First meeting with a broker

If you’re looking for a home loan but are inexperienced with finance brokers, attending your first appointment with a broker can be a nervous experience. Getting a home loan, after all, can be quite complex for a first-timer. There are lots of brokers around and there is a lot to learn. But there are many steps you can take to be confident that your appointment will be a success.

A good starting point is to familiarise yourself with the expectations of the first appointment between brokers and yourself. Your broker is very likely to ask you about your medium and long-term financial goals, the amount you want to borrow, comparisons of your home loan options and your understanding of the fees, costs and conditions attached to home loans. Knowing the direction the appointment will likely take lets you participate more actively in the conversation. This means you can better articulate your needs to your broker.

It’s also recommended that you give some consideration before the meeting to the types of questions you wish to ask your broker. Questions that can be of use include such things as loan types (such as term, repayment options and interest rate types), the types of ongoing fees attached to various loans (such as early exit, late payment, break and redraw fees) and the typical timeframe for a loan settlement.

These questions might pop into your head spontaneously during the meeting but preparing them in advance is a good way to refine them. By doing so, you are in a position to get more specific information from your broker.

It is common practice, too, for your broker to conduct a needs assessment prior to your face-to-face appointment – so you may be asked some pre-appointment questions.  To assist in answering these, you’ll need to supply information about your employment history, assets and expenses.

At the appointment it will save you time and effort to prepare and then bring the required documentation with you. This can include ID, transaction histories, tax returns, rental income statements and borrowing documents such as “contract of sale” and proof that you have the deposit for a property. It’s mandatory for brokers to maintain the confidentiality of information that you provide to them and only pass on information necessary to enable them to lodge your loan application or where required by law.

The other preparation you can make to maximise the success of your appointment is to research your broker. Many brokers provide content on their web pages and social media. This can give you a good indication of their knowledge and expertise and highlight topics to discuss with them. You can also determine if they specialise in any types of loans that match your needs, where they are located and their panel of lenders. Finally, you should investigate their qualifications. Although brokers are only required to obtain Certificate 4 qualifications, it could be argued that the better brokers hold Diploma qualifications. Finding a diploma-qualified broker will help ensure you receive the best credit advice.

Brokers can also be accredited, with accredited brokers held to higher standards. By verifying they are accredited, you can approach the meeting knowing your broker is appropriately educated, adheres to a strict and professional code of practice and is authorised to access a large range of products offered by a variety of lenders.

5 ways to fund a renovation

Considering transforming your home from ‘banal’ to ‘brilliant’, but lack the funds to support your makeover? Never fear, we’ve rounded up five home renovation finance options that could help turn your dream into reality.

1. Equity Release / Top Up Home Loan

This is probably the most common way people borrow money when they want to renovate. It involves borrowing against the current value of your home, before any value-adding renovations and in most cases allows you to obtain the funds upfront. You won’t be able to borrow the full value of your home but, without mortgage insurance, you can usually borrow up to 80 per cent of its value if you own it outright. One potential problem is that the cost of your renovations may actually be higher than the equity you have available. If you run out of funds mid-construction, and if the property is then not in sound, lock up condition, you may have an issue obtaining extra funds down the track.

2. Construction loan

If you’re planning to completely transform your home and undergo a major makeover, this may be a good option as you can spread the cost over a long period of time. You could even possibly borrow up to 90 per cent of the end value of your home and take advantage of mortgage rates which tend to be lower than credit card and personal loan rates. With a construction loan, the lender will assess the value of your home after the renovation based on the building plans and you can typically borrow against that value.  You won’t be given the full loan amount upfront, but usually in staggered amounts over a period of time – this is called ‘progress payments’ and is linked to a fixed price building contract which will be from your builder.

3. Line of credit

When you apply, you can establish a revolving credit line that you can access whenever you want to up to your approved limit. You only pay interest on the funds you use and, as you pay off your balance, you can re-borrow the unused funds without reapplying if that becomes necessary.  However, care must be taken not to get in over your head in terms of serviceability. Make sure you can make repayments on the line of credit that will reduce the principle because your minimum repayment only pays the interest, it will not reduce the loan. Rates on this product are typically much higher than a construction loan or top up loan. This product feature is great if managed well, but can also be a trap if not seriously considered as your limit will never change.

