenders to arrange loans and help manage the process through to settlement.
“When it comes to talking about a client’s debt structure or interest rates, or the best way to set up a loan, it’s really something that needs to be done by a mortgage broker who is qualified to give credit advice,” says Luke Mellar, a lending specialist at Shadforth Financial Group.
Financial planners, meanwhile, assist with anticipating and managing longstanding financial outlook. They help sort through and select options for investment and insurance, with attention paid to retirement planning, estate planning and investment analysis.
“Planners take care of more of the long-term, wealth-creation strategy, as well as super and life insurance, and other sorts of wealth protection insurances,” Mellar says.
A financial planner’s work is wide-reaching and important to your long-term financial health and stability, options relating to loans and refinancing can only be recommended by a qualified broker authorised to do so.
There are some situations where it would be best to include both types of financial professional. For instance, if your broker is helping you refinance your loans in order to undertake a financial investment, a financial planner can step in to assess the best investment option for you.
“There is rarely a time when I am dealing with a client, just on the loan side of things, where I’m not thinking about how it fits with what the financial planner is talking about,” Mellar explains.
“In terms of whether the client’s choice is a viable investment strategy or whether it fits in with their long-term wealth goals, that’s something that we absolutely have to refer back to the planner to make sure that it fits in with their broader plan.”
The answer? It depends on your situation – for loans, see a broker, for investment advice, a financial planner. Of course, your broker can always refer you to a planner if you need one.
Contact Us to find out how we can help you secure property or commercial finance, and ask us to recommend a financial planner we trust.
01 Sep 2015
As we head into spring and Australian share markets experience some volatility following falls on the Chinese stock market last week, the Reserve Bank of Australia has decided to keep the official cash rate on hold at 2.0 per cent during its September meeting today.
Most analysts were expecting rates to stay on hold due to the RBA’s comments after its August meeting, indicating that it would look to maintain the status quo. However there is considerable speculation that further rate cuts may be on the cards this year, possibly in October or November.
Rate cuts in February and May this year have already brought interest rates to all-time lows. This has stimulated rapid price growth in property markets, particularly in Sydney and Melbourne, causing the RBA to be reluctant to cut rates further right now.
However, global market activity is causing an upward effect on the Australian dollar, further compromising our export markets. And despite encouraging improvements to employment figures, economic growth has been slower than expected and analysts agree that if these trends continue the RBA will have no choice other than to cut rates again.
Since the recent APRA tightening of lending rules surrounding property investment loans, there has been a great deal of activity on interest rates, both for owner-occupier and investment loans. This has stimulated lenders to come out with some very competitive rates, with great deals available across the board. To find out more, please get in touch. When interest rates are changing, it’s a great time for a home loan health check, so do give us a call today.
01 Sep 2015
Getting your mortgage application together can require quite a bit of financial scrutiny. In order to figure out your serviceability, your potential lender will look deeply into your finances.
It’s a no brainer to take your credit card debts into consideration when applying for a mortgage. But what many people do not realise is that high credit card limits will not bode well for a home loan application.
If you have a high credit limit, you also have a high debt risk in the eyes of your lender. As the logic goes, there is no stopping you from boosting your credit card limit the day after your loan is approved.
“We have to take account of 3% of the total credit card limit, regardless of what the applicant owes,” says Homeloans Ltd BDM Sally Carmichael.
“If they had a $10,000 limit but they only owe $1000, we still have to assess $300 a month and that comes directly out of their liability. It does make quite a difference.”
Even if you haven’t put a cent on your credit card for the past five years, a high credit limit will negatively affect your serviceability. The best thing you can do is lower your credit limit, or cancel that credit account entirely.
“You need to pay out your credit cards and avoid having any other debt,” says Carmichael. “You need to be able to use your full amount of income.”
For those that have to pay off their credit account before dreaming of cancelling their liability, it is imperative that you pay your debt on time, according to your minimum repayments.
The first step towards finding your new home is speaking to your local licensed mortgage & finance broker to help to sort out your finances.
With the RBA setting the official cash rate at all-time lows, it’s a good time to work out how this impacts the interest rate on your home loan and whether you are getting a good deal or not.
When the interest rate on your home loan fluctuates, it can feel as though you don’t have control of your debt. Despite being frustrating, interest rate changes are a part of every loan’s lifespan and warrant your consideration.
The interest rates that banks charge on their home loans are influenced by the Reserve Bank of Australia’s (RBA) cash rate.
