By Dave Fleming : 22 August, 2017

Have You Ever Heard Of Mortgage Rate Bracket Creep?

What is Your Current Mortgage Rate?

39506709 – bracket creep word highlighted on the white paper

We’ve probably all heard of bracket creep when it comes to our salaries and pay packets, which is where you can end up in a higher tax bracket as your salary or pay increases. That being so, I’m thinking about creating a new description for home loans called mortgage rate bracket creep.

As a mortgage broker I bend over backwards for my new customers and try and get them the best interest rate going based on the features of the loan they are looking for. Keeping in mind, there isn’t a one size fits all when it comes to interest rate quotes on any given loan. Mortgage brokers are attuned to what tolerances most lenders have when it comes to negotiating what interest rate they’re prepared to offer on a specific loan.

Interest Rate Influences
To clarify the above, the rate of interest a lender will offer a borrower commonly depends on the loan amount (higher loan amounts get a better rate), what the loan to value ratio is going to be can also be a factor. Commonly lenders will offer a better rate if the loan to value ratio is 80% or under. In other words the loan amount wanted doesn’t enter into Lenders Mortgage Insurance territory, which for a full doc loan is over 80%. For low doc loans that can be 60%.

The new game for lenders is (especially the majors), now seems to be luring borrowers through the front door with enticing offers and then slowly (without fanfare) gradually increase the rates as time goes by. In May 2016 the Reserve Bank of Australia lowered the official cash rate to 1.5% and since then it hasn’t moved. Nevertheless, many people are finding that their owner occupied principal and interest repayment home loan interest rate is now hovering around the 4.7% to 4.9% interest rate. So, what’s happening here?

Does Your Interest Rate have a 3 in Front of it?
However, you might say, “that wouldn’t be happening to me, when I negotiated my home loan or investment property interest rate I got the best rate going”. Don’t be so sure, typically for owner occupied loans that have principal and interest repayments attached to them we are regularly negotiating rates for customers under the 4% benchmark. If you’re paying more than that for your loan I would suggest you get a mortgage health check at your earliest opportunity.

Are You Better off with a P&I Investment Loan?
Lenders have also been making hay while the sun shines by using the regulatory authority’s edict to reduce their loan book percentage of interest only loans as a facade to increase interest rates for The words Interest Rates on a blacktop road and a percent sign at the top of the street, symbolizing the rising interest rates due to economic factors and conditions those loans. In fact some financial experts are saying that investors should get their calculators out and calculate whether or not it would save them money by switching to a principal and interest loan for their investment property mortgages.

The reasoning for that trade-off is to see if the savings on interest rates by switching to a principal and interest loans is going to be greater than the tax benefits that would received based on the higher tax deduction for the increased interest repayments. Talk to your accountant or mortgage broker on this one as I don’t foresee any lender being enthusiastically helpful with this one.

Lenders Lurking in the Shadows
While all this has been going on lenders have also surreptitiously been slowly edging up interest rates on owner occupied principal and interest rate home loans. My suggestion is, if you don’t know what interest rate you’re being charged by your lender at the moment, go and check your latest statement online and see for yourself. If your rate doesn’t have a 3 in front of it (excluding fixed rates), then it’s time to take action and either call your lender or talk to your broker and ask them what they can do for you.

Break Costs Explained Once and For All
While we’re talking about fixed rates it’s probably worth a small blurb about break cost penalty’s as many people get hung up on the fear of trying to break a fixed rate loan. For years banks tried to keep consumers in the dark with their Boogie Man story of the terrible costs that would be thrown at anyone who ‘Woe Betide’ even thought about breaking their fixed rate contract.

Here are the facts; the only costs that a borrower would have to pay would be the ones that the lender would incur. The lender would only incur costs if they had to relend the loan money you discharged at a lower rate than what they had you contracted to. In other words, if they were able to relend the money from your vacated loan at a higher rate, then they would be making money and would have no basis on which to charge you any fees for breaking your loan contract.

That said, if you have been considering fixing your principal and interest owner occupied home loan now would be a good time to do it. Rates are not going to go any lower, but there’s a chance the banks (not the Reserve Bank of Australia) will find excuses to incrementally start increasing rates. There are a number of other economic indicators that are starting to suggest that rates could increase in the short to medium term.

A Strategy Worthwhile Considering
House shape made out of wads of $100 dollar billsA good strategy is to split your loan, whereby its part fixed rate and part variable rate. This allows you to have the best of both worlds by having the certainty of the fixed rate and the flexibility of the variable rate. Most fixed rate loans have limits on extra repayments over and above the minimum contractual payments they will allow you to make. Also, most fixed rate loans lenders don’t allow you to have offset accounts linked to those loans, although there are a couple of exceptions.

By doing what we’ve just discussed above banks are now opening themselves up to greater competition to second tier banks, non-bank lenders, credit unions and building societies. Additionally, keep in mind that the Government is about to put a levy on five of the biggest banks and we all know what that means. Yes, higher fees, charges and interest rates from those lenders. Therefore, it may pay you handsomely to start devising a strategy on how to save money on your mortgage.

