What are the extra costs of buying a home?

Application & establishment fees, stamp duty + more.

When taking out a mortgage, many people forget to consider the associated fees and expenses. Here are some of the extra costs that you’ll need to consider when you take out a home loan.

Home loan application fees

Most lenders charge a home loan application fee. This can range from loan to loan, and covers:

  • Loan contracts
  • Property title checks
  • Credit checks
  • Attending a settlement

Mortgage fees and costs

Mortgage establishment fees – Lenders generally charge a mortgage establishment fee – a fee for setting up a mortgage.

  • Property valuation – A third party chosen by the lender, is appointed to determine the value of your land and improvements.
  • Mortgage registration – Your Mortgage deed needs to be registered with the government.
  • Mortgage stamp duty – Some State Governments charges stamp duty to register your mortgage.
  • Lenders mortgage insurance – If you don’t have 20% of the purchase price or the value of the property, the lender will require you to pay  for a lenders mortgage insurance policy that covers their risk in the event you default on your repayments.

Property fees and costs

  • Building, Pest and Electrical Inspection fees – It’s wise to have your property inspected for any structural or electrical problems and for pests (e.g. termites).
  • Stamp duty – Governments charge Stamp Duty to transfer the ownership of a property.
  • Registration of transfer fee – The new owner of the property needs to be registered at the Land Titles Office.
  • Legal fees – You generally need to pay a Solicitor of Settlement Agent to handle the transfer of ownership of the property on your behalf
  • Home & contents insurance – Most homeowners insure their home and contents against a range of threats: burglary, fire, storm, etc. Lenders insist that your property is insured while you have a mortgage.
  • Life and income protection insurance – Borrowers should consider protecting their incomes and themselves while they have a mortgage.
  • Utility costs – Connecting electricity, gas and telephone can attract a fee.
  • Council Rates – Your local council charges rates to cover garbage collection and a host of other services.
  • Water Rates – The water corporation charges rates for the supply and upkeep of water to your property.
  • Body corporate fees – If you buy an apartment or Strata Titled property, body corporate fees are charged, and some fees can be significant – particularly if the building is in need of a major work (e.g. concrete cancer, security upgrade, new hot water system, etc) or if there are lifts, pools and other communal facilities.
  • Maintenance costs – Don’t forget to make provision for regular maintenance on your home – even if you decide not to undertake significant renovation.

To learn more about the hidden costs of buying a home, and discuss how we can help you, get in touch today.

Rental yields – what you need to know

Rental yield – essentially the rate of rental income returned against the costs of an investment property is a great indicator of a property’s investment potential. But you need to keep things in perspective when you factor it into your decision to purchase property.

Calculating rental yield

A good first step in examining rental yield’s impact on the investment potential of a property is to recognise that there are two types of rental yields, gross and net, and they are calculated differently.

In property, gross rental yield is calculated by dividing the annual rental income you receive by the property value, and then multiplying this figure by 100.

For example, if you collect $20,800 rent annually ($400 per week) and your property value is $450,000, it will look like this:

$20,800 (annual rent) / $450,000 (property value) = 0.0462

0.0462 x 100 = 4.622

The gross rental yield is therefore expressed as 4.622%

Presumably, the higher the rental yield percentage, the better, as it suggests a more efficient return on your investment – more bang for your buck.

Knowing a property’s gross rental yield is a quick way to make a rough comparison of how its rental returns fare with others in an area, but it does not give a full picture of the investment potential a property offers.

But the gross rental yield can be misleading.

Net rental yield, on the other hand, offers a more detailed picture of a property’s rental return. To calculate net rental yield, you also factor in the costs and expenses you incur in addition to your property’s value.

The list of costs and expenses is extensive and can include stamp duty, legal costs, building inspections and recurring expenses such as maintenance and repair work, council rates and loan interest repayments.

If you deduct $5,000 for annual costs and expenses from the annual rental income in the gross rental yield scenario in the example above, the net rental yield is 3.5%.

Of course, the credibility of net rental yield is dependent on the accuracy of assumptions you make about the cost of repairs, the property’s market value and the property’s occupancy rate.

A building inspection might reveal dormant issues that will drastically increase future repairs and maintenance expenses. Rental yield might be high for those properties occupied in the neighbourhood, but that doesn’t mean the property you have in mind will be occupied all year-round – vacancies in one street can vary from the next, too.

