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Mortgage Broker vs Bank

Are you confused?

June 22, 2018

You may have noticed the Australian finance sector is in the spotlight at present as a Royal Commission is held into the banking superannuation and financial services industry. 

If you're feeling confused about what it all means you're not alone - no doubt there will be some improvements in the banking and finance sector.  But perhaps it's timely for a bit of a recap on the industry and the choices that consumers have ...

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With multiple lenders and hundreds of ever changing mortgage products available, finding the home loan to suit your individual needs is not only a complex process it usually requires shopping around.  This has resulted in more and more home buyers turning to mortgage brokers for expert assistance.

Why are there mortgage brokers?

The mortgage broking industry developed in the early 1990's to fill a void in the market.  Mortgage brokers are generally seen as providers of comprehensive, convienient and solution based advice to clients.  As they represent a panel of lender they can offer clients a range of products and tailor loans to specific needs.

They have also established a reputation for assisting clients from the intial enquiry right through to settlement and beyond.

In particular, mortgage brokers work closely with borrowers by preparing documents for the lender, submitting the application, liasing with both parties through the process and answering questions through the loan approval stage.

It's all about the relationship

For most people a mortgage is the biggest loan they will ever undertake and it will most likely be part of thei financial situation for many years, and this is the real point of difference you won't experience with a bank...

Your mortgage broker will be there with you on your journey.  When you establish a relationship with your broker it will be the ONE constant throughout the life of your mortgage(s) - even if you change lenders along the way.

Through regular contact your mortgage broker will get to know you, your family and the ever changing events in your life that may prompt a review of your financial situation.  As your circumstances change it is always advisable to ensure any loans you have are still suitable for your personal situation.

Training and qualifications

In a bank you will be dealing with a bank loans officer - there is no requirement for a bank loans officers to acquire the same qualifications as a mortgage broker.

Mortgage Brokers must meet membership requirements such as minimum levels of experience and education.  They must also undergo probity checks and meet fair and ethical trading standards before gaining accreditation to practise as a mortgage broker.

A broker must also belong to an alternative resolutions service.  This is a protective measure for borrowers should any disputes arise.

As your finance specialist it is a mortgage broker's job to stay well informed on the changing landscape of lending in order to continue to offer you the most up to date information.

New generation of home owners

Most importnatly your mortgage broker is well placed to look after both you AND your family when they are ready to explore their own options for entering the housing market.

As Generation Y is now actively entering the property market you can feel confident the relationship with your mortgage broker can continue into the next generation.  If your children need to make contact with us to discuss their future plans we're always her to assist them.

 

Changes to Credit Reporting...

What you need to know!

June 14, 2018

Does it seem like the finance world is dominating the news at the moment?  Between the ongoing Royal Commission and the recent Federal Bidget we wouldn't really blame you if you were starting to 'switch off' to finance news.  Is there a problem with switching off?  Well possibly - especially if changes in the finance world that could affect you end up slipping under the Radar!

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So what upcoming changes do you NEED to know about?

It's probably fair to say that EVERYBODY should know about changes to credit reporting.  Why?  Because credit reporting could affect EVERYBODY!

And yes, changes are coming...

From 1 July 2018 mandatory comprehensive credit reporting (CCR) comes into effect with the big 4 banks required to participate fully in the credit reporting system.

The mandatory credit reporting will give lenders access to deeper, richer set od data enabling them to better assess a borrower's true credit position and their ability to repay a loan.

What is CCR?

CCR was introduced in 2014 - at that time Australia shifted from a negative reporting system to a positive reporting system.  However, up until now it has not been mandatory for lenders to adhere to the CCR guidelines.  That has NOW changed for the big 4 banks.

What is the difference between the two systems?

Negative reporting system - recorded negative events in your credit history such as overdue debts, defaults, bankruptcy etc.  Lenders based their assesment of your borrowing potential solely on this information.  They could also access information on credit applications you have made but were unable to see whether those were approved or not.

Positive reporting system - this regime makes it easier for lenders to conduct a comprehensive and balanced assessment of your credit history.  It now contains information on your repayment history for credit cards, home loans and personal loans including:

  • whether you have made a payment or the minimum payment required
  • whether the payment was made on time

It also contains information on you consumer credit liability including

  • type of credit account opened
  • when it was opened and closed
  • the name of the credit provider, and
  • the current limit on the credit amount

Your repayment history is stored on your credit file for up to two years.