Find a savvy experience mortgage broker who is going to put your interests first who know all the tips and tricks on how to save you money and at the same time enhance your lender experience.

Thanks for reading.

For The Home Page <ahref=”http://www.mastermortgagebrokersydney.com.au>Go Here

By Dave Fleming : 22 August, 2017

So, are you looking to buy your first home?

This can be a major step for anybody, and you will find quite a few things to consider, not the very least of these is the way to get the funds for a house. Sure, there are lending options readily available for property purchases; however you will need to have some money on hand to pay for a deposit, also there are other costs, which include fees and settlement costs that you may not be able to get included in a borrowing arrangement.

How Much Money do You Have to Start?

First home buyers signIf you’re like a lot of first home buyers who are looking to purchase using a low deposit home loan you will still need to do your sums to calculate how much cash you will need. Most lenders who provide low deposit home loans want to see that you have at least 5% in genuine savings. What does this mean? It means you will be able to demonstrate that you have saved 5% of the purchase price over a 3 month period. Or, you have had that amount of funds in a savings account in your name for at least 3 months.

Basically they want to know if you have fiscal discipline and a sense of responsibility. In addition, if you’re buying an established property you will also have to prove to them that you have enough additional funds to complete the purchase transaction. This means you will need enough extra cash to pay for purchase stamp duty and legal costs.

Are You Eligible for Government Concessions?

If you’re purchasing a new home that nobody’s ever lived in before you might be eligible for first home buyer concessions. If you fit into that category you should check with your local states Office of State Revenue for any programs they may have.

So, what are some methods the everyday Australian can use to get hold of some funds to cover the dollar amounts required to purchase a home?

Cash Generating Tips

Happy couple holding baby in front of sold houseIf you are planning to get a property inside of 12 months you will want a savings strategy that’s going to yield immediate results. Saving cash is usually a complicated challenge if you only have a preset amount of disposable income on a month to month basis. A Second employment opportunity could be a possible option for generating fast savings.

Investigating other cash flow scenarios including a cash value insurance policy might help put some cash together. However, be mindful that withdrawal penalties could be applied, nonetheless it may be well worth the expense to get your first home.

Additional ways to pull together cash include things like selling off valuable items on the net or with a garage sale. Spare cars, stocks and shares, collectables, along with other things that have got a good value can easily generate big returns.

Some lenders will allow a gift from the borrowers parents as long as the parents are prepared to put in writing that the money is a gift and non-refundable.

Longer Range Planning Strategies

Home for sale with signShould you be concentrating on a long range strategy you naturally will have much more time to accumulate the required funds. Investing more money into a term deposit or perhaps a cash value insurance plan may help keep hold of the funds for your new home.

Starting a savings bank account can certainly help ensure that the financial resources are readily available and generating interest along the way.

An additional second job would still be another possibility, but if you have the luxury of much more time to save you would then have the luxury of having to work a lesser number of hours.

Starting a home based business would provide a flexible alternative for generating extra cash flow. Nevertheless, choose wisely in finding a business enterprise that is both rewarding and legit.

Tithing is an Oldie but a Goodie

It takes a smart person to make money, however it takes an even smarter person to hang onto it. In today’s society most people are so busy paying everyone else, there is never any money left over to pay themselves. To reverse this habit a person needs to sit down and map out a budget of their expenses. Once that has been done, whittle those expenses down until there is a cash surplus left over each month.

A worthy goal is to aim at saving a minimum of 10% of your net income each month. In other words, before you pay anyone else you pay yourself 10% right off the top. Then, you figure out how to manage your lifestyle so you can live on the 90% that is left over.

The purchase of a home is a sizable, but very worthwhile step, create a workable plan for getting the money together that you need and then stick to the plan through thick and thin.

Bio:
About About Dave Fleming

Dave is enthusiastic and fascinated by the digital and social media worlds. He is passionate and enjoys entrepreneurial pursuits, wealth creation financial strategies, health, fitness as well as cooking. Dave is the webmaster at www.mastermortgagebrokersydney.com.au, which is an information website pertaining to loans. He has a deep commitment towards writing about and helping people understand the basics of how the financial world works.

Would you like more Refinancing Information?

By Dave Fleming : 22 August, 2017

No matter if you have a lot of money or only a modest income, it is really important to manage your available funds as well as possible. It’s been said that it takes a smart person to make money, but an even smarter person to hang on to it. You’ve probably heard the story of the person who won lotto or Powerball only to be broke again within 12 months.

How how do you know if you are actually good with money?

If the following 5 signs apply to you, it probably means that you are good with money.

 

You Have a Strong Budget

Moirtgage brokerThis means that you have made a list or spreadsheet of all your expenses on a weekly, monthly, quarterly and annual basis. After all, some expenses like rent, mortgage, electricity, car registration or holidays, do not fall due every week.

However, it is important to make provision for the annual expenses, and not panic when they fall due. Add up all your expenses and divide by 52. You now know what the maximum amount is that you can spend each week.

