Thousands, no tens of thousands of Australian families inadvertently flush their hard earned after tax dollars down the drain.
Simply because they keep delaying doing something about a mortgage refinance.
Are you overdue?
Home loan refinancing may be easier than you think.
While there are no hard rules about a home loan refinance, it makes financial sense to review the loan whenever your individual circumstances change.
For example, you may be growing your family, moving to a new location, wanting to purchase an investment property or getting married.
There are also plenty of reasons that exist outside personal circumstances, including the major financial benefits refinancing can offer, and we’ll run through some of these below.
The No. 1 Refinance Rule is to Get a Better Rate
Refinancing your home loan doesn’t necessarily mean you have to change banks. There can be a multitude of reasons why a homeowner will refinance their mortgage in order to get a lower rate.
Today’s loan market has slowed down and it is getting more and more competitive. Any home loan that was settled two or three years ago could very well need to be looked at to see if it’s still as competitive as it could be.
There is such a thing as interest bracket rate creep. So, you need to keep an eye on what your lender is doing and any rate increases they stick you with.
Nonetheless, if your bank isn’t prepared to come to the party and give you a market competitive deal there is no shortage of lenders out there that will give you a much better proposition.
Put a Padlock on a Great Home Fixed Loan Rate
Interest rates have been at record lows for some time now. In fact, the official cash rate is still at 1.5% and has been for 21 consecutive months.
However, how long can they stay that low!
Some are saying it’s possible that by the end of this financial year, or even before we’ll see an interest rate increase from the RBA.
Although a number of financial experts are saying that official rates could go up in the next 12 months, we’re already seeing a number of lenders starting to independently move rates up.
The reason for this is the pressure they’re getting from the increased cost of sourcing funds from overseas.
There is no better time than now to get your mortgage broker to find you a great fixed rate. Lock it in and allow yourself to ride the low interest rate boat for even longer.
Refinancing helps to reduce the interest payable on the different loans you have, which can include credit card, car loans or personal loans.
It basically involves combining all the loans into a new mortgage, giving you one simple repayment to make each month instead of a bunch of them – which can lead to late fees if you forget one.
The Best News?
All your debts are charged at the home loan interest rate – which is usually much lower than a credit card rate!
Increase your investment
If you are looking at your investment options but are financially constrained, it’s time to consider refinancing your mortgage.
Where one bank may limit how much you can borrow another one may be more liberal.
All banks are not the same when it comes to borrowing capacity.
Generally speaking when you leave one bank to go to another your old bank is going to charge you an exit fee of $350 (some banks may vary) for each loan you discharge from them.
Going into your new lender, they may charge you a legal or settlement fee of around $200 to $220.
There will also be some Government registration fees to account for. These will vary from state to state and your mortgage broker will bring you up to speed on those.
When Should I Refinance?
Your mortgage broker should have access to refinancing comparison software that can quickly show you if it’s monetarily worth your while refinancing.
Your mortgage broker can also help take some of the inertia out of the process by scanning the market for the best deal for you and then helping you to get your documentation organised.By Dave Fleming : 22 July, 2018
Small Changes Lead To Big Rewards: How To Save More Money Today!
It is easy to become frustrated when trying to save money. However, it is important to remember that even making small strides toward your goal can really help you. Putting aside your spare change each day, for example, can add up before you know it. One mistake that I made was thinking that I had to have ten or twenty dollars to save and ignoring anything that wasn’t a substantial amount. I wish I could go back in time and change my original outlook.
If you keep a strict budget, you may not have room to save a big chunk of change all at once. You probably do not allow yourself many luxuries, which is why it can be harder to put aside money. You have to think about little things you can do that will add up over time.
The information included here will help you put aside money easily and efficiently. You may not be able to use all the tips, but some should certainly apply to your situation.
Even just reading through the article will be of benefit to you, because it will help you think more about how you can save going forward. You may be able to come up with your own tips, that are personalized for your life!
1. Know What You Make And What You Spend
Do you know exactly how much you make each month? Do you keep track of your expenditures? You’d be surprised at how many people answer “no” to one or both of these questions.
When you write out the amount that you make and the amount that you spend, you are better able to evaluate how you can save going forward. You can see where you might be spending too much and think about how to cut back.
However, you have to be precise here. Look at several months of bank statements to ensure accuracy. You may have expenses that pop up every few months, rather than every month, for example.
Once you have your numbers in order, you simply subtract what you spend each month from what you make each month. If you have some money left over, that is wonderful! If you break even, that is okay, too. However, if you are in the negative, you need to reevaluate what is happening.