4. Personal loan

If you’re only making minor renovations – personal loans are usually capped at around $30,000 – this might be suitable, but interest rates on personal loans are higher than on home equity loans and payments need to be made usually over a maximum of seven years.

5. Credit cards

This option should only be considered if you want to undertake really small renovation projects. The interest rates are usually much higher than on mortgages, but for a very small project, that extra interest might actually total less than loan establishment fees.

*HomeBuilder

If you’re looking for further assistance to be able to afford your property renovation project, the Federal Government recently announced $25,000 grants for eligible Australian owner-occupiers to build a new home or substantially renovate an existing home. The Government’s HomeBuilder package is designed to assist the residential construction market by encouraging the commencement of new home builds and renovations. Income and other conditions apply and this grants program is active until 31 December 2020. For more information visit the Treasury website.

One thing you must do

There are very few exceptions to the rule that your renovations should add more value to your home than they will cost to carry out. Think about how the money you spend on a renovation will increase the value of your property. For example, consider making changes that would appeal to the majority of potential buyers to help you sell your house faster and at a higher price.

When is the best time to refinance your home loan?

As a home owner with a mortgage, chances are you’ve heard of the term ‘refinancing’. Refinancing involves reviewing your current mortgage, and potentially swapping your loan to another lender who can better meet your current needs, wants and circumstances.

Refinancing can also allow you to consolidate your debts or pay down your mortgage more quickly.

Another common reason borrowers look to refinance is so that they can access equity – the amount you’d get from selling your home after settling any associated loans, such as a mortgage on that property, and any other costs associated with the property. Depending on that amount, you may be able to access equity in the property without having to sell it, for example, to make home renovations or to buy an investment property.

However, refinancing is not suited to everyone. There are many different factors you will need to consider when thinking about refinancing a loan. Before you initiate an application to refinance, your broker will need to assess your needs and objectives as well as your current financial situation.

So how will you know that refinancing is the right option for you?

The first step is to speak to a professional, such as a mortgage broker, about your needs and whether you can afford a different loan structure or other change to your mortgage, particularly if you have more than one property.

Are you looking to pay less interest?

Some people are savvy researchers and will want to take advantage of a lower interest rate from another lender should that be available to reduce repayments. If you aim for a lower interest rate, this could potentially save you a lot of money in the long term.

While saving money is often one of the biggest benefits of refinancing, it may not be as straightforward as that and careful consideration is required.

At this point, the broker will need to find out about your existing loan, repayments and current loan structure.

Your mortgage broker will also need to find out more about your current financial situation, including your income, any other current debts and about any assets you own.

The current value of the property is also taken into consideration, so your broker will have access to current data that will indicate what your property is likely to be worth.

The broker will then review the various loan options and figure out whether it’s worth it for you to refinance. Sometimes it’s not worth it if it’s only going to save a couple of hundred dollars a year, particularly when you take into consideration the exit and application fees involved. But if it’s going to save upward of $1,000 a year, refinancing might be a sensible approach.

In some cases, the mortgage broker can tell you if getting a lower interest rate from your current lender can be achieved without refinancing.

Do you want to change your loan type?

One of the risks of refinancing your home loan is that you may need to pay Lender’s Mortgage Insurance (LMI) to your new lender. If switching your loan means you will need to pay LMI again, it may not be worth refinancing.

If you do decide to go down the refinancing path, working with a broker rather than going straight to a lender has advantages. Broker’s generally have access to loan options from a range of different lenders (on average 34 lenders), and if there’s a better opportunity for you, they’re usually able to access it.

It is important to consider that when you take up a new home loan, it can incur exit fees and may not have all the features your existing home loan has.

Have your circumstances changed?

If you had a recent major life change such as a because of a loss of income or a change in marital status, you might be looking to refinance.

If you want to refinance to lower lending costs to help you manage your monthly repayments, speak to your mortgage broker who can negotiate with your current lender for a rate suitable to your current situation.