Don’t forget those expenses that only happen occasionally, such as car and house insurances. Also, you’ll need a car service and new car tyres every so often.

Compare the budget with your income. If your weekly or monthly income is greater than your expenses, then you are on good ground. If you expenses exceed your income, you will have to trim some of your expenses.

A good objective is to focus on paying yourself first, rather than paying everyone else first and then looking to see what’s left over for you. For most that’s usually nothing and then, frequently having to rely on credit cards when there’s more month than pay cheque.

 

You Avoid Waste

You buy only as much as you need. This applies to clothing as well as to food. If you throw food out on a regular basis or at all, you aremortgage broker sydney wasting money. You take a shopping list with you to the supermarket and avoid buying specials unless you really need the item. You avoid fast food, and take a ‘doggy bag’ from restaurants if you could not finish your meal.

Try to condition yourself to think creatively before spending any money. Think, do I really need this item? Is there another alternative that could be used?

Multi-millionaire friends of ours from California on a trip to Australia many years ago wanted to find out how to make Sticky Date Pudding. This was before Google was around, so I suggested they go to the News Agents and look through the Family Circle and Women’s Weekly Magazines for the recipe.

About 5 days later they came back from a day at Manly Beach and excitingly said “Eureka, we found it, we found the recipe”!
I said, “That’s great which one did you buy?

“Buy”? He said. No, I didn’t need to buy anything, I read the recipe out and Linda (his wife) wrote it down.

There’s a lesson in there for all of us. We all seem to follow the least line of resistance and just readily pull the wallet out and part with our money. Instead, we should think twice, use a little brain power and consider if there’s an alternative.

 

You Pay All Your Bills by the Due Date

sydney mortgage brokerThis includes your credit cards. You don’t only pay the minimum amount, since interest on credit cards is so high.

Try to avoid credit cards that have expensive annual fees. If you retain a balance on your credit card/’s at the end of each month, thens shop around and get a basic credit card that has the lowest interest rate you can find.

Some bills, apart from credit cards, attract interest if they are paid late. You always make your mortgage payments on time, since the interest rate increases, sometimes by as much as 4% per annum, on the arrears.

You Have a Dedicated Savings Account

You have set up a direct monthly transfer of a fixed amount into a savings account. This is for special purchases like furniture, a holiday or the deposit on your first home. It is really important to get into the habit of saving money as early as possible.

This is one of the key’s to creating a better quality of life. As soon as you get your pay, you transfer a predetermined amount into a savings account. Somewhere between 5-10% of your regular pay is a good place to start. The idea is, you pay yourself first and then manage the budget around what is left.

 

You Look Around for the Best Deal When You Need Something

Comparing products and services from one provider to another can save you lots of money, whether you are in the market for householdhome loan expert appliances, baby furniture or car seats, credit cards or other financial services. Many similar products are available and you can make significant savings by doing some research before you commit yourself.

If you have a mortgage or a credit card balance, have you done a health check on these financial products lately? For credit cards, get on the internet and do some comparison shopping. If you have a mortgage, why not have your mortgage broker give you a health check. They’ll be happy to do that for you free of charge.

Authors Bio:
Sally Wolcott writes for creditcard.com.au , she worked for over 30 years in the areas of both corporate and personal insolvencies, advising numerous clients facing bankruptcy, as well as acting for financial institutions in the area of debt recovery. For the last 20 years she operated her own legal practice in North Sydney and is now retired.

 

Okay, How About a Bit of Fun!

best home loan brokerA wealthy, dying gentleman, laying upon his deathbed, requested that his priest, his bank manager and his lawyer come and join him at his bedside.

He told all of them that he wanted to be entombed, when he eventually passed, along with all of his cash. He then provided them with two hundred and fifty thousand pounds each and told them to toss the cash onto the top of his coffin, after it had been lowered into the burial plot, right after he had died.

A short time afterwards the old gentleman kicked the bucket and was laid to rest inside of a week.

Afterwards at the wake, the 3 men were having a chat during which, the vicar was all of a sudden weighed down with a sense of guilt. He then felt compelled to confess to the other pair he had in fact, only tossed one half of the cash on top of the coffin, given that the church required critical maintenance to the roof structure.

This got to the bank manager who thought, ‘What the heck if we’re going to have a confession,’ he then admitted to the other two that he also had only tossed half of the money he had in, given that the ‘Credit Crunch’ was now starting to hit hard and he really needed some extra funds for his bank in order to stop it from going under. The lawyer then jumped in and sternly told the other two, ‘This is an absolutely pathetic, shameful thing that has been done by both of you. I put a cheque in for the total sum!”

Bio:
About About Dave Fleming

Dave is enthusiastic and fascinated by the digital and social media worlds. He is passionate and enjoys entrepreneurial pursuits, wealth creation financial strategies, health, fitness as well as cooking. Dave is the webmaster at www.mastermortgagebrokersydney.com.au, which is an information website pertaining to loans. He has a deep commitment towards writing about and helping people understand the basics of how the financial world works.

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