Applying For Your First Loan?

Purchasing your first home or investment property does not necessarily need to be an overwhelming experience. While there are many factors that need to be considered, having a good understanding of the process before you commence will place you in good stead.

Before you commence the search for your fi rst property is it always advisable to calculate your borrowing capacity by obtaining pre-approval from a preferred lender. This involves us submitting all the necessary documentation to the lender to determine how much you may be able to borrow. Final approval will however be subject to property valuations and fi nal credit approval.

To apply for pre-approval you need to not only complete an application but also provide the following information for the lender to ascertain your identity, capability to repay, fi nancial security, financial risk and ultimately your borrowing capacity.

The lender will require you to provide:

Proof of identity

  • passport
  • driver’s licence
  • Medicare card
  • Details of your previous addresses.

Confirmation of income

  • last two income tax assessment notices and group certificates
  • last three pay slips
  • confirmation of Centrelink payments
  • details of other income (eg dividends from shares).

Details of your expenses

  • your rent
  • utility bills
  • car loan repayments
  • details of any dependent children.

Details of your assets and liabilities

  • savings account statements (evidencing your deposit and capacity to save)
  • credit card statements
  • share certificates
  • details of personal loans
  • superannuation and insurance policies

If your deposit is a gift you will also need a statutory declaration confirming that the money is a gift and will not need to be repaid.

It is advisable that you collate all your personal information and collect any missing documentation. It can sometimes be a lengthy process to obtain documentation through a third party.

Once you have obtained your pre-approval and know your borrowing capacity you are ready to go ‘house hunting’. When you have found your property, made an off er within your price range, it is important to apply for fi nal approval from the lender immediately.

You will need to provide:

  • details of the property including address, number of bedrooms, bathrooms etc for the lender’s valuation,
  • the contract for sale, and
  • if the property is for investment purposes, it is advisable to obtain a rental estimate.

Once your loan is formally approved, we will arrange the mortgage documents for you to sign. We will go through the mortgage contract with you to ensure that you understand the contents.

Need help negotiating your way through this process? Remember we are always happy to help.

New Car, Are you driving your investment?

Lots of us like to drive a new car but did you know it costs around $121 per week to finance the average small car?

Many Australians have a love affair with new cars with a record 1.14 million new vehicles sold in 2013. So are you one of those Aussies who want to buy a new car as soon as the last one is paid off? If so then let’s consider these points:

  • How many of us really NEED a NEW car every 3 to 5 years?
  • How could $121 pw make a real difference to your life?
  • Did you know you could probably afford an investment property with $121 pw?
  • We know that cars depreciate in value over time and properties appreciate over time, yet we are often guilty of investing in instant gratification – such as a new car NOW – as opposed to delayed gratification – such as a more secure financial future.

Did you know that approximately 80% of Australians end up on some form of government assistance in retirement? Did you also know that ONLY 20% of Australians invest in property?

Do you think this is a coincidence? Probably not.

While many of us like to have a new car, would you consider driving your current car for a few extra years if you knew your financial situation would be improved as a result?

Just think of some of the financial advantages that could be enjoyed if you were to postpone a new car purchase. You could maybe buy some other ‘toys’ with your extra cash, have a great holiday OR you could use that extra cash to start building wealth and become part of the 20% of Australians who actually enjoy a comfortable retirement. There are many paths to building wealth and id=”mce_marker”21 pw is usually enough to get you started. Let’s have a look at just two options for using that extra cash.

Option 1: Purchase an investment property. How do the numbers work?

A quick check of the table on the next page shows $710 pw in mortgage expenses and rental income of $392 pw leaving a shortfall of $318 pw.

But didn’t I say it would cost around $121 pw? Yes, but the story doesn’t end here.

By using both depreciation on the property AND claiming your finance expenses against your income you can reap a combined tax reduction of approximately $10,000 pa!

This reduces your weekly commitment to just $126 pw. You can even claim your tax refund in advance each pay cycle to help with cash flow.