Your broker can also help you look at alternate options to consolidate your personal loans and credit cards into the one loan. This could help you in lowering your monthly repayments, or help you keep your repayments on time and even save you interest in the long-term. Indigo finance has access to many lenders and their products and have the expertise to help you through the refinance application process.

 

 

Concerned about servicing your loans?

If you are concerned about servicing your loan, reach out to your local mortgage broker for help.

As Australians everywhere take a close look at their financial circumstances, mortgage brokers stand ready to lend a helping hand.

Whether experiencing financial hardship through job loss, a reduction in work hours, or business disruption, an increasing number of Australians may be struggling to balance their books as a result of the Coronavirus, and in many cases are wondering how they will continue to pay the bills.

Difficulty with repayments

According to research conducted by Finder in early 2020, about one in five mortgage borrowers, or about two million Australian households, were struggling to make repayments, despite record low interest rates.

And with the challenging circumstances that have emerged since, it is anticipated that these pressures will only increase forcing more people to require financial assistance.

Financial relief strategies

In this difficult time lenders have responded by announcing financial relief strategies. In an official Australian Banking Association (ABA) statement, CEO Anna Bligh said, “Banks stand ready to support customers and if anyone is in need of assistance, they shouldn’t wait but come forward as soon as possible”.

Different lenders have different assistance options. These may include, waiving fees on early term deposit withdrawals, interest rate freezes on loans, options to defer or restructure home loan repayments, and emergency credit card limit increases.

It is important to remember that mortgage brokers have the knowledge, experience and relationships necessary to assist people experiencing or expecting to have trouble paying their home loans as a result of changing circumstances.

In times like these, the importance of mortgage brokers in assisting customers with hardship and facilitating access to credit cannot be overstated. For many Australians – particularly those in rural or regional areas – brokers may represent the only source of assistance.

Expertise of brokers is of critical support

Brokers’ expertise in helping customers navigate the complex home lending market – and their intimate understanding of their customers’ personal circumstances – means they are uniquely positioned to provide critical support for customers when discussing hardship and available options with lenders.

If you have any questions or concerns about your existing loans, need further guidance on hardship assistance, or have other questions about your loan arrangements please give us a call today.

Finances on your mind? Do yourself a favour, speak to a broker

If you are finding it tough to meet your current financial obligations or you are just interested in reviewing your current home loan, then you are not alone. Mortgage brokers stand ready and able to assist with your options during this difficult time.

Turbulent does not even begin to describe 2020 so far. As a result of COVID-19 and not forgetting the bushfires, thousands of Australians are out of work, with Treasury predicting that the jobless rate will double in the June quarter from 5.1 per cent to 10 per cent. Many others have had their hours reduced or have been temporarily stood down.

In this period of uncertainty, at the very least many will be taking a closer look at their finances to make sure their current loan arrangements are right for them. Mortgage and finance brokers have the experience and knowledge to assist in a variety of situations and are simply an internet search or phone call away. Mortgage brokers are in regular contact with their lender panel and make it their business to understand the different options lenders currently offer.

And while the options can seem straight forward, it is easy to miss the details and differences that can add up, particularly over a 30-year term. For example, a number of banks are offering to temporarily freeze mortgage repayments for three or six months. While this may seem like a good option, it is important to fully understand the implications. This could mean that the total debt will increase. Of course, depending on an individual’s circumstances, there may be a number of available alternatives that may reduce repayments while not increasing your interest bill as much in the long term.

Refinancing too may be on the minds of many as a result of the Reserve Bank cutting rates and banks passing them on, to varying degrees, as well as access to a range of competitive fixed interest rate options on the market. A discussion with your local mortgage broker may be just the ticket.

While a simplistic view of what constitutes a great mortgage is the one with the lowest interest rate, mortgage brokers know that what suits one person might not necessarily suit another. For instance, fixed interest rates can offer piece of mind as interest rates increase, but they can be the cause of anxiety if rates fall or if unforeseen circumstances require a change.

No matter what your circumstances are, mortgage brokers can actively assist you in navigating your current situation. So, if you’ve been thinking about reassessing your finances and are not in contact with your broker, do yourself (and your cashflow) a favour and call us now!

