Line Of Credit Risks and Rewards

Sydney the home of a line of credit

Line Of Credit Risks and Rewards

Beware that your home equity line of credit doesn't get out of hand

What’s the Best Choice, a HELOC or a line of credit?

Essentially they are one and the same. A HELOC is a Home Equity Line of Credit, which basically means the same as a Line of Credit. That said, there is one subtle difference in that a HELOC is secured by the equity in your home.

Whereas a Line of Credit doesn’t necessarily have to be secured by property. Some Lines of Credit can be business LOC’s, much like a business overdraft. However, with this article we’re going to be focusing on the Home Equity Line of Credit.

Essentially, what is a home equity line of credit?

Some call a line of credit a money machineHow can you use one successfully? A line of credit (LOC) is a loan option that allows you to have an upfront approved cash credit limit that you can access at any time. There are no interest charges on the credit limit you are approved for only on the amount you have drawn down on, or the outstanding unpaid balance.

It operates much like your own bank account. Except the money you have access to is not really yours and whatever you use you’ll be charged interest on it. You can spend the money on whatever you like as long as you don’t exceed the approved limit.

You can take money out, pay it back and borrow over and over again, simply making sure you don’t go over the limit.

You get a Grace Period
The differential between a credit card and an LOC is, you get a grace period with credit card interest charges, sometimes up to 55 days. There is no grace period with an LOC. An LOC is a borrowing tool not a payment tool, because much like a home mortgage, the moment you take the money the interest charges start accumulating from day one.

A line of credit provides the borrower with a ready source of cash that people use for various reasons. Typically the limit can be set higher than a regular credit card at a lower rate of interest. You don’t have to take out a personal loan that forces you to make payments on the full amount whether you want to use all of it or not.

In other words it provides flexibility to pay what you need to pay when you want to pay it and only pay fees on the drawn balance. Common purposes for a line of credit are to pay school fees, consolidate other debts, do home renovations, holiday money or any other expenses.

You Could Lose Your Home
These days, if the line of creditA home equity line of credit is not for frivolous spending is secured by your home or other residential property it’s now evolved over time to be tagged as a Home Equity Line of Credit or HELOC.

The major concern associated with home equity lines of credit is you’re putting your home up as security.

Since any type of residential home mortgage lender will want your real estate asset as collateral you’ll want to be very sure that your line of credit doesn’t get out of hand, whereby you become delinquent with your repayments.

Falling behind on repayments and not being able to catch them up will very well put your property in peril of foreclosure.

Don’t Play with Fire Without an Extinguisher
Do your due diligence up front and find out if there are going to be other costs, like settlement costs or loan establishment fees. Some of these products will charge you a fee anytime you make a withdrawal or even a monthly account fee.

Over time these fees can start to add, notably if you’re in the habit of regularly withdrawing cash out.

That said, you really want to avoid using one of these as a personal piggy bank to start paying your everyday living expenses. Should you find yourself with your budget out of whack, then creating more debt isn’t the greatest solution in the world.

No, they’re Really not a Giant Credit Card
A home equity loan can be a disaster for someKeep in mind, one of these is not like a credit card, although they’re sometimes described as a giant credit card. However, as soon as you draw down on it for any given amount you are immediately charged interest on that amount from day one.

You do have to be careful with one of these and be able to manage your cash flow well, as lines of credit come with interest only repayments and some even allow you to capitalise the interest they’re charging you. That means, you don’t have to make any payments at all (until you reach your approved limit, of course) I’ll leave it up to your imagination as to how big a debt hole you could dig with one of these.

Make sure, for whatever debt you clock up you’ve got an effective plan worked out for paying it back.

Managed well, They’re Handy to Have Around
One of it’s benefits is it can remain in place for years, you can pay the balance down to zero and not pay anything until you have a need for it again. Keep in mind, a lot of lenders will charge you a nominal monthly fee for the privilege of having one.

Although, you should be aware that the usual term and conditions of these types of loan products allow the lender at any time to reduce your credit limit or even call on you to pay any outstanding balance in full.

Now, that’s unlikely to happen if you have been managing the loan with good conduct. Nonetheless, keep that point in mind.

Don’t get Caught Going the Wrong Way in a One-Way Street
Most lines of credit productsA home equity loan can be a disaster for some provide a variable interest rate, which is terrific while interest rates are at historical lows. Nevertheless, I’ve had customers in the past tell me that their LOC or HELOC is going the wrong way, in that they’ve been complacent and allowed themselves to use it for the wrong reasons.

Keep in mind if you allow that limit to keep on rising and then all of a sudden your bank increases your interest rate, where will that end up with your ability to repay them.