Why was CCR introduced?

CCR has brought our reporting system in line with many other OECD countires.  Under CCR it is now easier for lenders to conduct a comprehensive and balanced assessment of a borrower applicant's credit history.

The positive? If you have a good credit rating it could potentially allow you to negotiate a better deal on your mortgage, personal loan or business loan.

The negative? If you have a poor credit rating you could find that obtaining credit becomes more difficult and/or expensive.  On the other hand, it may alos be easier to show you have recovered and stabilised your financial situation after a negative event such as a default.

Not with the Big 4 Banks?

It is expected most other lenders not currently adhering to CCR will follow suit - before they are required to do so!  The Government is also considering extending this mandatory reporting to gas, electricity and phone service providers.

In Short, at some point in the future ALL of your financial habits - both good AND bad - will be an open book to potential providers of finance and financial services.

The bottom line?

There has never been a more important reason to pay attention to:

  • your bill paying habits
  • your credit card usage, and
  • staying on top of debt

It COULD make a world of difference to your future ability to be approved for finance.

Need some help to make sure your credit report is in tip top shape?  Contact us for a chat about debt consolidation.  It may not be suitable for your situation but could be worth exploring.

If it is time for you to get on top of your debt contact us for your copy of our debt consolidation spreadsheet and we'll explain how it works.

9 Steps to Successful Property Investment

June 7, 2018

Property has long been considered a popular path to wealth creation for Australians.  It has the potential to generate capital growth (an increase in the value of your asset) as well as rental income.  There are also tax advantages associated with negative gearing.  However, when buying an investment property, it is wise to remember that you are making a business decision and it's worth taking the time to plan.

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1. Do your homework.

You are not buying from the heart, but from the head, so it is important to assess your current financial position.  What are your cash reserves and/or what equity do you have in your present home?  Look at your long term objectives and factor in potential changes to your current situation (eg the birth of a child or the loss of one income)

2.  Understand negative vs positive gearing

Positively geared properties - rental income is higher than your loan repayments and expenses.  Tax is likely to be payable on the net income subject to qualifying capital allowance deductions

Negatively geared properties - rental income is less than your loan repayments and outgoings.  The loss can be offset against other income earned reducing your taxable income and therefore your tax payable.

3.  Decide how to fund your deposit

You'll probably need a property investment loan.  The deposit can come from your savings or alternatively from the equity in your home.  It can also be possible to invest in property via a self managed super fund using your super savings as a deposit.

4.  Find out how much you can borrow

This is an essential step in order to be realistic in your expectations and focus your property hunting time on properties you can afford.

5.  Choose the right type of finance

There are generally two types of loans being 'principal and interest' and 'interest only'.  Interest only loans defer the obligation to repay the principal.  The most suitable loan type for you will be dependent upon your individual circumstances so it is best to talk to us.

6.  Calculate your costs

Remember to factor in up-front costs such as stamp duty, loan application fees and legal costs.  Building and pest inspections are also a must to avoid expensive headaches down the track.

All properties incur ongoing expenses (eg rates, insurance etc) - you will also need to estimate these.  You'll use your rental income to cover most or all of these costs but you may need to have some spare cash set aside until you start recieving rent (most agents pay the owner at the end of each month so you won't recieve rental income straight away)

7.  Find the right property

This is obviously the area in which you will spend the most time.  It doesn'thave to be a home you would live in.  Think about features that are universally appealing and of course remember the old adage - location, location, location!

8.  Find a good property manager

It could be a good idea to look for personal recommendations from tenants and landlords you may know

9.  Cover yourself with suitable insurance

Some insurance companies now combine building cover with specialist landlord insurance.  You should also consider life, total and permanent disability, and income protection insurance to ensure your family doesn't suffer financial hardship repaying loans if the main income earner is unable to work.

Keeping your credit score healthy

We have all heard of credit reporting, but have you heard of credit scoring?