Boomeranging back to work

Rather than leaving the workforce forever, many Baby Boomers are choosing to boomerang back to paid positions, earning them the nickname of Baby Boomerangers.

It seems the generation that let it all hang out at Woodstock wants the security of some extra earnings or the satisfaction of a job well done.

In fact, social commentators say the two reasons Baby Boomers are going back to work are that firstly they realise that at 65 they probably have 20 to 30 years’ retirement ahead of them and not enough savings, and secondly they are just not ready to stop being a productive member of the workforce.

And really, if you’re a Boomer and you find yourself in one of the above situations, why shouldn’t you wiggle yourself back into the workforce?

The cost of living and feeling valued

It’s true that in your 50s and 60s salaries can start to decline. Coupled with stagnant wage growth in Australia and the probability of CPI costs rising again in coming years, this puts a strain on your bottom line. After the recent lows, it’s easy to see why Boomers have their minds set on making some extra cash. At the same time, many Boomers underestimate the feel good factor. Doing something well – and being paid for it – can definitely help boost self-esteem.

You may also feel that it’s not time to retire your special skills just yet – other people need you and your experience.

A growing trend

In Australia in the 1980s and 1990s, less than one in 10 workers was aged over 55.

Today that number is about one in five.

About 67% of men and 60% of women aged between 55 and 64 are still in the workforce, while for those who are 65 or older that figure is 20% for men and 10% for women.

Some good news

While age discrimination is still a problem in some Australian workplaces, a 2018 survey by the Australian Human Rights Commission found that 76% of people questioned credited older workers with more experience and 68% said they had more professional knowledge.

Sorting out your income

Returning to the workforce after you’ve ‘retired’ throws up all sorts of curly financial questions. Yes, you’ve already had your fingers in the cookie jar – that jar being your superannuation or the government pension.

Here’s where you should seek solid financial advice to help you understand all those seemingly small details that could make a really big difference to your Boomerang bottom line, such as your level of eligibility regarding the pension or your ability to be paid directly into your super (thus limiting taxation liability).

Obviously if you return to work because you are worried about running out of money in retirement, your financial planner can help you to plan a better future and worry less.

Remember insurance

Income protection insurance gets tricky around this age as most Australian insurers have a maximum entry age for income protection insurance of around 60 and they will generally have a payout age limit of around 65 (some cover goes up to 70).

Whether your insurance policy is within your superannuation or covered personally, understanding the fine print and details specific to age is of vital importance.

Some people may be able to self-insure with the help of a full financial plan, however this again takes careful consideration.

If you are entering the Boomeranging stage of life, before you leave the workforce talk to us before cancelling any policies or making any changes.

Transition to retirement and boomeranging in and out of the work force requires serious attention and planning.

Don’t leave it too late.

Explainer: fixed-rate loans

When purchasing a property, refinancing or just renegotiating with your current lender, borrowers can generally decide between fixed-interest loans that maintain the same interest rate over a specific period of time, or variable-rate loans that charge interest according to market rate fluctuations.

Fixed-rate loans usually come with a few provisos: borrowers may be restricted to maximum payments during the fixed term and can face hefty break fees for paying off the loan early, selling the property or switching to variable interest during the fixed rate period.

However, locking in the interest rate on your home loan can offer stability.

“For those conscious of a budget and who want to take a medium-to-long term position on a fixed rate, they can protect themselves from the volatility of potential rate movement,” a finance broker says.

Fixed rates are locked in for an amount of time that is prearranged between you and your lender.

“There are some lenders that offer seven-year or 10-year fixed terms, but generally one to five years are the most popular,” the finance broker says. “The three and five-year terms are generally the most popular for customers because a lot can change in that time.”

Further to this, fixed-rate loans can also be pre-approved. This means that you can apply for the fixed-rate loan before you find the property you want to buy.

“When you apply for a fixed rate, you can pay a fixed rate lock-in fee also known as a ‘rate lock’, which will, depending on the lender, give you between 60 and 90 days from the time of application to settle the loan at that fixed rate,” the broker explains.

“It will also depend on the lender as to whether the rate lock will be applied on application or approval,” added the broker. “It is important to be clear on this issue as it has been known to be a common point of error”.