Search the ATO website for the PAYG withholding variation application for more details.

Purchase cost

Median unit price for Australian capital cities $425,954

Interest rate* 5.91%

Weekly repayments $627

Expenses

Rates (will vary between councils) $1,200 pa

Property management (based on 10% of rent) $2,038 pa

Insurance $500 pa Maintenance $600 pa

Total expenses $4,338 pa or $83.42 pw

Total weekly cost for investment property $710

Income Average weekly rent $392

Option 2: Pay off your home loan sooner.

If you are not yet ready to take the next step into the property market then why not consider paying off your mortgage even faster? If you take the median unit price in Australia of $425,954 with an interest rate of 5.91% you will be paying weekly repayments around $627. If you add the extra $121 pw to the mortgage, this will boost the repayment amount to $748 pw. Now I’m sure you can guess this will turn into some serious savings – in fact it could take up to 7 years off your mortgage and save you a whopping $127,700+ in interest over the life of the loan!

Is this food for thought?

So NOW what are you going to do when you pay off your car?

Steps to a Successful Renovation

Australians are renowned for their obsession with property, in particular renovation and DIY.

A successful renovation can be measured in many different ways, but the most important measure is that the renovation meets your needs, now and in the future. Here are some simple steps to get the most out of your renovation.

Step 1 : Determine your Future Needs:

A successful renovation needs to address not only how you want to live now, but also in the future. Take the time to think about how long you intend to stay in the property and what you need from the property during this time period. For example, a home designed for a young family may not meet the needs ofa teenage family.

Step 2 : List the Features you would like to Change in your Home:

If you are renovating with a partner this is critical to ensure you are on the same page. Your discussions should cover the ‘must do’ repair and replacement items through to the ‘nice to haves’ like decor and furnishings. It is important to list the things you love about your home that you would like to retain.

Step 3: Document your Renovation Goals:

Using the first two steps you will now be able to document your renovation goals. For maximum results this should be broken down to the specific area of the house affected, the existing problem, the new features you want and how you want to use the renovated space.

Step 4 : Find a Reputable Builder:

Talk to your friends who have completed renovations or use a reputable source such as the Housing Industry Association (www.hia.com.au). Select a builder who is well presented, punctual and reliable in the initial quote stages as this is generally a good indicator of how they will operate once the renovation begins.

Step 5 : Source the Right Finance:

There are many ways you can elect to finance your renovation. Options range from taking out a personal loan or line of credit, refinancing your existing home loan or utilising the equity you have built up in your home. All these options have advantages and disadvantages and the best method will depend on your personal circumstances and your existing financial arrangements.

By following these simple steps you are closer to ensuring that your renovation runs smoothly and results in a home that improves your quality of life now and in the future.

Superannuation – Out of Sight, Out of Mind

Outside of ownership of your home your superannuation account is generally one of your largest investments.

So why is it that a large majority of Australians fail to manage this important investment?

Is it because your employer is usually the one making regular contributions and therefore it is out of mind? Or perhaps it’s because it will be a long time before you need to access the funds?

Whatever the reason it’s not surprising that a survey of baby boomers in 20151 revealed 35% were ‘completely unprepared’ for retirement, 51% were ‘somewhat prepared’ and only 14% were ‘financially prepared’.

It’s astonishing the percentage of Australians that realise – often when it’s too late – that they won’t have sufficient savings to pay off their mortgage or fund their retirement.

Most of us can expect to spend 20+ years in retirement but for many of us the money will run out after 10 years.

It is never too early to start preparing financially for your retirement! This means taking charge of your financial security sooner rather than later.

Your super account

In July 2005 new laws were introduced that allowed you to take a greater interest in the performance of your superannuation (super) fund. These changes allow you to have control over where your super contributions are deposited.

Most super funds now have a number of investment options with different risk profiles depending on your stage of life and tolerance for risk. Each fund will perform differently over time. Regardless of the fund you choose you will need to regularly review your fund’s performance and risk profile to determine if they are still appropriate for your personal circumstances as these will change over time.