May 30, 2018

Your credit file is one of your most importnant financial assets.  Safeguarding this file is an importnat part of the finance application process.  Your credit file contains:

  • Credit applications, overdue credit accounts, payment defaults, clearouts (as a missing debtor), commercial credit information and public record information.

You will have a credit score which is calculated from your credit file.

 

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Did you know that a score of less than 500 will severely affect your ability to gain finance from many lenders?

Do you even know what your score is or how easily it can be affected?

What is your credit score?

Credit scoring is a mathematical assesment of the data included in your credit report.  The credit score is calculated by the credit reporting agency using a number of complex formulas.  The score shows the likelihood of your defaulting on your credit repayments within the next 24 months.  Scores range from 200 to 1,200.

The higher the credit score the lower the risk that you will default.  A score of around 550 will indicate that you are an average risk.

Credit reporting

The credit report is the basis of your credit score.  In Australia there are two main credit reporting agencies:

 - Equifax (formerly Veda)

 - Dunn and Bradstreet

You can access a copy of your personal credit report through www.mycreditfile.com.au normally at no charge.  Your credit report is very important as it provides the information used to calculate your credit score.

You will have a credit report if you have applied for any form of credit.  This can include phone contracts, credit cards, residential or personal loans and hire purchase.

So what affects my credit score?

The exact formula used is a closely guarded secret that not even the lenders know.  What we do know is that there are some behaviours you can control that will affect your score:

 - Late payments

 - Overuse of credit

 - limiting the number of credit applications

I didn't realise that was recorded on my credit report!

We have had clients lodge a loan aplication with us, only to be rejected due to a poor credit score.  When we investigated the case we found there had been multiple credit enquires listed in a short period of time.  What the clients didn't realise was that every time they were offered (and accepted) a new credit card these services were individually loadged as a credit enquiry.

Our clients had also sought pre-approval from various lenders while they were searching for a new home.  These pre-approvals were also listed as a credit enquiry.  When the time finally arrived to acquire their home loan, it appeared they had submitted many applications for a range of credit over a very short period.  This history resulted in a low credit score and subsequent rejection by the lender.

Surely the lender can understand what really happened?

Unfourtunately many major lenders are now treating credit scores as a black and white decision.  If your score is too low then the loan application will be rejected - no questions or discussion!

What should I be doing?

You need to be conscious of your credit report.  Make sure you meet all your credit obligations.  If you are considering refinancing in the next couple of years, be aware of all agreements, pre approvals and enquires you make (where you sign a privacy agreement) as these will generally result in an entry on your credit report.  These entries stay on your file for 5 years.

 

 

 

Crushing Credit Card Debt

Choosing the option that works for YOU!

May 24, 2018

The summer holiday season may leave many of us with a warm glow from indulging our loved ones and perhaps even enjoying a relaxing summer holiday.  BUT......

How is the credit card balance looking?

In Australia, over 70% of adults have at least one credit card.  With nearly 17 million credit cards in circulation chances are this is also the time of the year when some of us have to face the reality of our extravagance - in black and white on our credit card statement.

 

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Options for credit card debt

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 lowest balance to clear it as quickly as possible
  • Transferring your balance to a new credit card offering a lower interest introductory period
  • consolidating your debt into your home loan

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

As an example let's say you have a $10,000 debt over three credit cards with an average interest rate of 20%.  If you paid only the minimum payment of $200 per month across all cards you would accrue $44,000 in interest and take 66 years to pay off the debt.  You read that right 66 years.

Clearly, having a plan to repay credit card debt as quickly as possible is the best option...

Credit card balance transfers

Many lenders now offer credit card balance transfers with a range of rate and offer periods.  You transfer the balance of your existing credit card/s to a new card at a lower (or even zero) interest rate for a set period to provide 'interest breathing space' to help you to pay off your debt quicker.

To ensure a credit card balance transfer works for you it is essential to know the terms and conditions of the card AND to be disciplined with repayments

What you should know.

  • To maximise the benefits you should pay of all the transfered balance within the offer period
  • Know the offer end date!  If possible set sufficient auto repayments each pay day that wil clear the debt before that date.
  • Any transfer balance at the offer end date will attract interest charges at the card's standard rate
  • New purchases usually attract the standard interest rate - Not the transfer rate
  • Know what fees applly and when they fall due, eg annual fee or percentage of trnasfer amount

Most importantly, cut up your old card(s) so you are not tempted to rack up even more debt while paying down the original debt!

