By Dave Fleming : 15 December, 2017

Hot Off The Press, Courtesy
Of Channel 9 News

Almost one million Aussie households are
staring down a mortgage ‘time bomb’

mortgage debt spelled out on scrabble tokensAlmost one million middle-income Australian households are facing a mortgage time bomb as soaring living costs plunge families into repayment stress.

A new analysis by Digital Finance Analytics (DFA) has shown that the number of households currently in mortgage distress has risen by 20 percent in the last six months to 910,000.

At the current rate, more than one million households will be struggling to make repayments on their home loan in 2018.

Primary factors ratcheting up the stress faced by families include stagnant wage growth, living pay cheque to pay cheque and the looming threat of a rise in interest rates.

Martin North, Principal of Digital Finance Analytics, says that the risks of more middle-income families borrowing enormous loans from the banks are rising.

“Risks in the system continue to rise, and while recent strengthening of lending standards will help protect new borrowers, there are many households currently holding loans which would nothand calculator with Mortgage showing in the calculation screen now be approved,” said North.

“The number of households impacted are economically significant, especially as household debt continues to climb to new record levels. Mortgage lending is still growing at three times income.
“This is not sustainable.”

Broken down by region, NSW had the most households in stress with 238.703, followed by Victoria with 250,259, Queensland with 162,726 and WA with 121,393.

Households are defined as being “stressed” when their net income does not cover ongoing costs, including repayments on their home loans.

Households that have a tight budget but manage to make ends meet are defined as being “mildly stressed”, and those who are unable to make a mortgage repayment within the next 30 days are defined as being “severely stressed”.

word cloud with debt as the central wordNine Network’s Finance Editor Ross Greenwood said that it’s “pretty obvious” why families are struggling.
“Families are struggling with rising costs. Rising health insurance premiums, rising electricity bills and on top of that, many families have taken on very big mortgages,” said Greenwood.

“Now if their wages aren’t growing fast then quite clearly they are going to struggle.

“Another worrying statistic is that there are now 52,000 households that this organisation has identified that are now 30 days behind on their mortgage repayments, that means technically banks could walk in and close them up.”

Independent Analysis

I have been in the mortgage brokering industry now for approximately twenty years and I have now seen a whole generation of Australians take out mortgages who have no experience of what a 7-8% interest rate mortgage is. Many of these borrowers insisted on borrowing to their maximum capacity. Although in the last six months banks have been tightening up on what any new borrowers can get loan amount wise, there is still many years of previous borrowers who pretty much were able to borrow almost anything they wanted.

Recently we have seen not only banks but many other commercial enterprises prey on the Australian consumer with increased prices (energy companies being one of the notable ones). Although many borrowers have budgeted diligently there would be very few of them that would have factored in some of the essential services price rises we are seeing.

The Solution

For many there may not be a solution, however our advice is to drill down on your budget and find every last cent you can find and start paying it onto your mortgage. I would recommend you beg, borrow, and tighten your budget belt to find whatever you can to pay toward your home mortgage in order to escape the mortgage stress that may be headed your way in the not too distant future.

Also, get with your home mortgage broker, because if you have a 4 in front of your home mortgage you are probably paying too much.

Home Page Return

Refinance Page Return

Mortgage Reduction Page Return

Borrowing Power Page Return

By Dave Fleming : 15 December, 2017

toy wooden house cut out sitting next to a series of check boxesOne of the most important financial decisions that you’re going to make today is that of getting a home. To get a house today, you’re going to have to work with a financial investment that takes on many years. It’s a decision not to take lightly. With the sheer number of applicants that want a mortgage, banks and other lenders are now starting to restrict the qualifications that someone has to have in order to get a home. This can be both helpful and a hindrance to those that are trying to get a home.

The change in the qualifications a person needs to get a home has been received with mixed reviews. As Australians seek to buy property, they are starting to realize that the property market can shift wildly depending on several factors, including their income and buying power. To fully understand this, and the changes, it’s imperative to consider a few notes in regard to the rules and regulations that seem to be calling for more experienced brokers overall.

Factors at Play
The first thing that you need to realize about purchasing a home is that there are a lot of different factors at play when you apply for a mortgage. Whenever a person seeks to get a loan, the broker has to consider a great deal of elements, including financial history, current employment records, affordability and other risk factors that aren’t always seen by individuals.

Purchasing a home should not be taken lightly, and therefore brokers are now putting in a lot more scrutiny to figure out just how qualified a person is before they give such a large sum to them for a home purchase. With the changes by the federal government causing a disruption in long term mortgage handling, individuals have to understand that there’s no “yes or no” scenario here, as a lot of elements have to weighed out.