I don’t mean to be boring, but seriously there are definite risks associated with lines of credit. Whatever you do, don’t use it as an emergency fund, this is the most common frequent trap I see people get themselves into. At any time, the bank can close it down on you.

These May not Be Right for You
There are other choices besides a line of credit for enabling you to get access to extra cash. For example you can apply to your lender to top up your existing loan for the amount you need.

This is a better option if you need a one off cash injection for home remodelling/renovations, purchase a vehicle, pay a tax bill etc. Once the bank approves you they will adjust your regular repayment amount and you will start paying the debt down.

If you’re doing renovations where the money is paid out incrementally over a period of time, have the lender put the amount you borrowed into your offset account so any remaining balance offsets against your mortgage.

Sexy Maybe, but can You Afford to Have One?
How sexy is a home equity line of credit when you have to pay it backDon’t be lured into the roller coaster of a line of credit where you can be exposed to the temptation of using the money over and over again. It takes a strong willed person to resist putting their hand into the biscuit tin again and again

One more final cautionary word: Fast Cash Lenders (Payday Lenders) and some non-bank (secondary) lenders are now in the market place offering LOC’s with credit limits up to $20,000. Run the other way. when it comes to debt traps, this is the bear trap of all traps, they charge interest rates of 60% plus along with actrocious fees that can force you to get another loan to pay the first one off.

Line Of Credit Risks and Rewards

Beware that your home equity line of credit doesn't get out of hand

What’s the Best Choice, a HELOC or a line of credit?

Essentially they are one and the same. A HELOC is a Home Equity Line of Credit, which basically means the same as a Line of Credit. That said, there is one subtle difference in that a HELOC is secured by the equity in your home.

Whereas a Line of Credit doesn’t necessarily have to be secured by property. Some Lines of Credit can be business LOC’s, much like a business overdraft. However, with this article we’re going to be focusing on the Home Equity Line of Credit.

Essentially, what is a home equity line of credit?

Some call a line of credit a money machineHow can you use one successfully? A line of credit (LOC) is a loan option that allows you to have an upfront approved cash credit limit that you can access at any time. There are no interest charges on the credit limit you are approved for only on the amount you have drawn down on, or the outstanding unpaid balance.

It operates much like your own bank account. Except the money you have access to is not really yours and whatever you use you’ll be charged interest on it. You can spend the money on whatever you like as long as you don’t exceed the approved limit.

You can take money out, pay it back and borrow over and over again, simply making sure you don’t go over the limit.

You get a Grace Period
The differential between a credit card and an LOC is, you get a grace period with credit card interest charges, sometimes up to 55 days. There is no grace period with an LOC. An LOC is a borrowing tool not a payment tool, because much like a home mortgage, the moment you take the money the interest charges start accumulating from day one.

A line of credit provides the borrower with a ready source of cash that people use for various reasons. Typically the limit can be set higher than a regular credit card at a lower rate of interest. You don’t have to take out a personal loan that forces you to make payments on the full amount whether you want to use all of it or not.

In other words it provides flexibility to pay what you need to pay when you want to pay it and only pay fees on the drawn balance. Common purposes for a line of credit are to pay school fees, consolidate other debts, do home renovations, holiday money or any other expenses.

You Could Lose Your Home
These days, if the line of creditA home equity line of credit is not for frivolous spending is secured by your home or other residential property it’s now evolved over time to be tagged as a Home Equity Line of Credit or HELOC.

The major concern associated with home equity lines of credit is you’re putting your home up as security.

Since any type of residential home mortgage lender will want your real estate asset as collateral you’ll want to be very sure that your line of credit doesn’t get out of hand, whereby you become delinquent with your repayments.

Falling behind on repayments and not being able to catch them up will very well put your property in peril of foreclosure.

Don’t Play with Fire Without an Extinguisher
Do your due diligence up front and find out if there are going to be other costs, like settlement costs or loan establishment fees. Some of these products will charge you a fee anytime you make a withdrawal or even a monthly account fee.

Over time these fees can start to add, notably if you’re in the habit of regularly withdrawing cash out.

That said, you really want to avoid using one of these as a personal piggy bank to start paying your everyday living expenses. Should you find yourself with your budget out of whack, then creating more debt isn’t the greatest solution in the world.

No, they’re Really not a Giant Credit Card
A home equity loan can be a disaster for someKeep in mind, one of these is not like a credit card, although they’re sometimes described as a giant credit card. However, as soon as you draw down on it for any given amount you are immediately charged interest on that amount from day one.

You do have to be careful with one of these and be able to manage your cash flow well, as lines of credit come with interest only repayments and some even allow you to capitalise the interest they’re charging you. That means, you don’t have to make any payments at all (until you reach your approved limit, of course) I’ll leave it up to your imagination as to how big a debt hole you could dig with one of these.

