You might be comfortable paying off your mortgage now, but what if things change? Here are some tips on how to avoid a mortgage stress fracture.

Paying off a mortgage is one of the biggest financial challenges you and your family will ever tackle.

And it isn’t easy – mortgage repayments take up about one-quarter of a family’s income on average, according to the Australian Bureau of Statistics’ 2016 Census.

While most families manage, what happens if your circumstances change?

An unexpected redundancy, relationship breakdown, illness or accident can dramatically impact your ability to make your payments and put you in mortgage stress.

But first, what is mortgage stress?

While there isn’t a technical definition for the term, mortgage stress is generally considered to occur when a person or family is spending 30% or more of their income on home loan repayments.

There are also a range of other criteria which would suggest you’re experience mortgage stress.

If you’re paying only the interest on your home loan, borrowing money from family, or having difficulty paying your bills, then you might be experiencing mortgage stress.

I don’t have a problem now, why worry?

It’s unwise to assume your circumstances will never change. An accident or illness can befall a person at any time, and the impact on your finances can be devastating.

An increase in interest rates can also have a significant impact on your mortgage repayments. A simple 0.25% rate hike can increase repayments on the average Australian loan ($375,000) by about $50 a month.

Over the course of a year – and with a potential of further rate hikes – this can really chew into your disposable income.

Ok, so how can I avoid it?

The smart borrower won’t wait for their circumstances to change, they’ll start planning now to make sure they can weather a storm if it hits.

Steps you can take to reduce your risk include:

Step 1: Use a mortgage calculator to see what your repayments would will look like if there was a rate increase. Would you be able to keep up?

Step 2: Review your current income and expenses, and make a new family budget. Use it to track where your money is going and where savings can be made, so you can either pay off your mortgage sooner or get by if things go awry.

Step 3: If you’re worried about your mortgage, or concerned about the impact of a future rate hike, come pay us a visit.

We can talk to you about your situation and help you make a plan to ensure a small problem doesn’t become a big one.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

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We all know that recycling is great for the environment. But debt recycling? Well, if done right, that could be great for your own little patch of planet earth.

There are three things that many Aussie property owners wish they could do: make their debt tax deductible, pay off their mortgage sooner, and invest in other asset classes to build towards future wealth.

Well, with debt recycling it’s possible to achieve all three. But it’s a somewhat complicated strategy that’s not without risks.

But first, what exactly is debt recycling?

The idea behind debt recycling is to take the non-deductible debt from your home and recycle it into tax-deductible debt.

That is, to replace your mortgage debt with investment debt.

The earnings accrued from your investments can then be used to pay off your home loan.

If done effectively, not only can you pay off your home loan much faster, you can also generate higher levels of wealth as your home and investments grow in value over the long term.

Who might it suit?

Debt recycling is a higher-level financial strategy that is more suitable for certain individuals including those who:

– Are happy to invest for the long-term (5 years plus), as opposed to seeking immediate returns.
– Have a high marginal tax rate (greater benefits from tax-deductibility).
– Have a good appetite for risk.
– Have a secure income source that is not affected by investments.

The benefits

When executed properly, debt recycling offers a number of significant benefits, such as:

– Allowing you to start investing almost immediately, even if you have no existing source of finance with which to get started.
– You don’t require years of investment practice to begin debt recycling (although it is highly advisable to work alongside an experienced mortgage broker or financial planner).
– It can help you to cover the gap between your superannuation savings and your retirement targets.
– It can help you to pay off your mortgage earlier and relieve your debt burden.

The risks

Though it is true that you can reduce risks by gaining a firm understanding of debt recycling and other investment strategies, you will never be risk-free.

The two major risks you face are:

1. In the same way that you benefit from compounding gains over time, a market downturn can compound losses, meaning that the amount you eventually owe could be more than the value of the portfolio.

2. You could also be at risk of losing your home if you use the existing equity in your home as security for the investment loan.

Is debt recycling right for you?

It’s fair to say that debt recycling isn’t for everyone. Like most things in life, it will depend on your personal circumstances.

So if you’d like to find out more, get in touch. We’d be more than happy to run through your options with you.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

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They grow up so fast. One minute they’re nagging you for a dollhouse, the next, it’s for help buying a two bedroom unit in an up-and-coming suburb. If you always find it hard to say ‘no’ to your kids, here’s how to say ‘yes’ the right way.

You’ve probably heard your children complain about how hard it is to crack into today’s property market.

And smashed-avocado shenanigans aside, they do have a point. It is tougher nowadays.

With the property market constantly on the up-and-up, reaching that 10% to 20% deposit can feel like a mirage for your child.

The good news is that you can help them obtain that slightly out-of-reach home loan by using the equity in your property.

How it works

Banks find it risky to lend to borrowers who have an unstable job or low deposit. But they do allow seemingly more-reliable immediate family members to guarantee a home loan.

Guarantor loans have huge benefits for your children, including:

No deposit required: If guaranteed against a parent’s property equity, your child may be entitled to borrow 100% to 110% of the purchase price of a property. That means no deposit is required. Instead, your child can focus their savings on white goods and repayments.

Discounted interest rates: Guarantor loans can come with reduced interest rates and we can help you secure a great deal.

No Lenders Mortgage Insurance (LMI): Your child will likely not need to get LMI because the equity is usually enough of a guarantee to protect the lender against losses.

Things parents should keep in mind

Sounds great, right? But it’s not entirely without its risks. Here’s what you as a parent need to keep in mind:

Safeguard your credit report: Be sure that you can honour the repayments in case things go awry and your child is unable to pay. You should be positive that they will uphold their end of the bargain, but also prepare for the unexpected.

Financial risk versus emotional benefits: Going guarantor makes you financially responsible if your child defaults on payments. The emotional benefits, however, can outweigh the risk.