Rental yield is only one factor to consider

Calculating rental yield should only be part of your assessment of a property’s investment potential. To do due-diligence and ensure you’re making the right investment, it’s also important to consider the resale value, investigate market reports, demographics, sales and rentals history in an area, planning and infrastructure, and the story of the building.

Looking to buy an investment property? Get in touch and we can help you further evaluate the benefits and the issues to consider before making your purchase.

How to negotiate the best property price

Negotiating the best property price isn’t a matter of swindling a seller. It’s about doing your homework, knowing what you want, knowing the market and making sensible offers.

When you are buying property, getting the best price can mean the difference between being able to afford it and having to settle for second best. And, of course, a purchaser is often negotiating with a seasoned professional, so any time spent brushing up on negotiating skills is well spent.

But we’re getting ahead of ourselves. For a first-class property price negotiation, the homework starts well before you even let the agent know you are interested.

The first thing to do, says buyers’ agent Shelley Horton, is get a good understanding of your requirements and circumstances. Aside from the location and type of house you are looking for, this understanding involves finance, of course.

“One of the first things I would be wanting to find out is whether a purchaser will be borrowing to finance the property, and how much they are looking to borrow,” Horton explains. “If someone is relying on finance as part of the property purchase process, I would always recommend they go and get preapproval, because if you don’t have preapproval, it doesn’t really put you in a strong position against the rest of your competition.”

Aside from meaning that when you do eventually make an offer it will be taken seriously by the seller or their agent, having finance sorted out means that you can be sure of what your stamp duty and associated costs are, and exactly what price range you can consider.

“We can start to work out what an offer range might be, and then it’s just a matter of ascertaining the market,” Horton says.

“This means doing lots and lots of research – seeing the prices other similar properties are listed on the market, checking recent sell prices for other properties that fit the criteria, comparing as much as we can like for like, so then you know that you’re not paying too much.”

Horton initially looks at online resources such as realestate.com.au or Domain. She also uses RP Data reports, but notes that the general public doesn’t usually have access to these (agents, valuers and finance broker usually do).

“The reports give us a little more insight into properties that have sold, and background on the circumstances and situations leading up to a property coming on the market, how long they’ve been on the market and whether they have switched agents,” she says.

Above all, the best thing a buyer can do is get out and look at properties, and speak to the agents to build contacts.

“I inspect properties and go to auctions just to keep in touch with the area, to see what the market is doing,” Horton says. “If you go to an auction and there was a lot of hype around the property, but then you find that there was really only one person interested in bidding, it tells a different story.”

Once you have your finance sorted and you’ve found that special property, get the building and pest inspections done as soon as you can so that if you do make an offer, you are prepared to move quickly. This can give you the edge on your competitors.

“If you have your homework done – your due diligence reports, your finance – you know exactly the position you’re in and you’re ready to go, and letting the agent and vendor know that is actually a good thing,” says Horton. “An agent wants to look for all those signs to see who is the most serous buyer. So being able to make an offer, possibly with no cooling off, will put you ahead of anyone else, because the agent knows that you’re going to start talking about dollars and, once you agree, it’s a done deal.”

Finally, it’s time to talk dollars, and you are well armed by the time you reach this point. Most agents will make buying guides available at inspections, so you will have a good idea of the vendor’s expectations; you will have a certain budget in mind because your finance is locked in; and you will have a good idea of the value of the property from all the preparation you have done (if you are still unsure here, you can have a professional run a valuation or engage a buyers’ agent).

So what should you offer?

“I tend to not start too low because the agent won’t take you seriously,” Horton says. “You have to get that balance right. You might want to start five per cent below a realistic opinion of the value of the property, and go from there. It also depends on your budget. Certainly start below your maximum, and work up to that. Every dollar you get the property under your budget is a bonus for you.”

One exception to this is when a property has been on the market for a long time and there is not much interest in it. “That might be the case where you can get something at a heavily discounted price because the property is stale,” Horton says. The key to knowing whether this is the case, of course, is all that thorough research you’ve done.

Ready to make the deal? Get in touch today to see how we can help you get your finance sorted.

What comes first: the property or the loan?