A balance transfer should NOT be used habitually to manage recurring periods of debt!  Poor financial habits and/or Multiple credit enquires may negatively impact your credit score - even if the enquiry didn't proceed.  This could influence your ability to be approved for a home loan in the future!

There IS another way....

Together we may consider consolidating all your debts (credit card balances, personal loans, car loans etc) into one loan with a much lower average interest rate.  If you are a home owner your home loan usually has the lowest interest rate.

Choosing YOUR best option should involve creating a budget, being brutally honest about your self-control when it comes to spending and repayments and then finding the fastest and lowest interest option to clear your debt.

If you need help call us TODAY.

 

 

Beware your spending footprint!

May 10, 2018

Did you know that your daily spending habits could be the difference between securing your loan....or not?

This time last year the big news in the finance world was the introduction of tighter lending criteria by APRA (Australian Prudential Regulation Authority) designed to curb what the regulator saw as 'heightened risk in investor lending.  The result has been a considerably slower investment property market.  

Now in 2018, the focus of the regulator is the accuracy and verification of borrower income and spending information in support of loan applications.

 

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Why are they doing this?

APRA plays a key role in protecting financial well-being of the Australian community.  Their focus on lenders' assessments of borrower living expenses and total debt is aimed at ensuring a more realisitic assessment of a borrower's genuine capacity to repay their home loan.

Why is this important?

We may be currently enjoying the lowest interest rates on record, however what goes down must eventually go up.

If you are a property owner and your financial situation isn't quite as healthy as your lender might think, you could find yourself struggling if and when interest rates eventually begin to rise.  And NOBODY wants to be heading into mortgage stress further down the track!

What if you're applying for a loan?  Could it affect YOU?

Whether you are a potential first home buyer or a current property owner looking to invest further, chances are you may be subject to this increased level of scrutiny if you apply for a new loan.

The answer?  Make sure you can substantite your stated income and expenses and any other loans or debt.  Ask us how!

Big brother is watching...

Many lenders now have a greater visibility over your spending.  Have you noticed that your transactions are grouped into categories such as groceries, utilities, cash out, retial spending etc on your online statement?  It is also important that you and your partner are on the same page when it comes to managing your finances.

So.... How can WE help?

There can be a variety of reasons a lender may reject a loan application.  This is where our expertise comes to the fore - we help you navigate a sometimes complex process and ensure you are 'loan application ready'.

It is our job to keep up with regulatory changes, interest rates and loan products to help you find the most suitable home loan for your individual circumstances.  An accurate assessment of your situation and home loan readiness will help you move forwards with confidence.

Here is a little story about Jack and Dianne....

In a recent loan scenario a loan application was submitted by Jack and Dianne to their existing lender along with verification of their incomes and a monthly expenses estimate of $2,500.  Because their savings accounts were held by the same lender, the lender was able to access their account history and determine their level of spending was not really $2,500 but more in the vicinity of $3,600!

To the great surprise of Jack and Dianne, the lender was even able to identify that every Friday Dianne has lunch at a certain cafe followed by beauty treatments and a bit of retail therapy.  Tim on the other hand - who is a bit of a car buff - spent most Ssturday mornings at Supercheap Auto tending to his hobby.

Neither was really aware of how mych their partner was spending each week OR that their 'bit of weekly fun' amounted to very much.  They certainly didn't expect it to be the basis for possible rejection of their loan application!

Fortunately Jack and Dianne were introduced to a broker by one of tehir friends who was able to work on a budget with them to identify what spending habits had to change.  With the broker's skill and knowledge they were able to resubmit the loan through the broker with an explanation to the lender about the changes they were going to make and they were able to have their loan approved.

 

  • Call the office TODAY to discuss your current budget and spending to get yourself application ready!!!!!

 

Get Ready To Knuckle Down

May 10, 2018

You have probably noticed in recent months that financial institutions have started to increase interest rates independently of the Reserve Bank's decision to keep the cash rate on hold.  