Why Mortgage Brokers?
For consumers that aren’t certain that they want to deal with brokers, it’s imperative to realize that they are going to help smooth over the lending process. Mortgage brokers today help consumers figure out what loan type is best for their specific needs. It seems like this can be difficult at first, but you’ll find that brokers are trained to isolate risk factors and help people get the home they want, without breaking the proverbial bank.

A mortgage broker will sit down with a consumer, and they’ll discuss assets, price points, income, self-employment elements, and so much more. They’ll tailor a solution that meets the needs of the consumer, and not just approve a dollar amount. This is better than just asking for a set amount, and hoping for the best. The broker is trained to help meet the needs of the consumer, simple as that.

The Cost of a Broker
People assume that getting help in financial matters means that you’re going to have to pay someone a fee up front. That’s not the case inman's hand writing mortgage broker in light blue texta on reverse glass relationship to mortgage lending. In fact, you’ll find that there are plenty of free services that you can work with, especially if you want to get the advice of a mortgage broker about lending and more.

Mortgage brokers are in the business of connecting people with lending opportunities that they can afford, so that they can purchase the home of their dreams. They can help with focusing on mortgage rates, and price points that are not going to cripple the finances of any one individual. It’s a positive push forward.

First time homebuyers will delight in knowing that someone will help navigate the road of purchasing a home today. Purchasing a house is not a transaction that works the same like buying anything else. You’ll find that you’ll need to work through a variety of elements if you are to get the right home for your family. A broker can answer questions, and explore solutions that are going to help make this a bit easier to manage.

Dealing with Mortgage Brokers
man with black felt pen writing who, how, what etc on a white boardFor those that haven’t dealt with a broker or the new rules that are in place for mortgage lending, consider asking questions. Write down questions beforehand, and get ready to ask questions that you are not sure about. Do not feel that any question is off limits, or “dumb”. There are no dumb questions here, because you’re dealing with a loan amount that could take you decades to pay off. Do not resist asking questions, it’s that simple.

The mortgage broker that you use will not simply help you get your mortgage, mind you. They will help you understand any changes and updates that come through the marketplace after the fact. If there’s a change, problem, or new legislation, you’ll hear from the broker that helped you, so that you know what you’re dealing with. Buying a home is not something that is easy to get done on your own, and brokers know this, which is why they build a relationship with clients to help navigate the real estate market appropriately.

Your mortgage professional is in charge of staying abreast with all the latest news, views, and updates. They help navigate the real estate world, mortgages, financial matters, and any abrupt changes that the Reserve Bank of Australia may end up moving forward with.

Be Patient
At the end of the day, the best tip that you can take with you today is simple, be patient. That’s right, be patient with your mortgage lending and investigation. You may have found your dream home, but don’t assume that the transaction will be open and closed within a short span. Get a professional mortgage broker to help you gain access to the bigger picture, and you’ll end up with a positive push forward.

Home buying takes time, but so does the lending solution. If you rush things, or try to avoid using a broker, you may find yourself with a mortgage that is too hard to pay off, or rates that are not favorable for you at all. Take your time, ask questions, and get a good broker on your side.

Check The Home Page Out

By Dave Fleming : 15 December, 2017

Just pay out the credit cards – It seems like a no brainer, right?

Pay Down Your Debt imprinted on a Credit Card in a 3d IllustrationYou’re buying a home or looking to get a significant personal loan, so you’re going to pay off your charge cards to minimize your debt, but keep them activated so that you can get some household furniture or cope with emergency situations although you may have a mortgage loan to cover. Wrong.

It’s obvious that a loan provider will take into account your credit card obligations and the repayments on those when you make application for a mortgage. What many individuals do not appreciate is that charge cards that tend not to have any debt owed can also impact a loan companies evaluation of what you can afford to borrow. Most individuals decide that the prospective loan service will still only be worried about how much the credit balances end up being.

What Lenders Are Afraid of

When you’ve got a large credit limit, you then have a greater debt risk in the eyes of the lender. As the logic goes, there is absolutely no way to stop you from racking up financial debt on your charge card the day after your finance is okayed. Say, on lovely furniture to be able to fill up that brand new home or jump on that inviting cruise liner sitting at the local docks.

“We have to take into account about three per-cent of the total credit card credit limit, it doesn’t matter what the individual owes”, says the loan broker.

“If they possessed a $10,000 maximum approved limit but the balance owed was only $1,000, you still have to assess $300 a month (around 3% of the limit amount) according to lender policy as a liability. It will make quite a variation”, says the adviser.
Out of this, it is typically surmised that if you have never put a brass razoo onto your charge card for the past five years, a substantial borrowing limit will negatively influence your borrowing capacity serviceability; $300 per month off a home loan repayment will mean a lot over the duration of a loan. The truth is, having the capacity to pay back an added $300 each month over a 30 year $500,000 loan at 5.5 percent interest will mean paying it back Five-years quicker, as well as saving somewhere around $100,000 on the overall amount of the loan. In contrast, it could possibly mean that you are able to obtain an extra $50,000.