It’s easy to get carried away with the fun part of buying a property – looking at houses – but delaying the less compelling task of arranging finance will weaken your negotiating position on both the property and the loan.

Looking for a property to purchase is an exciting time. Choices regarding location, size, number of rooms and local amenities often see house hunters carried away in a deluge of daydreams and anticipation.

But, before you get carried away, it’s important to check off the essentials first. Although organising your finances may seem drab in comparison to perusing sales listings, gaining pre-approval with a lender will give you confidence about how much you can afford to borrow.

“First and foremost you need to determine if you’re eligible to borrow money from a lender,” says the finance broker. “Your ability to repay the loan will need to be assessed – you don’t what to find out after you’ve [made an offer] that your credit history or deposit is not up to scratch.”

Arranging finance before finding the perfect property will put you in a good position when it comes time to make an offer. When you do find the house you have always wanted, you can present to the seller and estate agent as a prepared applicant who is serious and reliable.

“It shows you mean business, and gives them peace of mind that your financing will not fall through. Don’t be afraid to let the selling agent know you have conditional loan approval in place,” the finance broker advises.

Sellers are most interested in completing their sale fuss-free and with steadfast funding, and showing that you are capable of both will help put you at the top of a potentially competitive list of applicants.

In the instance that you find and secure purchase of a home without having your loan pre-approved by a lender, there are a few pitfalls that you risk running into.

“If you don’t have financing to pay for your property, you run the risk of forfeiting your initial 10 per cent non-refundable deposit you need to put down to secure the property. This may differ depending on what state you live in, but the point is it always pays to be organised and have pre-approval in place,” Nolan says.

Saving home loan applications to the last minute also leaves less time to find the most suitable loan and have it approved ahead of settlement.

“Arranging financing as an afterthought also adds immense pressure to the process of shopping around for the right loan and gathering the paperwork to prove you can service the loan,” the finance broker explains. “You don’t want to rush this process.”

Get in touch today to take the first steps toward finding your new home.

How The ‘Best Interest Duty’ Can Help You Find The Best Home Loan

The Best Interest Duty (BID) for mortgage brokers came into effect
1 January 2021.

The Best Interest Duty and related obligations ensure that you
receive advice that meets your objectives, financial situation and
needs, and that we act in your best interests when providing this
advice.

What does that really mean for you?

In short, it means that your mortgage broker (us!) must legally
comply with the BID to ensure that you secure the best home
loan product that is most appropriate for your situation.
It also means that not much will change for us because we have
always put our clients’ interests first.

More about BID

The Best Interest Duty guidelines state that while price will always
be a determining factor, in some cases the cheapest price may
not be the best outcome.

Some circumstances may mean that the benefits provided by
certain features might outweigh the importance of cost.

Some clients may have a strong preference for a loan feature that
may not be in their best interests. For example, someone may
insist on an interest only loan, when in our view it is not in their
best interest.

In this case, we are expected to make reasonable efforts to
explain why these features may not be appropriate or offer good
alternatives to help them make an informed decision.

Other home loan considerations where we will act in your best
interests include:

When refinancing – “the consumer may benefit from being
made aware of any potentially minor cost savings associated
with refinancing, with an explanation of when the cost savings
would exceed the refinancing expenses.”

Considering promotional offers – “any promotional offer
that is quantifiable will be considered as part of the cost of the
credit product… it is important to be aware of eligibility criteria,
exclusions and time limitations.”

Comparing interest rates – for example a “fixed rate loan with
a substantial break fee could be detrimental to a consumer who
wants flexibility to refinance.”

Deciding on account structure – “an offset account may not
be relevant to a consumer whose plans do not include repaying
additional amounts (and may be detrimental if there is an
additional cost for the feature).”

You will have the assurance that we must place your interests
ahead of our own as set out in the Conflict Priority Rule
guidelines. Conflict priority requires mortgage brokers to prioritise
the consumer’s interests in the event of a conflict of interest.

For example

Linh and Zelda approach a mortgage broker for a home loan.

Based on the information provided, the broker sourced two very
similar loan products:

Lender 1 – A home loan package with an offset account, but NO
annual fee.

Lender 2 – A home loan package with an offset account but
includes an annual fee of $149.

The broker recommends to the client to proceed with Lender 1.