Not only are interest rates increasing but financial institutions are now starting to significantly change the lending rules and criteria sometimes on a weekly - evendaily - basis.

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  • Interest only loans are under scrutiny for investors AND owner occupiers 
  • Preferred lending rations are decreasing - that means larger deposits are required
  • Lending criteria is tightening, particularly for investors and off the plan purchases - potenitally a headache for those who entered into contracts at a more flexible time
  • Bank valuations are starting to come in lower than expected in most states across Australia.

If you have been sitting on the fence waiting for lower interest rates or looking to refinance your debt, then your oppurtunity may already be lost.

We are finding loans that were easily financed only a few months ago are now not being approved by mandy lenders.

What is driving the constant changes? 

At a time of record low interest rates you would expect the news for borrowers to be all good!

Instead lenders and regulators (Royal Commission anyone) tend to become very nervous about how borrowers will manage their debt when interest rates eventually rise, so they take steps to lessen the impact.

Bank lending rules are not a set and forget.  Lenders introduce changes over time largely due to funding pressures.  In addition, APRA (Australian Prudential Regulation Authority) has continued to exert pressure on lenders in an effort to slow down lending in a low interest rtae environment.

What are the signs of potential mortgage stress? 

  • If you are living week t week now, you will not survive a rate increase.  CALL US URGENTLY before it is too late.
  • If you have multiple investment loans and are highly geared CALL US FOR A REVIEW NOW
  • If you have an interest only loan coming off the fixed interest period CALL US NOW
  • If you have any finance coming off the fixed interest period in the next 3-6 months call us.
  • If your credit cards are maxed out and you are struggling to pay out the balance - yes you need to call us too.

How can we help? 

The reasons that more than 50% of Australian home owners now use mortgage brokers are:

  • We do all the research (that takes time and patience) to understand different lending products and can recommend several options for you across many different lenders.  Your bank can not do that.
  • We are a professional service provider and we educate you throughout your finance journey with us and beyond.
  • When rapid changes are happening in the world of finance, we are the best equipped across the range of lending products to help you identify how to get through these changes and come out singing! 

These are interesting times and although we are currently in a low interest rate environment, that doesn't stop the lnadscape from changing.

You are best to catch up with us at least every 18 months - preferably every 12 months.

Even just a 10 minute phone call to the office may help relieve the stress of not knowing whether you should be taking action.

It is much easier for us to help you BEFORE mortgage stress sets in.  Please do not leave it until it's too late for us to review your finance.

Call the office TODAY because we are going to be busy over the coming months.

 

Avoid a Christmas Spending Hangover

December 6, 2017

Excessive credit card usage is typically at its highest in December – only for us to then be hit with a very scary credit card statement in January, which is not a great financial start to the new year!

If you take action now to limit your spending, you may also protect your credit score in the process AND set yourself on the right track to achieving your financial goals in 2018! Here are some simple tips to help you avoid a new year spending hangover.

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So where do you start? 

Set up a holiday budget for gifts, travel, socialising and kids. (We know it’s boring – but it works!) 

Firstly, work out where the money is coming from. If you know you won’t have enough saved in time, rethink your budget now! 

  • Set a limit for all your activities, events and travels. 
  • Research and compare prices online and shop early. 
  • At all costs, avoid putting it all on your credit card at the last minute.
  • Better still, ditch the credit card altogether, and shop with cash or a pre-loaded debit card. Try withdrawing your budgeted amount in cash each week and making it last the distance!
  • Make a pact with the family to give gifts in the new year to take advantage of the sales.
  • Remember to factor in the cost of extra school holiday activities (those trips to the movies can really add up!).

Love this time of year? So why does it matter? 

It's difficult to achieve new financial goals if you are still paying dearly for the previous year's expenses. If you end up struggling to pay off the debt hangover, or even defaulting on payments, it could affect your credit score. 

Did you know that your credit score COULD impact your future financial plans? 

What is your credit score? 

A credit score is a mathematical assessment of the data included in your credit file. You will have a credit file if you have applied for a credit card, loan or even a mobile phone plan within the past five years. It contains a history of overdue debts, defaults and credit applications. It certainly pays to be aware of factors that have a negative effect on your credit score.

Why should I worry about it? 