Pre-approval helps you to discern how much money you are likely to have approved on official application. Knowing that your potential lender will offer a fixed-term fixed interest loan gives further peace of mind for those borrowers looking to budget precisely rather than be susceptible to rate fluctuations.

In addition, borrowers should consider the possibility of arranging a ‘split’ loan. This option allows you to split your loan between fixed and variable rates – either 50/50 or at some other ratio. This can allow you to ‘lock in’ a fixed interest rate for up to 5 years on a portion of your loan, while the remainder is on a variable rate which may give you more flexibility when interest rates change and potentially minimise the risks associated with interest rate movements. Also, be aware that at the end of the fixed-rate term, your loan agreement will include information about how the loan will then be managed by the lender, usually to a ‘revert’ variable rate – which may not be the lowest the lender offers.

If you would like any further information please give us a call to discuss.

Is one phone call really all it takes to secure a lower interest rate?

With official interest rates trending downward, shrewd mortgage holders may take the opportunity to call their lender to ask for a better deal.

But when even a small interest rate reduction means potential savings of thousands of dollars, is a simple phone call really enough to get you there?

In 2019, ‘your interest rate should have a three in front of it’, is common advice for home owners considering the competitiveness of their loan settings.

But while a number of lenders offer lower rates to new customers, it’s not always so simple for existing customers to secure the same outcome.

A leading mortgage and finance broker says that if people want a better deal on their mortgage, there are basically two options:

  1. Call your bank and ask them to match the new rate, or
  2. Contact your broker and vote with your feet.

And although the first option is commonly recommended, lenders aren’t always so obliging when it comes to rate-matching to get you a more affordable mortgage.

“As an existing client, it can be disheartening to see your bank offer new customers a lower rate to the one you currently have.

“Lenders regularly try to ‘win’ new customers by offering low rates. It is a great acquisition strategy.

“But if they refuse to match your current rate to this new offer, you can always contact a broker and refinance with a lender who is hungry to win your business.”

Mortgage brokers, on average, have access to a panel of 34 lenders and this creates competition amongst lenders. Mortgage brokers are also in a position to offer you a more in-depth and customised level of service. This can allow them to find their customers a mortgage product that may suit their current needs, wants and circumstances.

Styling for Profit

Styling your home for sale can add some serious dollars and help your property stand out from the crowd. Here’ s everything you need to know.

What is styling or staging?

Property styling or home staging for sale is a specialist area of design, aimed at ensuring your property attracts appropriate buyers and sells for the highest price possible. It can be as simple or extensive as the property requires (and budget allows). Most real estate agents believe a styled or staged home will gain a higher sale price (some surveys have found styling your home could boost the final sale price by between 7.5% and 12.5%).

Go Pro or DIY?

A professional property stylist will work with your real estate agent to understand the demographics the property is being marketed to and style your property accordingly. Their goal is to help potential buyers see the property’s full potential. A stylist will generally start by organising any repairs or maintenance required on the property as well as managing cleaning, decluttering and removing highly personal items such as family photos. Stylists will usually work with a combination of the homeowners’ furnishings as well as furnishings they lease or loan for the purpose of the staging. As a general guide, styling costs can range from $1,500 for a simple staging of a one-bedroom apartment and up to $10,000 or more for complete high-end staging of a larger home.

Self-styling

If your budget doesn’t allow for a professional, follow these DIY styling tips to give your home the professional touch.

Understand your market

Have your real estate agent explain the type of people who are likely to buy your home and the type of people you will be marketing to. This will help you understand the type of styling that will appeal to them.

Be a nosy neighbour

Just because you aren’t paying for a stylist, doesn’t mean you can’t learn from one. Check out comparable homes marketed to a similar target group to yours that have obviously been well-styled – then borrow their ideas.

Take the ‘you’ out of your home

This is a hard one for many sellers to understand, but the psychology of a buyer means they need to be able to see your home as their new home, and that’s hard to do if it’s full of your personal items and photographs. Within reason, pack these items away and allow the home to be a blank canvas.