However, Lender 1 offers a higher commission to the broker than
lender 2 for the same size loan.

Commentary

In prioritising the consumers’ interests, it IS POSSIBLE that the interests
of the consumer and the broker align – even if the broker is paid more
commission. In this situation, the fact that there is an additional
benefit for the broker DOES NOT indicate that the broker did not
prioritise Linh and Zelda’s interests.

If the situation was reversed, where Lender 2 offered the broker more
commission, AND the broker recommended Lender 2 over Lender 1,
then the Lender 2 product would be inconsistent with the conflict
priority rule, and therefore becomes a conflict of interest – thus not
operating in the best interests of the consumer and not legally
complying with BID.

Best Interest Duty does NOT apply to any lenders!

A lender may offer you products, but a mortgage broker
MUST act in your best interest.

Lenders have no legal obligation to act in your best interest, but
we do!

Looking for a home loan? Contact us today to see how we can
assist you.

What The Banks Can’t Offer – But We Can!

What a difference a year makes. After the turmoil of lockdowns
and employment uncertainty around this time last year, things are
looking up for many of our clients – in more ways than one!
26% of Australians say their families are now ‘better off’ financially
than this time last year and some recent auction clearance results
are nearly 90%.

We suspect we will continue to experience a level of uncertainty
as borders and restrictions ease and then tighten again, however
many of our clients are taking advantage of the current
opportunities to buy their first home, invest or upgrade. These
are the key reasons that you could too…

• First home buyer incentives, discounts, cashbacks and
concessions are available

• Interest rates remain at an all-time low

• Consumer confidence is lifting

• Simpler lending rules for home loans are expected shortly

For many Australians who are considering taking advantage of
the current opportunities to secure a home loan at the lowest
rates in history, the choices and process itself can be a little
daunting.

If you don’t have a good understanding of the financial services
industry or the many products and features available for home
loans, it can be difficult to decide on the right property finance
for you. Plus, mortgage applications can sometimes be confusing
and time consuming. But not for those using a mortgage broker.

It’s all about your best interests – one more reason to
use a mortgage broker.

The Best Interest Duty (BID) for mortgage brokers came into
effect on 1 January 20213.

The Best Interest Duty and related obligations ensure that you
receive advice that meets your objectives, financial situation and
needs, and that we act in your best interests when providing
advice.

This new duty gives you additional peace of mind knowing that
we are now legally required to act in your best interests.
Did you know that Best Interest Duty does NOT apply to any
banks or other lenders?

ASIC, the industry regulator, released Regulatory Guide 273
which sets out obligations for mortgage brokers under the Best
Interest Duty.

The Best Interest Duty obligations:

• are intended to more closely align mortgage broker practices
with consumers’ expectations

• should improve the support, guidance and communication
provided to consumers throughout the credit assistance
process

• should lead to a higher quality of credit assistance being
provided

The new obligations include a duty for mortgage brokers to
prioritise the interests of clients over their own – which we have
always done anyway!

Products recommended by us must be in your best interests
and the reasons for product selection should be recorded and
explained to you.
While costs (interest rates, fees and charges) are often a major
determining factor when deciding on a home loan, the cheapest
may not always be the best outcome for the borrower.

ASIC’s BID guidelines state that some consumer
circumstances will mean that the benefits provided by certain
features may outweigh the importance of cost.

While some people may value access to an offset account,
others may prioritise faster approval time. Mortgage brokers are
expected to exercise judgement in considering the relevance
of these factors with reference to the consumer’s individual
circumstances.

Regardless of legislation, how could a bank or other lender always
‘act in your best interest’, if they can only offer you a limited
number of products?

The ANSWER is… They can’t!

A lender may offer you products, but a mortgage
broker MUST act in your best interest.

We have always sought finance options for our clients that best
suit their own individual circumstances and work in their best
interests, so don’t expect anything to change from us. We will
keep focusing on doing the right thing by our clients.

Not only are market conditions and interest rates tempting
our clients to buy, but there is now the added confidence that,
amongst the other benefits of using a mortgage broker, we
are legally obliged to offer finance options that are in your best
interests.

To find out how you could secure a better mortgage deal that
MUST be in your best interest – read our guide here.

