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.
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.
06 Jul 2017
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.
20 Apr 2017
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.
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.
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.
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.
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.
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.
How to pay off your home loan faster and save big bucks
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 pay 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. 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.
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.
Let’s say you have set the mortgage on your investment property as interest-only but you make the principal and interest payment equivalent by putting surplus rental income into an offset account. 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 if you would like us to match you to your perfect loan.
Do you need a finance broker or a financial planner?
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. Brokers and financial planners, although similar in their professional outlook, cater to different financial endeavours.
Brokers that deal in home loans must be qualified and licensed loan advisers with in-depth knowledge of home 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.
In contrast, financial planners 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 qualified brokers.
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 help you 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,” Mellar adds.
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 Glenavon Finance to find out how we can help you secure property or commercial finance, and ask us to recommend a financial planner we trust.
20 Jan 2016
When was your last home loan health check?
Circumstances can change, leaving your home loan less suitable than it was originally. A home loan health check can reveal if you’re paying too much.
Your finance broker can do a full home loan health check for you either in person or over the phone. They will check if your loan is still competitive and still suited to your individual needs.
Having an expert do this for you can also take the stress out of the process for you. It is advisable to get this check done at least once a year, or if your circumstances change.
Questions to ask
Be aware of what you want checked. Think about the following when you speak to your broker:
- Am I paying an unreasonably high interest rate?
- Am I paying high fees?
- Am I happy with the service I receive?
- Does my loan give me the features I need?
- Am I paying for features I don’t use?
- Have my financial circumstances changed?
A home-loan health check will generally cost you nothing and could save you thousands. Your home loan features could be improved or you could find yourself with a lower interest rate. A better payment structure could also be introduced, making your repayments more manageable.
Checking the state of your current loan could uncover the possibility of taking out additional finance, which can consolidate any other debt you may have or help you purchase an investment property.
Contact us at Glenavon Finance to organise your free no obligation home loan health check.
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.
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.