Increasing your chances

The best thing you can do is reduce your credit card limit or terminate your credit card account.

“You really need to pay off your bank plastic and stay away from having any other debt,” declares the loan broker. “You will need to be able to employ your full sum of income.”

For those who have to pay off their charge account in advance of dreaming of cancelling their financial liability, it is, in fact, necessary to make those repayments when they’re due to prevent negatively hurting your credit rating.

Be careful what you show them

When you do present bank card statements to a possible lender you will need to make sure that there’s no harmful notations across the documents, like overdue payments or maybe over the limit entries. Those kind of entries will likely get a rejection with most loan providers.

If you need to decrease your debt as a way to trim your charge card limits to help be approved for mortgage finance stick to the following tips.

1/. Concentrate on only one card account to begin with. In cases where you might be holding amounts on several credit cards, it’s a hardPay Down Your Debt imprinted on a Credit Card in a 3d Illustrationslog to remove those debts. Ask your self this: What short term financial goal will help make me feel as though I am putting together significant improvement on credit card debt reduction?

If your answer is “Having one charge card entirely paid back,” then toss as much dollars as possible at the charge card with the smallest balance to start with. In the event the reply is “Elevating my credit score,” then tackle the card having the topmost utilization rate (this is your debt owed divided by the credit card’s ). Due to the fact your score takes a hit should you use over 20 percent of your readily available debt owed, moving the utilization value down just Twenty per cent might significantly boost your credit rating Given that your reaction is “Having to pay less in interest charges,” in that case your tried-and-true technique is to get rid of the card which has the highest rate of interest first.

2/. Check with your lenders for decreased rates. Often a straightforward telephone call to the provider is all you will need to secure a more affordable rate of interest, so long as you’ve got a good credit score (any credit report score of 730 and up) and you’re already a long term patron who makes regular installments in a timely manner. You might get a percent or even more sliced off, which may amount to 100’s of dollars saved each and every year. One suggestion to try out: In the event that you could have already been presented with a smaller percentage rate by a rival, don’t hesitate to tell the customer service rep There is a chance they’re going to meet the other offer.

3/. Transfer the balance (wisely). It’s enticing to move a balance from a card account with a high rate of interest to a new charge card which has a substantially lower one. And quite possibly that could be an intelligent approach; it can save 100’s of dollars a year. However take care: You need to transfer a balance only if you are dedicated to paying back what you owe within the intro low rate time frame (which usually is on offer for 12 to 18 months as soon as the first billing cycle closes) and to making monthly obligations in a timely manner. Otherwise your interest rate could explode, quite possibly winding up in excess of the one you recently eliminated.

(Vital: You must also refrain from making any kind of new additional purchases using the new credit card, as quite often the reduced rate of interest won’t be applicable to them.) Additionally, realise that you’ll in all probability end up being asked to pay a balance-transfer fee, which can be generally about Three to four per-cent of the whole balance amount transferred.

4/. Make use of a peer-to-peer loan provider. In a perfect world, you’d probably clear your bank card outright and then be free as a bird. But if you can’t accomplish this, think about asking for dollars in order to clear your card account coming from a peer to peer loan company, say for example a personal loan company with a low percentage rate. These lenders may offer loans with set interest rates that could be 20 to 30 percent below almost all bank cards.

5/. If you are seriously truly in a tight spot, come up with a couple of minimum repayments each and every month. Credit providers generally can charge interest fees on a day to day basis, consequently the earlier you can make a repayment, the faster your nominal everyday account balance will be reduced, and this translates into a lesser number of dollars in interest fees that you ultimately fork out. If you happen to be on a strict budget, go ahead and give the the bare minimum owed month to month, then try to make precisely the same payment for a second time a fortnight later. Continue to keep coming up with a repayment of the original minimum due amount twice a month until finally the debt is paid off.

Taking care of your money successfully can result in a financially stress free everyday life. You’ll find any quantity of helpful suggestions and tutorials that can be seen online.

Finally, all the best with your financial future.

Home Page Access Here

By Dave Fleming : 15 December, 2017

How did we get into this Mess Anyway?

man clutches his head in panic as stock market crashesIt’s been over eight years (how time flies) since the Global Financial Crisis made its presence felt. Initially Australia looked like it was going to be immune to its effects, or so a lot of people thought. However, we all now know that’s not the real world we live in. The real world we’re now living in here in Australia is a world that has been economically affected by the financial status of the countries we trade with.

