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.