2. Take A Close Look At Your Bills
Once you have an accurate picture of your personal finances, you can figure out what you need to do going forward. Start with the bills.
Is there something that you can eliminate? If so, you’ve got a great start to your savings. If you aren’t sure, systematically look at each one of your bills. Think about them carefully. Can you do without the service? Can you cut back on the service so that you save more money?
For example, how much do you spend on cable every month? You may be surprised. My bill skyrocketed over the course of just a couple of years, and many of the channels I simply didn’t watch. After contacting my cable company, I was able to reduce my package and save quite a bit of money each month.
My car insurance was high as well. I adjusted my deductible (making sure it was an amount I was comfortable paying in the event of an accident) and saved money that way.
There are so many ways to make a difference. For example, try writing out your grocery list before you head to the store to shop. You may find that you spend less when you stick to a plan. I know that if I head to the store without writing out what I need, or the ingredients that are necessary for the week’s meals, I end up overspending by quite a bit.
You can save money if you really set your mind to it. Challenge yourself to see how much you can put away this month!By Dave Fleming : 22 July, 2018
From auto loans to personal loans and student loans to mortgages, there are plenty of options from which you can choose, and they all fit into different buckets.
If you find yourself in need of funds but aren’t sure how to pick from the many types of loans out there, here are a few ways to tell them apart.
Open-ended vs. closed-ended loans
Open-ended loans, such as credit cards, offer revolving credit, meaning debt can be added to the loan as needed. By comparison, loans for a predetermined amount, such as auto loans, are considered closed-ended.
Examples: personal lines of credit and credit cards
Open-ended loans offer you the chance to borrow as much or as little money as you want, up to a certain amount, and then pay back some or all of the funds monthly. There’s no end date for this type of loan; it’ll always be open for you.
The upside to an open-ended loan is that you’ll be able to use exactly as much money as you need when you need it up to the pre approved limit. This can come in handy if, say, you’re temporarily short on funds. The downside is that if you only make the minimum payments, the interest can add up.
Watch out for open-ended loans with a variable interest rate, which fluctuates depending on the market. This can add a sizable chunk of money to your payments if interest rates rise over the life of the loan. You can find more information on variable rates below.
Examples: auto loans, student loans, and mortgages
Closed-ended loans are probably what you think of when you imagine a traditional loan. You borrow money for a specific purpose, such as paying for a car or house, and then you make monthly payments until it’s paid off.
Closed-ended loans are installment loans. When you borrow money, you make payments in installments until the loan is paid in full. You might have a five-year car loan or a 30-year mortgage — both have endings.
Closed-ended loans are clear-cut since you know exactly how much you’ll borrow and when you’ll have it paid off. Once the loan is paid off, you’ve held up your end of the bargain. And if you need to borrow money, you’ll have to get another loan, which can be costly with establishment fees added in.
Fixed-rate vs. variable-rate loans
A variable rate is an interest that fluctuates over the life of a loan based on market conditions. A fixed rate means your interest rate never changes for the agreed fixed term, regardless of how the market plays out.
You usually have the opportunity to choose a fixed or variable rate, depending on the lender and the type of loan.
Examples: student loans, and some personal loans, auto loans, and mortgages
You can also get a fixed-rate mortgage, which means the interest rate won’t change for the duration of your agreed home loan term. This can be valuable when most interest rates are heading higher.
Examples: some private student loans, personal loans, auto loans, and mortgages
If you get a loan with variable interest, it means your payments fluctuate depending on an underlying index rate that tracks the market.
Secured vs. unsecured loans
When you apply for a secured loan, you offer up something as collateral if you can’t pay off your loan. For an unsecured loan, you don’t have to provide any security for the debt, which means that if you can’t pay it back, it will go into collections and will tank your credit score.
Examples: mortgages and car loans
When you take out a car loan or get a mortgage, you’re receiving a secured loan. It’s easier to get because the collateral you put up secures your loan.
If you fall behind on your payments, your car could get repossessed or your house could be foreclosed on. Secured loans typically have lower interest rates because if you can’t pay back your loan, lenders have a way of recovering at least some of the cost.
Example: most personal loans
Personal loans that you use for anything you’d like are usually unsecured loans. These don’t require any collateral and are based on your credit score and income. You can use the loan however you wish, but you might have a harder time getting one if your credit history isn’t great.
Because there isn’t any collateral, unsecured loans tend to have higher APRs and in many insatnces a cap on how much you can borrow.
Types of loans
There are many types of loans that fall into the categories described above. Here are a few common ones that you might use at one time or another.