The cash rate is reviewed by the RBA on a monthly basis in order to safeguard Australia’s economic stability. The cash rate is the rate charged on loans made between the RBA and your lender. This, in turn, has a very strong impact on the interest rates your lender charges you.
“The RBA supports the banks with liquidity facility,” explains Advantedge General Manager Brett Halliwell. “The RBA is a bank to the banks. The cash rate is effectively the rate at which the RBA will lend to the banks, and what the banks effectively use as a reference rate for other things.”
When the cash rate is changed by the RBA, lenders decide whether or not to mirror the new rate in the interest they charge their mortgagees.
This is entirely up to the lender in question and depends on the market and how the lender is performing at the time of the cash rate change.
“If you look at the mortgage market, specifically by itself, it is very competitive,” Halliwell says. “It is about the lender trying to get the right outcome on the deposit side of the balance sheet within the context of a very, very competitive marketplace, but recognising that a reference rate has changed and, therefore, looking at where they stand.”
Some lenders choose to shift their interest rate changes higher than the RBA’s cash rate change and, in these instances, other lenders may be offering lower interest rates than the one you currently have.
Keeping track of how your lender manages cash rate changes and where that leaves you as the person paying the interest can be time consuming, and is made more difficult by fees, charges and the flexibility offered by different loan products, which all need to be weighed alongside the interest rate.
A simple way to regain control of your interest rate is to lock it in for a period, if you believe rates are not likely to fall further. Fixed rates offer less flexibility, but more certainty.
An MFAA Accredited Finance Broker is familiar with the different lenders and their responses to cash rate changes, and can track interest rate fluctuations across a panel of lenders to ensure you’re getting a great deal.
07 Jul 2015
At its first meeting for the new financial year, the Reserve Bank of Australia (RBA) has today elected to keep the official cash rate on hold at 2.0 per cent.
The news was widely expected by analysts as the RBA waits for the economy to adjust to its rate cuts in February and May this year. With the Australian dollar already showing signs of returning to more acceptable levels, analysts are undecided whether the RBA will drop rates again this year or not. If another rate cut does occur this year, it will most likely be in November or December.
Australian property markets are traditionally slower during the winter months and this year is no exception. Auction numbers in Sydney and Melbourne are still quite high, but have eased considerably compared to May and June. Other markets have also cooled slightly, but should pick up again as spring approaches and interest rates remain at all-time lows.
The start of a new financial year is a great time to make plans and get your finances organised. Talk to us about a home-loan-health-check or your property purchasing plans for the year ahead. We’re here to help get the best rate available for you considering your personal circumstances and goals, so please give us a call today.
The Reserve Bank meets tomorrow to decide what to do with interest rates. The majority of economists are predicting no change. Many are predicting rates will be decreased once more this year. The general consensus seems to be that rates will begin to increase next year at some stage.
Many parts of the economy are still sluggish, housing construction excluded, and unemployment is still too high. The events in Greece are also leading to uncertainty which may cause the Reserve Bank to hold steady.
The government has been successful in making lenders tighten up on investment lending which will slow the market down and negate the need for Reserve Bank action.
So, with rates not looking like increasing any time soon and the likelihood of another rate cut later this year, should you fix?
Fixed rates are still quite low but not as low as some of the variable rates that are available. If you like the idea of the security and are worried about your ability to make the repayments in rates increase then a fixed rate may be for you. Just make sure you talk to your Finance Broker to make sure you are aware of the restrictions of a fixed rate.
We will know what the Reserve Bank does at 2.30 tomorrow. Interesting times ahead!
You may have heard a lot in the press lately about a crack down on investment loans by APRA. That’s the Australian Prudential Regulatory Authority and it’s their job to keep an eye on the banks and make sure they are behaving responsibly, and not about to get into financial difficulty. Not a bad idea if you think about the impact of a bank going out of business.
So what’s all the fuss about? Well, APRA are forcing the banks to limit the growth in investor loans to no more than 10%. This is under the actual growth levels with most banks. In fact in the year to March 2015 investor loans surged by 12.4% according to APRA. The worry is that this may lead to riskier loans and could also be pushing property prices up.
In response the lending industry is taking action. Some lenders are insisting on up to 20% deposit if you want to by an investment property. Previously this was up 10%. Other’s are reducing the discounts and / or increasing interest rates for investor loans.
What this means is that you should speak to your Licenced Finance Broker before you go ahead and sign up for an investment property. Even if you have the 20% deposit, which most investors do, you need to make sure you are getting a competitive interest rate.
There are still plenty options out there for investors but if your bank won’t come to the party it’s time to speak to a Licensed Finance Broker.