Many people don’t realise their credit file is one of their most important financial assets. A poor credit score has the potential to affect: 

  • Your ability to obtain finance: If you are in the market for a home loan, car loan or finance for any reason, the loans with great interest rates may be out of your reach. 
  • Your rental ability: A poor credit rating may also see you knocked back on a rental application because those with a higher rating will seem to be a much better choice for most real estate agents and landlords. 
  • Your employment: There are even certain careers that you will be deemed ineligible for if you have a poor credit rating, such as select jobs in finance and insurance. Imagine if your previous big spending ways were to cost you a dream job? 

So… If you want to make a difference to your financial position NEXT YEAR, please call Luke THIS YEAR on 0438 569 584 to book a finance review – there are some appointments available for early next year. Make sure you book in before the holiday break! 

Good luck with the holiday season spending, and remember that we are always here to help with your budget or debt consolidation if things start to get out of control. 

Is Switching Loans a Suitable Alternative for Me?

November 27, 2017

Your home loan is usually your largest financial commitment. We understand that changes in interest rates can have a big impact on your monthly repayments and how long it takes you to pay off your loan. Switching loans might cost you thousands in early exit fees and other required fees, but it could possibly save you thousands of dollars as well.

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  • How will you know?
  • How will you compare each new lender's offering against others?
  • What new conditions will accompany a new loan?

When you contact us, we will compare your existing loan with other lenders' products.

We will use the following steps

We do the shopping around for you:

We use our financial calculators to compare the interest rates, fees and features of your current loan with several other home loans available. We might also be able to negotiate (on your behalf) a discount below the listed interest rate, especially if you have a large loan. We will talk to your current lender and tell them you are thinking of switching to a cheaper loan offered by another lender. They may offer to reduce the interest rate or suggest a cheaper 'no frills' loan. This could save you significant switching costs. Often, by using us as your mortgage specialist, we can secure a better rate than if you try to negotiate this yourself.

We research the potential savings from switching:

Our role is to calculate the fees you will be charged if you change loans, plus other expenses you may need to pay, e.g. Lenders Mortgage Insurance (LMI). We will show you how long it will be before you start making savings after the cost of switching. We can also compare the minimum repayments of potential new loans.

We compare home loan features against your existing loan:

We determine a range of potential loans that may be suitable for your circumstances and check them against your existing loan. We will compare the following features:

  • The ability to make extra repayments
  • Having an offset account
  • Having a redraw facility

You may pay more for a loan with extra features and flexibility, so we will need to determine if these features are important to you and if they are worth the extra expense.

You decide, and we help you take action:

We will present the potential cost savings and differences in features between loans.

Please note:

You will only reap the potential savings if the new loan stays cheaper over the long term. The longer it takes for a switch to save you money, the greater the chance that the interest rate saving may fade. Your savings can be used to pay off your new mortgage more quickly or to make lower repayments to alleviate some of your financial burden.

IF YOU DECIDE YOU WOULD BE BETTER OFF SWITCHING LOANS, LET'S TAKE ACTION TOGETHER!

20% of Retirees Will Run Out of Money

November 24, 2017

Research shows about 20% of retirees are spending their super at 'unsustainable' levels. What does that mean? It means about one fifth of us will most likely outlive our retirement savings. This percentage is predicated to rise as more of us enter retirement! Recent research shows 54% of pre-retirees (55 and over) are financially unprepared for retirement and only 8% are prepared.

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So WHY are retirees running out of money?

  • One of the primary reasons is simply because we are living longer. Australia is in the top 5 countries for life expectancy. If you are aged 64 now, you can expect to spend about 20 years in retirement.
  • Medical advancements have also meant that many of us are more physically and socially active in retirement than previous generations. That's a wonderful bonus for us, but not so beneficial for our super balance!
  • There has been a seismic shift in expectations of what 'modern' retirement entails – we now want a slice of the 'good life' after years of working. This is having a significant impact on how retirees use their savings.
  • Lastly, it has been suggested that our cultural tendency towards the 'she'll be right, mate' attitude has lulled us into a false sense of security.