Make an entrance

First impressions really do matter, and the street appeal and entry of your home will leave a lasting impression on potential buyers. Ensure your lawn is well maintained, remove any rubbish or junk from the lawn or garden and add some colour and style to your entry with interesting pots or a piece of outdoor furniture.

Kitchens and bathrooms

These are the rooms that make or break a deal. Your real estate agent will tell you if you need to update the kitchen or bathroom. Stores such as Ikea and Bunnings have renovation kits for kitchens and bathrooms that don’t break the bank. If it’s just a tidy up that is required, remove all clutter and ensure they are spotlessly clean. Nothing will put a buyer off faster than a grotty kitchen or an unkempt bathroom.

Keep it simple

You may love bright purple furnishings or think your children’s Minecraft posters are a hoot, but if you want to appeal to a broad audience and ensure as many buyers as possible come through your doors, you need to tone everything down. Think soft, neutral colours and an easy design aesthetic. Any purchased furnishings can be sold afterwards on online platforms like eBay, Gumtree and Facebook marketplace.

Sometimes, bigger IS better

Nobody wants a cramped home, so maximise the space in every room. In the bedroom, use a double bed instead of a queen or king, replace wardrobe doors with mirrored doors and use soft window furnishings as opposed to dark heavy curtains.

Nowhere to hide

Remember, people inspecting your home will open cupboard doors and check out the garage, so avoid the urge to hide everything in the linen cupboard. And make sure the garage is not full of clutter – you want to show its full capacity.

When not to style

There are certain selling situations where even the best styling can add little or no value to a property. Low cost properties are not likely to see a return on the cost of styling. If the home is run down and potential buyers are generally only interested in a knock-down, styling will have no impact. If you are selling in an area undergoing a severe downturn, styling is also likely to make little impact on the property’s value or ability to sell. Your real estate agent should be able to advise you if styling your home could increase your sale price.

TOP 11 DISCIPLINES FOR FINANCIAL SUCCESS

Spend less than you earn – champagne taste on a beer budget?

Pay down non-deductible debt first

Any debt that doesn’t make you money or create your wealth should be paid down first. Start repaying your store and credit cards and personal loans then your home loan BEFORE your investment debt. For every $5,000 racked up on your credit card, you are affecting your property borrowing capacity sometimes by about $30,0001 or more.

Pay off your highest interest bearing credit card fast

Paying off a credit card with a 27% interest rate will allow you to feel awesome. When you apply your existing payment that was previously used to pay off the high interest rate card to another card debt, watch the balance drop significantly in a much shorter time frame.

Think carefully before taking on any new (or bad) debt (including credit cards, Afterpay/Zip Pay, personal or car loans). Not every 0% interest (or low interest) rate is what it seems.

Always check with your financial adviser (us) first, BEFORE taking on any new debt.

If you start to shop around yourself, you could very well damage your credit rating and end up not being able to borrow at all for a longer period of time.

Spread your indulgences over a longer time frame

Yes, you need to be rewarded for your hard work and discipline.

So when you DO indulge, spread it across the year or over several months to take advantage of maintaining your budget, cash flow and to reduce any more financial damage.

Revisit the way you are using and spending your money often

Sometimes we drop out of good habits. Don’t beat yourself up, just jump back into the flow and get cracking again.

Invest in good quality objects/clothing that will last as opposed to grabbing possessions in sales that you will only use on a few occasions or perhaps never use at all.

Quality over quantity is a good mindset to have in the world of saving, finance and investing.

Prepare for life’s unexpected financial events.

Have a rainy day account to avoid upsetting your plans. You don’t need any excuses to stop your progress and results.

Don’t be afraid to ask for help. BUT – be careful who you listen to

Sometimes those who give us advice are the ones not following their own advice or have little knowledge and/or success themselves. Remember, we are only a phone call away.

Be positive about the future

What we think about comes about, so be careful what you focus on. Looking at your debt will bring more debt. Look at your equity and asset growth instead!

Educate yourself, then take massive action

“To know and not do is really to not know.” Stephen Covey. There is a lot to do to achieve financial success. Don’t try it alone.

Call us to arrange a catch up. We can discuss your personal needs and help you get on track financially.