Impacts on your borrowing capacity: Future credit providers will take into account the guaranteed loan. They will assess your borrowing capacity based on it, and whether or not you are an active participator in the repayments of your child’s mortgage.

How we can help

We understand that when it comes to your children, it can be near-impossible to take your emotions out of decision making. That’s where we come in.

We can help you calculate whether or not you have the equity to make this work, and assess your child’s financial capabilities to see if they’re in a position to be making repayments.

We’ll also help you understand your legal liability as a guarantor before helping you make the big decision. So give us a call today.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

In a perfect world you select a property to buy, complete with white picket fence, and the settlement goes through on the agreed date without a hitch. But as we all know, we don’t live in a perfect world.

When you buy or sell a property you go through a ‘settlement period’, which is the time designated for the buyer to complete payment of the contract before becoming the owner of the home.

Up until the settlement goes through the home is the property of the existing owner.

And with a large home deposit at stake, you’ll want to ensure you choose the right period length.

How much time should I give myself?

Generally, settlement periods are 30, 42, 60 or 90 days.

In NSW a 42 day settlement period is the most common, but in most other places around the country it’s 60 days.

Just because it’s common, however, doesn’t mean it’s the best fit for your situation (or the seller’s).

You see, both the buyer and the seller must agree on the settlement period.

However, you may have competing motivations, so this can be tricky.

Whatever the case, just make sure you allow yourself enough time for conveyancing, bank financing approval, organising the move, undertaking requested repairs for the buyer, and negotiating settlements for your other property interests.

Also, keep in mind that if you buy the property at an auction, there will already be a settlement date indicated in the contract.

If you can’t meet that date, chat to the selling agent before signing on the dotted line to see if another date is agreeable.

You might push for a longer settlement period if:

– If you’re the seller and you’re still looking for a property to purchase
– If you’re a buyer and you haven’t yet sold your own home
– You’re selling and the buyer has requested you repair something
– If you have an upcoming event that you want to deal with first (wedding, big overseas trip, etc)
– Someone is going guarantor on the loan or you’re purchasing through a family trust
– You’re buying off the plan, as the scheme has to be registered with the titles office
– You need to save more money as a buffer (especially if you’re upgrading or will be renovating).

You might push for a shorter settlement period when:

– You’re a seller who has already found another home
– You’re a buyer who has already sold your current home and needs to move quickly
– A holiday period or big event is coming up and you’re keen to move in beforehand
– You’d like to undertake work on the property sooner rather than later
– You need cash flow.

It’s important to get right

One-in-five property settlements in Australia are delayed by about one week so it’s important to give yourself a comfortable buffer.

While each party can request a settlement extension if a delay occurs, that doesn’t mean the other party has to agree.

This is where it gets a little tricky. Each state and territory has different laws, and every contract differs.

Queensland’s laws are probably the most stringent. For example, either the buyer or the seller can terminate the contract, sue for damages, and keep/lose their deposit if the other party is not ready to buy on time.

Other states have a little bit more leeway.

In NSW and Tasmania an extra 14 days can be given, in WA and SA buyers are given three days’ grace before penalty interest applies, and in Victoria a seller can immediately start charging a tardy buyer penalty interest.

Final word

So that’s negotiating a settlement period in a nutshell.

The best news? That’s about as much negotiating as you’ll need to do. Because when it comes to negotiating a loan with a lender, we’ve got you covered.

If you’d like to find out more about our services, get in touch, we’d love to help you out.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

Back-breaking furniture, perilously narrow staircases and chipped crockery – the idea of moving house strikes fear into the hearts of most. But with careful planning it doesn’t have to be a nightmare.

So you’ve just secured the home of your dreams? Congratulations. Now the fun really begins.

The good news is that knowing how to move properly will help ease the gigantic task ahead.

So to help you keep your sanity, here are our top five tips to guarantee less mess, less stress, and ultimately, more moving success.

Draft a budget

A moving budget doesn’t just help manage the cost of moving, it also acts as a checklist to make sure you haven’t overlooked anything.

Besides the obvious expenses like removalist fees and utility connection costs, it can also help you remember things like redirecting your mail. Here’s a good rundown from ASIC’s MoneySmart website on some costs to expect.

It’s cull time

Moving is often the perfect time to get rid of any stuff you no longer want or use.

Go from room to room and work out what items you can offload at a garage sale to make some extra cash. Not only will you save on removal fees, but the extra cash can go towards paying for the removalist.

Hiring a removalist

Sure, offering friends pizza and beer to help you move is one way to do it, but you’ll still probably need an expert hand. If so, ring several different removalists and compare both the quotes and the insurance coverage.

Be sure to enquire as to whether there are any additional fees – for example, if the move takes longer than expected.

Also ask if they offer moving supplies as part of the deal as this can help you save money on boxes and tape.

Ask for leave

Moving house isn’t something you want to squeeze into a two day weekend.

Talk to your boss about taking an extra day or two off to move, and think about putting the kids in childcare if necessary to make the day less stressful.

The best bit? Removalists often charge cheaper rates mid-week.

And finally, pack smart

How you pack will help you when you’re unpacking so keep in mind a few things.

• Pack boxes with heavier items on the bottom and don’t overfill a box – weight limits are there for a reason.
• Newspaper makes great fill for packing boxes, as do tea towels and dishcloths.
• Keep a list that labels and numbers every box as you pack it to keep track of the items in each box. This is important in case anything is lost, and ensures you don’t unpack the garden tools in the kitchen.

We’ve seen hundreds of our clients prepare for their big house moving day before. So if you’d like any extra tips or advice, be sure to get in touch. And yes, apologies in advance, but it’s a darn shame – we’re already busy that day…

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Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.