1. Student loans
These loans are meant for educational expenses, though the borrower can choose how exactly to spend the funds. Government student loans are awarded to you based on your financial need.
If you don’t have enough money to pay for college even after Government student loans, you can take out private student loans, but make sure to compare lenders to see which offers the lowest interest rates and best repayment terms.
2. Auto loans
Whether you’re buying or leasing a car, an auto loan helps you pay for it if you can’t afford a full cash payment. They’re secured loans, which means if you don’t pay back your loan with minimum payments each month, your car could be repossessed.
Your interest rate depends on your credit score. If you don’t have great credit, you might need a cosigner for your auto loan.
Unless you can afford the entire cost of a home upfront, you’ll need a mortgage. It’s a type of secured loan that banks offer, usually with a low interest rate. If you can’t afford your mortgage payments and fall behind, you could lose your property.
4. Home equity loans
Home equity is the slice of your home’s value that is your’s outside of what you owe the bank. In other words, it’s the total value minus anything you owe on it to a bank or other creditor. Also known as a line of credit.
You can use a home equity loan for almost anything, but your home is used as security if you can’t pay back your loan. This means it could go into foreclosure if you fall behind on payments.
5. Personal loans
Personal loans can be a good option if you need cash. Whether you’re trying to pay off high-interest credit card debt or stay up to date on bills, you can use personal loans for many things. As with any financial decision, though, you’ll want to shop around and consider your decision carefully.
Unsecured personal loans are harder to get because they require a great credit score. Payday loans are considered personal loans, but they should be avoided since they are short-term, high-interest loans. If you can’t pay it back by your next payday, don’t get a payday loan.
6. Refinance and consolidation loans
If you have a lot of different student loans, you might look into refinancing or consolidating them. This allows you to streamline your debt into one easily managed monthly payment.
Consolidation takes all your applicable debt and makes it into one loan, generally at a weighted average interest rate. You can consolidate your federal student loans, for example.
Refinancing loans replaces one or more loans with a new one, often with a lower interest rate, a longer repayment term, or both. If you’re struggling to pay high-interest credit card debt or your mortgage, you might consider refinancing those loans.
Find a loan that’s the right fit for you
Now that you’re familiar with the different types of loans, you can go through all your options to find the one that fits your situation best.
From secured or unsecured to variable or fixed, there are plenty of choices. The next step is to compare lenders and other options to get good repayment terms for your budget and low interest rates.
If you need help, seek out an experienced professional mortgage broker who can help you quickly understand the jargon surrounding loans. There services are generally free as the lender pays their commission. Yes, most mortgage brokers these days also can help you with all kinds of loans including car and personal loans.By Dave Fleming : 22 July, 2018
Lending regulations have tightened up considerably in the last few months. So much so, it’s time to examine the 11 issues that could put the kibosh on your home loan dreams and aspirations, and some solutions on how to fix them.
Godsend or big mistake?
The fact is, despite their rising popularity and fast convenience Payday or cash loans are definitely a huge no, no if you are looking to apply for a home loan, because any prospective lenders will get the impression that you are financially stretched and are going to be a lousy risk
Slowly but surely the Nanny state grows
With record low interest rates the demand for home loans have not been this high since before the Global Financial Crisis. However, authorities are now stepping up the pressure on lenders to reign in their previous unconstrained lending practices.
This is being done under what is known as the National Consumer Credit Protection (NCCP) act, or Responsible Lending Practices. When first initiated in 2011 there wasn’t too much fanfare about the new rules and in the main, other than a few mild policy changes, it was pretty much business as usual.
That said, in the last few months things have changed dramatically and the Australian Prudential Regulatory Authority (APRA) have been bringing pressure to bear on the banks to start enforcing the new rules to the letter.
Also, along with the current Royal Commission Inquiry into banking practices, the banks themselves are trying to put on a ‘Goody, Goody Two Shoes Face’ to try and convince the Inquiry and associated authorities that their bad behaviour is a thing of the past and they have now turned over a new leaf.
They now want to know what size underwear you use
Anybody who has made an application for a mortgage over the past few months can tell you that things have become a lot more difficult to obtain any kind of loan now that the banks have gotten serious about the new affordability lending. They are now starting to forensically focus on borrower’s income and expenses in much finer detail. Some lenders are insisting that applicants provide them with their latest bank account and credit card statements so they can ascertain how much goes in and how much goes out on a regular basis.
In other words, they will now know how much your hair cut and dry cleaning bills are.
Many would be borrowers will have to be a whole lot more savvy nowadays if they have any chance to meet these strict new requirements before making any mortgage or personal loan applications.
