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.
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.
13 Apr 2015
The array of mortgages available helps a good credit adviser to tailor a package to suit your needs. Here are just some of the options.
With a fixed-rate loan, you know exactly how much you’ll pay per fortnight or month for the fixed period of the loan (usually one to five years).
Variable rate mortgages
Repayments can change during the life of a variable-rate loan, so you may pay more or less as interest rates rise or fall. If you’re fairly sure that rates are set to fall, this is a good option.
Principal and interest mortgages
In this mortgage, you are paying the amount lent to you plus the interest.
With interest-only, you are paying just the interest on the loan – you are not paying off any of the original principal.
Split home loan (fixed and variable)
You can choose to have part of your loan at a fixed rate and the other part can be at a variable interest rate. If rates do fall, the interest will go down on the variable part of your loan, but you aren’t taking as big a risk should rates rise.
If you have a variable-rate loan and you make extra repayments, then you can withdraw that additional money when you need to (you can’t do this on fixed-rate loans).
A land loan lets you buy a block of land without the pressure to build on it as soon as possible. Land loans are usually variable interest for up to 30 years.
For buying land, building or renovating your home, a 12-month construction loan can be the best way to go. Usually, up to 90 per cent of the property value can be borrowed.
For self-employed people, a home loan can still be arranged using differing supporting documentation that shows your ability to service a loan and might include BAS and bank statements. You self-certify your income, which will need verification. You may be able to borrow up to 80 per cent of the property’s value.
This loan type allows you to convert a portion of your residential property ‘asset’ into cash or an income stream while still allowing you to continue to live in your home.
The best person to help you tailor a loan to your needs is an MFAA credit adviser. Find one here.