6 Ways First Home Buyers Could Buy Sooner

The dream of home ownership is a tough one for many Australians to fulfil. After all, Australia is one of the most expensive countries to live in. But it’s not just the cost of living and property pricing that delays our property buying.

The road to home ownership can be a long and winding one for most. Considering the affordability of repayments, the location and lifestyle balance of the property, saving up the baseline entry level 20% deposit (if not, having to absorb further costs by paying lenders’ mortgage insurance (LMI)) and stamp duty are just some of the other factors to consider. In Australia, depending on age of the borrower and purchase price, it can take anywhere from two years to over six years to save for a deposit. This of course is also dependent on the income and expenditure of individuals.

Yes, it can be tough to get a foot on the property ladder, but first home buyers (FHBs) are not deterred.

About a third of millennials and a quarter of all Australians plan to buy a property in the next two years with many using the lockdowns in 2020 to up the ante on their savings.

There is no better time than now for FHBs to dive in and make that commitment – if possible.

Here is why:

1. Only a 5% deposit and no lenders’ mortgage insurance (LMI) – until 30 June 2021 and only through certain lenders – for those who are eligible!

Under the First Home Loan Deposit Scheme (FHLDS) eligible first home buyers can buy or build a new home with as little as a 5% deposit

Usually, a 20% deposit is required to avoid LMI costs (which can cost tens of thousands of dollars). But under the FHLDS, the government guarantees the remaining 15% of the value of the property purchase financed by the eligible first home buyer’s loan. Eligibility, property price thresholds and conditions apply.

2. One-off $15,000 grant to eligible owner-occupiers, including first home buyers

The Australian Government HomeBuilder grant provides eligible owner-occupiers, including first home buyers, with a grant to build a new home, substantially renovate an existing home or buy an off the plan home/new home. A $15,000 grant is available for contracts signed between 1 January 2021 and 31 March 2021.

The government has also extended the deadline to 14 April 2021 (inclusive) for those applying for the $25,000 which applies to eligible contracts signed on or after 4 June 2020 until 31 December 2020³. They have even lifted the property price cap for new build contracts in New South Wales to $950,000 and Victoria to $850,000 ($750,000 in all other states and territories).

Caution: lenders won’t assume you have this money because the grant is paid to you and not the bank – so be careful when working out how much money you have for the build (or even if T&Cs apply)!

3. Some lenders are offering bonus first home buyer incentives

From bonuses offered at settlement, conveyancing fee rebates, no account keeping and establishment fees, to no application and valuation fees – these are a few of the incentives offered by some lenders to attract first home buyers (however these include specific criteria and conditions).

4. Lenders’ mortgage insurance discounts are being considered by select lenders

Some lenders have been known to reduce the LMI to just $1 for eligible first home buyers! Others offer a percentage discount on LMI fees following settlement. Minimum deposits, maximum loan size and T&Cs apply.

5. Cash in on cash backs – certain lenders offer cashback incentives to first home buyers

Thousands of dollars of cashback to an eligible first home buyer with LMI and new purchase rebates are just some incentives that are on offer from some lenders.

Nabbing a great deal or incentive on your home loan could help you save money, but it is even more important to consider price (interest rates and fees) and features when choosing the right home loan.

6. Stamp duty concessions are available in some states

Besides saving for a deposit, stamp duty can be another big barrier to home ownership. However, most states and territories offer some assistance on this cost, including some exemptions, for eligible first home buyers.

Accessing one or more of these schemes or incentives could provide the assistance you need to buy your first home. It could also potentially save you tens of thousands of dollars.

But before considering any of these options, CONTACT US, so we can help steer you through the various options that may be appropriate for your specific situation. It is important to understand the various terms, conditions and eligibility criteria.

A FHB opportunity awaits

If you are one of the lucky ones who have remained financially stable, this could be your opportunity.

While there are always varying peaks and troughs in different property markets across the country, now could be an ideal time for FHBs to get into the market… Why?

  • Historically low interest rates make borrowing cheaper than it has ever been
  • Government incentives, spending and infrastructure initiatives continue
  • Consumer confidence is returning as we adapt to the new normal
  • Simpler lending rules for home loans are expected shortly

Knowing where to start, taking the initial steps and navigating through the whole process can be overwhelming. We can step you through the process from the initial stages so you can rest assured you will be well informed for one of the biggest decisions in your life. We have the experience and knowledge, along with access to a wide array of lenders, to ensure you are successfully guided through your first home buying journey.