Remember, your super is YOUR money!

Quick quiz…. Tick the box if you can answer these questions.

  • How much do you currently have in your super account?
  • Do you have more than one account? If so, how many?
  • What investment options do you have for your super?
  • What fees apply? How much are your total annual fees?
  • How much does your employer contribute annually?
  • Do you have insurance cover included with your super? If so, what type(s)?
  • How much are you paying for this insurance and what is the level of cover?
  • When can you access your super?

How did you go? If you could answer all or most of these go to the top of the class!

In fact, 6 out of 10 people don’t know how much super they have AND 45% of working Australians have more than one super account.

Does that sound a little more like you?

There is no time like NOW to take a greater interest in your super.

In reality, the earlier you engage with your super the more you may be able to improve your financial future.

Other options

Taking a more active interest in your super is only one of the many steps you could take towards achieving financial independence.

Establishing a household budget that creates surplus funds for investment is always the first step.

Your surplus funds could then be applied to a range of options from starting to pay down your mortgage, investing in an additional property to making extra contributions to your super.

Remember you don’t always need to pay off your home before you buy an investment property! You may use the equity in your home as security if you are able to demonstrate a capacity to service the loan.

Take charge of your own financial security NOW! After all, if you’re not willing to take responsibility who will?

No Leave, No Life

Finding Balance in a Busy World…

We Aussies enjoy taking annual leave, so why is it that so many of us have accumulated a large amount of leave that is screaming out to be used?

Are employers being too tough and refraining from approving leave? Or are we letting everyday life and work commitments get in the way of planning for longer term events?

Maybe the cost of a holiday is simply becoming too expensive to justify spending our hard earned cash?

It is staggering that the 7.7 million1 full time workers in Australia have accumulated 123,510,0002 days of annual leave. That’s an average of just under 21 days – or almost a calendar month – that those workers could be spending relaxing and doing as they please!

Even more interesting is that 28% of the total workforce has over 5 weeks of accrued annual leave.

Stop and look up

Rather than trying to understand why people are NOT taking leave perhaps we should look at the benefits of taking leave?

Recent research3 indicates changes in career and jobs aren’t always triggered by events that occur at work. Surprisingly, personal events such as major birthdays, reunions and holidays ranked quite high on the list.

The theory is that these personal events often cause people to rethink their life and what they are doing. This was particularly true where they spent these times with other people and had the opportunity to make a comparison. In other words until people take some time out of their everyday life (going to work) they don’t have time to assess what they are doing – and why.

Recharge

According to the ABS around 5 million full time workers regularly work more than 40 hours per week. That’s 65% of us! So it’s not surprising that people who DO NOT take leave tend to be unhappier at work and have higher stress levels.

On the other hand those that DO take leave not only tend to be happier but are also more productive.

It’s been shown that there is a strong correlation between workers’ levels of happiness and their ability to operate at peak performance. Don’t forget, when you’re operating at peak performance you are more likely to be considered for that promotion or pay rise.

Finding the balance

So why is it that so many of us don’t always take our annual leave?

We need to find a balance between the cost of taking annual leave and the benefits that result from taking annual leave.

Most importantly we should always strive to live within our means. An extravagant overseas holiday or that trip of a lifetime may deliver instant happiness, however this happiness may be short lived if we return with a mountain of debt that holds us back and causes stress well into the future.

Let’s consider… Is there a return on investment from taking annual leave? A relaxed break on annual leave may allow you the time to contemplate:

• your next career – that could lead to improved happiness and higher earnings,

• your financial objectives and how you might achieve them through future investments, or

• lifestyle choices, including where you really want to live.

Taking Leave is Important!

Aim not to be in the 50% of workers with more than 4 weeks of accured leave!. Taking your leave regularly allows you to recharges the batteries and take the time to consider where you are and what you want to be doing.