Financial house cleaning is now in order
In fact, most seasoned mortgage brokers will tell you that you should put your financial house in order at least 3 months in advance of submitting any kind of application. On the other hand though, depending on your chosen lender it may necessitate you do this at least 12 months in advance.
Whether you’re looking to purchase your first home, upgrade to another, downsize, refinance or buy an investment property you’re going have to ensure that your finances are in good order if you want to give yourself any kind of hope in getting any kind of home loan application approved these days.
Here are 11 issues that could scuttle any mortgage aspirations you may have and how to rectify them.
1 RECENTLY SELF-EMPLOYED
Prior to and during the financial crisis you could get loans based on what you told the bank you earned. Yes, that’s correct; they would take your word for it. Funnily enough they earned the nickname of ‘liar loans’. All the borrower had to do was sign a self certification document declaring what their annual earnings were. I’m sure some bank staff occasionally had a good chuckle when they saw applications from occupations like a bus driver claiming to make $180,000 a year. Nonetheless, they opened a gateway for many self-employed people to purchase their own home. However, the continuing abuse of these mortgages and the global financial crisis soon put paid to these loans.
The market conditions today, show many self employed people struggling to qualify for a home loan. All main stream lenders require that self-employed individuals have had an Australian Business Number (ABN) for at least two years, have been trading profitably for at least two years, and have at least two years financials available. A couple of lenders will accept one years tax returns, but you still must have had an ABN number for two years.
That said, most lenders will also do what’s called Low Doc loans. You still will need to have held an ABN for two years, but now the lenders will rely on your trading bank statements and/or Business Activity Statements (BAS) to calculate your income.
Beyond that there are lenders who will cater to newly self-employed people if they only have had an ABN for 1 day, 3 months, 6 months and 12 months. Of course, they view these loans as higher risk and they come with a premium when it comes to interest rates, fees and charges. Nonetheless, they aren’t the end of the world as they can be used as a means to an end. Meaning, you can have your cake now and refinance the loan to a better rate a little way down the track when you have the required documentation.
Self-certified loans previously offered a way for the self-employed to buy a home, but abuse of these mortgages – dubbed “liar loans” because they required no proof of income – brought about their demise during the financial crisis. The Financial Conduct Authority will officially ban self-cert mortgages in April when the mortgage market review rules come into place, but this has left some self-employed borrowers struggling to access finance.
Self-employed people finding it difficult to get traction in obtaining a home loan may well consider getting in touch with a well-seasoned mortgage broker
2 ANY MAJOR CHANGES IN LIFESTYLE CAN AFFECT YOUR ELIGIBILITY
Bankers like to see stability, it calms their ‘Risk Meter’ down no end (lol). Switching jobs or having another child at the time of a mortgage application can cause lenders to scrutinise your application a lot more closely. If you’re expecting another child lenders will increase your number of dependents immediately even though the baby isn’t quite in this world yet. That in turn will reduce your borrowing capacity. Lenders like to see stable residency and employments.
3 AVAILABLE CREDIT LIMITS OR NUMEROUS OUTSTANDING DEBTS
Lenders get nervous with people who have a lot of existing outstanding debt. So, it’s a good idea to pay off as much debt as possible prior to applying for a mortgage. This will also increase the applicants borrowing capacity when existing liabilities are reduced. Another key point to observe is that lenders go on credit card limits and not the balances owed on them. Therefore, where feasible reduce your credit card limits as much as possible if those limits are affecting your borrowing capacity. You can even cancel then and reinstate them after your mortgage has closed/settled.
Always keep in mind, if you are able to present lenders with a well-managed personal financial profile the better they like you.
4 ARE YOU ON THE ELECTORAL ROLL
Electoral rolls are a handy tool that some lender use to confirm a potential customers identity. If you’re not there it can at times cause some confusion and cause you additional frustration when the lender starts to pursue you for additional ID documentation verification.
5 WHEN WAS THE LAST TIME YOU LOOKED AT YOUR CREDIT REPORT?
It’s important to keep an eye on your credit report, regardless of how good you think it is. Equifax (formerly Veda) will send you a free copy in 10 days or overnight for a fee. Identity theft is rife these days, so don’t let yourself in for a nasty surprise the next time you go for a loan.
6 PAYDAY LOANS ARE NOT A GOOD LOOK
Payday or fast cash loans with their outrageous rates of interest give mainstream lenders cause for concern when they come across them on a borrower’s profile. It gives them cause for thought that any individual who uses them regularly is stretched financially or may be having difficulty managing g themselves monetarily.
It gives the impression that a person cannot make it from pay check to pay check and they use them as a desperate measure to get by on a day to day basis instead of having a practical back up plan if they get themselves into a situation that needs sorting.