How Healthy Are Your Finances?

Your 5 step financial health check

Many of us have faced financial challenges over the past year and as a result some may have asked themselves “how could I have better prepared for a financial emergency?”

Here are five easy steps to help take control of your finances and prepare for an emergency:

1. CREATE A BUDGET AND IDENTIFY ANY POTENTIAL CASH FLOW ISSUES

One of the first steps you should take is to determine whether you can meet your current and future financial commitments. A good way to do this is to prepare a budget including all your expected income and expenses. Include regular and irregular costs such as insurances, electricity etc for each period, so you know whether you’ll have enough income to cover your expenses when they are due. Your completed budget will show whether you are in surplus (your income is greater than your expenses) or deficit for each period.

2. BUILD AN EMERGENCY FUND

Setting aside some money in the form of an ‘emergency fund’ (usually in a separate bank account) will help to cover the costs of any unexpected expenses. Your washing machine or refrigerator may break down or you may experience mechanical issues with your car. Having some ‘rainy day’ or emergency savings means you won’t need to access your everyday funds needed for your budgeted expenses. Use your budget to determine how much you could deposit into an emergency fund and when.

3. PROTECT YOUR ASSETS

It is important to have sufficient insurance cover to avoid financial stress due to emergencies or unexpected events. Consider insurance cover for your home and contents, health, car, property investments and yourself – via income protection and life insurance

4. KEEP YOUR DEBT UNDER CONTROL

If you use credit (or take on other debt) to tackle financial emergencies, it can become challenging to repay the debt AND continue to cover the costs of everyday living and expenses. Credit card and other forms of debt usually involve high interest rates which could make the situation worse.

5. PLAN FOR THE FUTURE

If you are experiencing short-term cash flow issues it can be difficult to keep a long-term view, but it is important to always keep a degree of focus on growing your savings and assets for the future. Whether it might be for education costs, family celebrations, upgrading, renovations or your retirement, is it important to focus on the short AND the long term.

We have many tools, techniques and strategies to help you through your financial challenges and reach your goals. Call us today for a confidential discussion.

From Survive to Thrive

Well, 2020 was a year we will never forget. Many of us endured
personal and financial challenges that forced us to adjust our
lifestyle and priorities – some significantly and some for the
better!

While we adapt to a new COVID-normal, life should prove to be
more stable and positive this year. We can use our experiences
of 2020 to get us back on track with new perspectives on life
and money.

Now is a good time to set some personal financial goals for
2021. But first, we need to learn some lessons from 2020.

A consumer survey conducted in late 2020 identified
Australians’ top financial concerns were debt worries, savings
goals and property market outlook.

Some of the concerns and trends from this survey show that:

The piggy bank took a hit – 30% of Australians dipped into
their savings to cope in 2020.
There were two big pain points – Job security and price of
groceries were Aussies’ biggest financial concerns.
We accumulated more debt in 2020 – 40% of the average
debt was accumulated in 2020.
Credit card debt remains high but has lowered
Australians have knocked $7.31 billion off personal credit
debt BUT there has been a shift to using more buy now pay
later services. Beware of the BNPL trap!
Majority of our savings are sitting in a savings account
– 47% of Australians keep their savings in savings accounts
compared to only 7% in an offset account linked to a home
loan. 4% made extra payments on a home loan and another
4% salary sacrificed extra superannuation contributions.
We took advantage of low interest rates – 32% of
mortgage holders negotiated a lower home loan rate with
their current lender, 14% switched home loan lenders and a
further 17% intend to switch.

Australians appeared to be in survival mode by sticking to the
basics of putting food on the table and holding down a steady job.

But by making small shifts in your spending habits and financial management techniques, you can shift from just surviving to thriving.

Here are a few ways we help our clients to thrive:

1. We can help you clear your credit card debt

While credit card debt is easy to rack up, it is not so easy to clear and it can have detrimental effects on your cash flow and your future borrowing power.