Minimum draw down rates

The government mandates a minimum amount retirees should draw down from their superannuation pension each year. Data supplied from super funds shows that over the past decade 50% of these superannuation pensions are being drawn down at above these minimum rates. Interestingly, the balance 'size' did not appear to affect people's decision on how much to withdraw.

What is the alternative?

We know you've heard this before, BUT the majority of retired Australians rely on the age pension. In 2017 that amounts to a maximum of $669.60 per fortnight each for couples and $888.30 per fortnight for singles.

You can certainly see that reliance on the pension as your sole source of income would probably mean your retirement may not look quite like you had planned.

So what steps do you need to take now?

If you fall into the 'pre-retiree' category (and, let's face it, that's all of us who haven't retired yet, no matter what age we are now), planning is the key. The earlier you start the better!

Depending on your current age, this may involve a short-term, medium-term or long-term strategy. Statistics show 44.5% of homeowners aged 55–64 had an outstanding mortgage debt in 2013–14, which is almost triple the level from 1995–96!  Clearly, paying down debt and maximising our retirement savings are key considerations for most of us when planning the lifestyle we want in retirement.

Remember, you are never too young to start thinking about your future. Time and capital growth doesn't wait for anyone, so the time to start thinking about your retirement is right NOW!

We welcome the opportunity to discuss your financial future at any time. Call us for an appointment TODAY.

More than the big 4.

November 2, 2017

What do you know about the Australian lender market?

The 'Big 4' banks have maintained a dominant profile in the complex and ever-changing Australian finance market – just think about how often you read about them in the news! It is this high profile in our everyday lives that has contributed to the perception that all lenders are the same. Is that what you think? In fact, Australian consumers are spoilt for choice...

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What do you know about the Australian lender market?

The 'Big 4' banks have maintained a dominant profile in the complex and ever-changing Australian finance market – just think about how often you read about them in the news! It is this high profile in our everyday lives that has contributed to the perception that all lenders are the same. Is that what you think? In fact, Australian consumers are spoilt for choice... One of the key advantages of choosing us as your finance specialist is that we have access to a range of lenders when seeking a loan that may be suitable for your individual circumstances. We are not tied to just one lender and their limited availability of loan products.

So what is the difference between lender types?

Banks:

Banks are authorised deposit taking institutions (ADI's) and can use their own funds to provide home loans. They provide integrated banking packages including savings, transaction accounts and credit cards. Wide branch networks provide additional services but also contribute significantly to overhead costs.

Second Tier Banks:

Second tier banks are those that are not part of the Big 4. They include a surprising number of household names such as ING, Bank of Queensland, Macquarie Bank, Suncorp, ME Bank, Bendigo and Adelaide Bank, St. George, Bankwest, Citibank and AMP Bank. While some are now owned by the big banks, it is worth considering their competitive offerings.

Building Societies and Credit Unions:

These non-profit cooperatives are owned by the people who use their services so each member is both a customer and a shareholder. Rates can be very competitive. Member deposits are used to fund loans. Like banks, they offer a wide variety of banking facilities with a focus on customer service. They are regulated in the same way as banks.

Non-Bank Lenders:

They do not hold an Australian banking licence, so they cannot accept deposits and must source wholesale funding via investors, financiers, trusts and even the Big 4 banks. They do not have overheads of an extensive branch or ATM network. The appeal for customers is the competitive interest rates, more flexible lending criteria (e.g. for low doc or non-conforming loans) and higher loan to valuation ratios (LVRs). However, low rates are often balanced by higher fees. An emphasis on customer service, faster loan processing times and responsiveness are other selling points compared to the big banks. However, they tend to have limited products and services, so they may not be suitable for all your financial needs.

So, do we recommend the Big 4 to Clients?

The Big 4 are strong competitors with broad product ranges. If they have a solution suitable for your individual circumstances, of course we would recommened them. However, we may also recommend second tier banks or non-bank lenders if their product, pricing and services are ideal for you. Most importantly, you will have confidence in knowing that we only recommend lenders that have provided a good personal experience for other clients.

CALL OUR OFFICE TODAY IF YOU WOULD LIKE US TO TAKE THE LEGWORK OUT OF YOUR SEARCH FOR LENDERS.

Planning for Retirement – Will you have enough money?