In simplistic terms if people in America aren’t buying new houses then they’re also not buying all the furnishings that go with those houses, such as white goods etc. If they’re not buying those then manufacturers are not making them. I think you get the gist of what I’m trying to say.

If people in first world countries are not buying, then the economies of manufacturing countries like China, Japan and India go backwards. When they start going backwards they stop buying coal and other resources like iron ore.

Why Have the Banks Been Immune to all of this?

That’s why we had a two speed economy that everyone marveledcartoon of greedy banking grabbing lots of bank notes at. Fast and average were the two speeds we had. What we have currently is average and slow. Now the mining boom is over for the time being our economy is going to continue to struggle until the global economy starts to hum again.

It seems the only industry that is not bemoaning its fate is the banking industry in Australia. They continue to make record profits off of the back of hard working Australians. The four major banks in Australia continue to make record profits year after year.

Even though the Government outlawed exit fees on home loans, lenders have come up with new and innovative ways to ensure that their profits continue to increase. These strategies include increasing interest rates out of sync. This means, when the Reserve Bank of Australia’s (RBA) rate increases, the banks have in some instances increased their rates even more and also have not been passing on all of the rate cuts when announced to maintaining ridiculously high credit card interest rates.

When does the Rip Off Stop?

Their ongoing justification for this outrageous profit plundering is that Australia needs a profitable banking system to maintain a strong balanced economy. Well, how much is enough? When does this flagrant profit gouging stop.

At the moment the Federal Government has been a running a ‘Show Tribunal’. They lined up the boss’s of the big four banks and then fired some tepid questions at them, which made a couple of them squirm uncomfortably a little bit in their seats. What’s going to come out of that, not much? We may see one or two minor concessions, but that won’t slow the banks profit increases down.

What can You do About it?

Unlock your potential sign in rainbow coloursUnless we take personal responsibility for our own finances, we are always going to be stressed out with the banking system and trying to pay off our mortgages.

In the current market interest rates are at an all time low and some economists are predicting they could even go lower. Some say as soon as next month. In this financial environment it behooves anyone who wants to get ahead financially to start working their finances a lot smarter.

The principal and interest repayments on a 3.64% (yes you can get an owner occupied home loan (<80% LVR) with an offset account at 3.64%) $500,000 30 year owner occupied home loan are $2,284 a month. We all know that the majority of that repayment amount for the first 15 years is going to go to the bank in interest. Did you also know that over the last 30-40 years home loan interest rates have averaged around 7.5% to 8.5%? Many current older home owners will remember back to the late eighties and early nineties when home loan rates were 17.5 – 19.5%.

Which Would You Prefer – pay Yourself or Pay the Bank?

So, what I’m saying is home loan rates will inevitably raise again. However, when they get to 7.64% the majority of that payment will be going to the bank. If you allow that to happen, you will always be at the beck and call of the banks.

What we’re suggesting is that you tighten your mortgage belt, get the budget spreadsheet out and (I know, it’s a pain, but there is no other way) start figuring out how you can fit a 7.5% principal and interest mortgage repayment into your budget.

A 7.5% principal and interest mortgage repayment on a $500,000 home loan would amount to $3,578 a month. Yes that’s about $1,200 a month more than you’re paying now. The real decision is, do you pay yourself now or pay the bank later?

Because, inevitably interest rates will rise and when they do you will be forced to pay those amounts. Notwithstanding when it does most of the repayment will be going into the banks back pocket.

How Well Could You do?

The good news is, if you do activate this strategy you will pay your thirty year mortgage off in 15 years and two months. In other words youStep out of your comfort zone sign would lop off an enormous 14 years and two months off your 30 year mortgage and in the process save an astounding potential $170,986 in interest.

Imagine, if fifteen years from now you didn’t have a mortgage as opposed to being locked into the bank for the rest of your life. The choice is, you either pay now or you pay later.

There’s an old saying that says ‘You Should Never Look A Gift Horse In The Mouth’. What does that mean, I really don’t know. I think it has something to do with not being ungrateful when you’re handed a gift.

Nonetheless, the point is interest rates are at historic lows which provides an opportunity that may never been seen again. Or, if it does come again it will probably be a long time coming.

If you want information on more strategies that will help you pay your mortgage off faster or to create more wealth through mortgages and property, please get in contact.

If you don’t have a 3 in front of your owner occupied home loan interest rate these days, then you’re paying too much for your home loan.

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.

Refinancing Info Page

By Dave Fleming : 15 December, 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?

Start your No Obligation

Free quote
Now

Follow Us

Smiley face  Smiley face Smiley face Smiley face

Blog Posts