What is the best way to clear credit card debt? This will depend on your level of debt, the number of cards and your individual circumstances. However your choices might include:

• paying out the balance in full before interest accrues

• paying the maximum amount you can afford each month to clear the debt as quickly as possible

• if you have more than one card, paying at least the monthly minimum on each card while allocating a larger payment to the card with the highest interest

• transferring your balance to a new credit card offering a lower interest period

• if you are a home-owner, consolidating your debt into your home loan

You should avoid paying ONLY the minimum monthly repayment or you could be in a cycle of debt that is NEVER resolved.

There are other ways to free up cash for the essentials, nice-tohaves or big-ticket items.

Together, we may consider consolidating all your debt (credit card balances, personal loans, car loans etc) into one loan with a lower interest rate. If you are a homeowner, your home loan usually has the lowest interest rate, especially during this time of historically low rates.

We can help our clients decide which type of debt best suits them and help them minimise ‘debt lag’ – especially after festive season spending!

2. We have the power to negotiate

By refinancing, switching lenders or simply negotiating a better rate with your existing lender, you can potentially save thousands of dollars in interest, repay your home loan quicker, or lower your repayments. By securing a lower interest rate and still making the same repayments, you can pay down your debt sooner. We can step you through refinancing should you go down that path.

Here is a quick calculation to show how you could save almost $52,000 in interest.

Of course, interest rates do fluctuate over time, fixed and variable rates vary from lender to lender as do rates for owner-occupiers or investors.

Loan Term – 25 years

Loan Amount – $600,000

Repayment Frequency – Fortnightly

Repayment Type – Principal and Interest

Interest Rate – 2.54 % – 3.10%

Total Cost of Loan – $810,810.43 – $862,575.12

Total Interest Payable – $210,810.43 – $262,575.12

3. Structure your home loan and bank accounts for maximum benefit

We mentioned earlier that only 7% of Australians use an offset account for their savings. Many mortgage holders are missing out on potentially massive savings. Here is how:

Let’s say you signed up to a 30-year loan and you are five years into your $600,00 mortgage when you start your 100% offset account. You could save $24,189.03 in interest and cut 10 months off the term of your loan.

Loan Amount – $600,000

Loan Term – 30 years

Interest Rate – 2.8%

Repayment Frequency – Fortnightly

Start Offset ay year – 5 years

Interest Saved – $24,189.03

Time Saved – 10 months 

Now that seems a lot to think about, but as you can see by making a few changes to your financial situation (with our help), you can potentially save yourself a lot of money.

The challenges we have faced over the last year left many of us asking ourselves how we can better prepare for an emergency and take control of our finances.

If you want to improve your finances this year, call us to book a time to discuss what potential solutions are available to suit you.

How to avoid paying too much for a home!

Knowing what a property is worth is central to avoiding paying too much for it.

Set a benchmark

Comparing nearby properties that have sold recently is the best way to assess an acceptable price for the property you are looking at and provides a valuable bargaining tool when you are negotiating with a seller or agent. Make sure the properties are comparable, with a similar land size and number of bedrooms, for example, so you aren’t measuring apples against oranges.

“Your mortgage broker can give you a list of sales in the area and then you can drive around and look online to do a quick comparison. If you can find one or two similar properties then you can be sure of what the property is worth,” advises the finance broker.

Keep in mind current market conditions

The property market is always changing, so doing this research once and sitting on it for a few months will offer little help. Going to open homes and auctions regularly will give you insight into the current state of the market and how much certain properties are going for.

Expand your search

“My number one tip is to look at properties in the suburb next to the one that you want,” says the finance broker. “We find that first-home buyers in particular usually end up buying in the more affordable suburb next door to the one that they first wanted to buy in.”

Don’t exceed your financial capacity

Even if a lender approves you for a particular loan amount, it doesn’t mean you have to accept it – a higher loan amount means higher interest charges over the life of the loan, increasing the total cost of the property purchase, so only ever commit to a loan that you can afford alongside your current income and real expenditure. When calculating figures for the price of a home, ensure you also budget for maintenance and repair costs, as well as any other expertise you may require in the purchasing process.

Bring in the experts

“I would strongly recommend using a buyer’s agent as buying a home is one of the biggest financial decisions of your life and most people go in blind,” says the finance broker. “If cost is a concern, then I would suggest maybe using them only for part of the process that you need help with, such as the negotiation or bidding at an auction.”