7 KEEPING IT AFFORDABLE: DON’T OVER REACH BY BORROWING TOO MUCH
We now have a generation of borrowers who have no idea what 7 ½ – 8% interest rates on a mortgage would be like. At this stage of the game where interest rates are at record lows it’s a great opportunity to take advantage of the situation and pay down a mortgage as fast as possible. Keep in mind mortgage rates won’t always be this low and when they do rise that you will be able to afford the higher repayment amount.
Use your mortgage as a stepping stone to eventually bypass the Jones’s. Start with a smaller property, a smaller mortgage and pay that down with your extra spare cash to create equity that you can use to step into a larger property.
8 COURT JUDGEMENTS, DEFAULTS AND BANKRUPTCY
These don’t preclude you from getting a home loan, nonetheless if you have experienced damaging financial circumstances that have ended you up carrying an impaired credit report then mainstream lenders won’t want to know you.
There are enterprises out there that are known as alternative lenders and they exist in the main to cater to people with impaired credit profiles. Should you find yourself in this situation we highly recommended you find a mortgage broker who specialises in this niche to guide you through the minefield of fees, charges and high interest rates.
Keep in mind though if you have a minor paid default under $1,000 on your record there is a possibility some main stream lenders will still consider you if you have a reasonable explanation for the default.
9 ARE YOU A CREDIT JUNKIE AND LEAVING TOO MANY FOOTPRINTS?
Every time a person applies for credit there is a listing of that credit request noted on the persons credit file. If the number of listings are low there isn’t too much to be concerned about, it may affect your credit score marginally.
That said, if you are frequently putting in applications for credit this and credit that, any credit assessor assessing your mortgage application is going to get a negative impression on how you can’t find what you want and how desperate you are.
Be careful when making financial inquiries over the phone or the internet as the person on the other end could be pulling your credit file without you even being aware of it.
If you’ve ever been declined or have concerns about the number of enquiries on your credit file, use a broker as they can sort through all the various lenders and loans to find the one you will possibly succeed with.
10 GAMBLING SITE PAYMENTS, OVERDRAWN ACCOUNTS AND OVER THE LIMIT CREDIT CARDS
Showing regular payments from your bank account or credit card statements will in most cases get you a swift decline notification as they are definitely a big ‘No-No’ in this age of responsible lending. Even though payday or fast cash loans are fairly new to the lending world lenders still get nervous when they see them. If you show a prospective lender any loan or credit card statements that have late payments or over the limit notations showing on them you will in most instances get an automatic decline for your application.
11 OVERTIME, BONUSES, COMMISSIONS AND ALLOWANCES
These payments can become a bit sticky when it comes to include them to boost your borrowing capacity.
With bonuses, commissions and overtime most lenders want to see documentary evidence of the same for periods ranging from 12 – 24 months. If there’s any confusion or doubt about the payment amounts the lender will insist on an employer letter confirming the amounts and dates paid.
Additionally, when they do accept the amounts tendered they will shade the total amount by 20% and only allow 80% of those payments toward borrowing capacity purposes.
WHERE DO YOU GO FROM HERE?
Inquire in advance to any lender or mortgaged broker as to what documentation you will need for any given lender application. Keep in mind that any bank or credit card statements you provide are going to be examined for income deposits, outgoing expenses, late payments or over the limit balances.
Examine the above information carefully so you can prepare and present any application you are planning on making it in the best light possible.
Most of the time the home loan industry can be a serious and sometimes frustrating business – perhaps at times even a little over the top too serious. I know Easter Friday still seems a little way off so to help ease you through the next four days, here’s a corny joke to help keep a smile on your face and in your head until 5 o’clock Thursday afternoon.
After all of the issues that were caused through the sub-prime loan market in the USA and the Northern Rock debacle in England, Japan has now been hit with uncertainty.
Over the last week the Origami Bank has folded, additionally the Sumo Bank went totally belly up and the Bonsai Bank is considering options on how best to cut a whole lot of its branches.
Yesterday, the Karaoke Bank said that they were going to put the bank up for sale and were willing to let it go for a song.
During today the Kamakazi Banks shares did a nosedive and have now been suspended.
Although they have suffered some severe cutbacks the Samurai bank are still soldiering on
Even though they took a pretty good hit the Ninja Bank are saying they still remain well into the black.
Unfortunately though, the Karate Bank had to give 500 of their staff the chop and after some extensive investigation analysts are reporting there seems to be something quite fishy happening at the Sushi Bank where staff are in all likelihood getting a very raw deal.
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