October 23, 2017

Our recent client survey revealed that 48% of our respondents have an investment property! That is music to a finance specialists's ears – it is satisfying to hear that people have a financial strategy that could lead to a more comfortable retirement...

Mortgage Broker Sandhurst Carrum Downs Mornington Peninsula

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Our recent client survey revealed that 48% of our respondents have an investment property! That is music to a finance specialists's ears – it is satisfying to hear that people have a financial strategy that could lead to a more comfortable retirement. However, 66% also said that they were worried about having enough money in retirement. This is a concern for many of us as almost 80% of Australians over 65 receive the aged pension. For 66% of those retirees, the pension is their main source of income. So, have you started to think about retirement? It is never too early to start planning, but it can certainly be too late.

Where do you start?

And when should you start? Firstly, you need to focus on the lifestyle you want in retirement and then how you plan on getting there.

What if your plan changes?

That's fine. You can make goal adjustments along the way. In fact, a retirement plan shouldn't be a 'set and forget' strategy. Chances are that your imagined needs in your 20's may look quite different by the time you reach your 50's. A good starting point is to calculate how much you will need to ensure a comfortable retirement.

What is a comfortable lifestyle?

For most of us this means being able to pay bills without financial stress, the odd holiday, maintain a house and car and an occasional indulgence. You will generally require 60–80% of your pre-retirement income to lead the type of active life you desire IF you have paid off your mortgage. It was previously assumed that the first 10 years of retirement would be the most active and most costly. With longer lifespans and an increased chance of health or mobility issues, this could change.

What should a plan include? 

There is no 'one size fits all' plan for wealth creation. If you are in your 20's and plan to retire at 65, your options may be more diverse than if you're approaching 50.  

Superannuation

Many Baby Boomers will outlive their superannuation savings. While younger generations will have more time to maximise super balances at retirement, they may also have significant HECS debts, which was generally not an issue for previous generations. As you approach your retirement salary sacrifice, a transition to a retirement strategy or property investment through a self-managed super fund (SMSF) could help build your superannuation balance.

Property Investment

Property investment has long been considered a proven road to personal wealth, yet only around 20% of Australians successfully invest in property outside the family home. But there may be more than one way to get a foot on the property ladder.

Save a deposit: Budget and stick to a savings plan. Gen Y's living at home should maximise the opportunity to save and invest. Increase saving each time you get a pay rise.

Ask your parents to help: There are several ways parents can help children into their first property including a cash gift/loan or acting as guarantor. There are also new mortgage products such as a family pledge or family gurantee.

Use rent as a savings plan: A continuous rental history of 12 months may be taken into account when assessing your ability to service a loan.

Co-ownership: Perhaps explore investing with family or friends.

Already a home owner: Access the deposit for your next property by using the equity in your current home or property. 

The earlier you start planning for retirement, the greater your chances of living the comfortable retirement most of us desire.

15 Ways to Own Your Home Sooner

October 16, 2017 | Luke Sorati

For those of you with a home loan, paying it off as soon as possible will give you a great amount of financial freedom to do whatever you want. Before taking action on any of the below suggestions, we recommend you speak with a finance specialist. Call me on 0438 569 584 for more information on any of these 15 suggestions.

Mortgage Broker Sandhurst Carrum Downs Mornington Peninsula

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1. Pay the first home loan instalments as soon as you settle

2. Review your loan at least every two years and negotiate a cheaper rate with good flexibility

3. Ensure you use a mortgage offset account for your savings and understand how to best use it

4. Split your loan – fix a portion and leave the rest variable for flexibility

5. Avoid redrawing money off your mortgage at all costs

6. Don't lower your minimum regular payments if interest rates fall

7. Set higher minimum payments

8. Make lump sum repayments or regular mini lump sum payments

9. Pay your loan fortnightly rather than monthly

10. Set a budget and reduce any unnecessary spending

11. Pay loan fees up front

12. Align your repayments with your income cycle

13. Make extra payments as often as you can

14. Talk to us about loans that offer features without a charge

15. Check loan fees and negotiate where possible 

Please give me a call to discuss any of the above or to work out how much you can save with extra repayments.

 

For a pdf copy of this blog please email luke@flamemortgages.com.au or check out my Financial Fact Sheet page.