Make sure, for whatever debt you clock up you’ve got an effective plan worked out for paying it back.

Managed well, They’re Handy to Have Around
One of it’s benefits is it can remain in place for years, you can pay the balance down to zero and not pay anything until you have a need for it again. Keep in mind, a lot of lenders will charge you a nominal monthly fee for the privilege of having one.

Although, you should be aware that the usual term and conditions of these types of loan products allow the lender at any time to reduce your credit limit or even call on you to pay any outstanding balance in full.

Now, that’s unlikely to happen if you have been managing the loan with good conduct. Nonetheless, keep that point in mind.

Don’t get Caught Going the Wrong Way in a One-Way Street
Most lines of credit productsA home equity loan can be a disaster for some provide a variable interest rate, which is terrific while interest rates are at historical lows. Nevertheless, I’ve had customers in the past tell me that their LOC or HELOC is going the wrong way, in that they’ve been complacent and allowed themselves to use it for the wrong reasons.

Keep in mind if you allow that limit to keep on rising and then all of a sudden your bank increases your interest rate, where will that end up with your ability to repay them.

I don’t mean to be boring, but seriously there are definite risks associated with lines of credit. Whatever you do, don’t use it as an emergency fund, this is the most common frequent trap I see people get themselves into. At any time, the bank can close it down on you.

These May not Be Right for You
There are other choices besides a line of credit for enabling you to get access to extra cash. For example you can apply to your lender to top up your existing loan for the amount you need.

This is a better option if you need a one off cash injection for home remodelling/renovations, purchase a vehicle, pay a tax bill etc. Once the bank approves you they will adjust your regular repayment amount and you will start paying the debt down.

If you’re doing renovations where the money is paid out incrementally over a period of time, have the lender put the amount you borrowed into your offset account so any remaining balance offsets against your mortgage.

Sexy Maybe, but can You Afford to Have One?
How sexy is a home equity line of credit when you have to pay it backDon’t be lured into the roller coaster of a line of credit where you can be exposed to the temptation of using the money over and over again. It takes a strong willed person to resist putting their hand into the biscuit tin again and again

One more final cautionary word: Fast Cash Lenders (Payday Lenders) and some non-bank (secondary) lenders are now in the market place offering LOC’s with credit limits up to $20,000. Run the other way. when it comes to debt traps, this is the bear trap of all traps, they charge interest rates of 60% plus along with actrocious fees that can force you to get another loan to pay the first one off.

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3 ways to kick your gambling habit this footy season

https://mastermortgagebrokersydney.com.au/mortgage-broker-kellyvilleWhen it comes to footy, Australians love a punt – of both the kicking and betting varieties. The thing is though, one is great fun, the other can cost you thousands of dollars a year. 

With the AFL and NRL footy seasons kicking off in March, we thought now was a great time to address that little problem that can creep up on us this time each year: gambling.

Did you know the average Australian loses $990 each year – no other country in the world gambles away more money per capita – and 75% of Australian adults gamble each year.

That’s a decent lump of money that could go towards a mortgage repayment, overseas flights, or paying off a credit card bill.

So rather than hand over your hard earned cash to sports betting companies on a weekly basis, here are three ways you can still enjoy each match without gambling on the result, first try scorer, whether it’ll rain, etc, etc, etc…

The 100 Day Challenge

Up for a camping trip to explore the great outdoors? Time for a clothing cull? Is the car overdue for a service?

The Victorian Responsible Gambling Foundation recently launched the 100 Day Challenge, which is a list of 100 different yet very manageable activities designed to help you reclaim your life and resist the urge to gamble on footy.

The activities have been categorised into six groups, including: wellness, solitary, practical, physical, creative and social, and are available in web and app based formats.

Since its launch last year, more than 4000 people have signed up for the challenge, many of whom support each other through a strong online community.

Fantasy Footy

Fantasy Football is huge in the US. And in recent years it’s been gaining popularity here in Australia, too.

The general gist of it is that you act as a coach and select players who you think will perform best each week. Each round you can trade a number of players in and out.

The beauty of Fantasy Footy is that usually you will have at least one player from your selected side playing in each match, so there’s always a vested interest.

You can also set up your own comp to battle against your family, friends and colleagues at any of the below sites, which also offer prizes.

AFL: AFL Fantasy (official AFL site), SuperCoach (NewsCorp).

NRL: NRL Fantasy (official NRL site), SuperCoach (NewsCorp).

Tipping comp

Those who are more interested in team performances, rather than individual performances, may be better suited to a tipping comp.

Tipping comps are also more inclusive for groups with more casual fans (diehard fans tend to dominate the Fantasy comps), because if in doubt you can always default to backing the higher team on the ladder!

If you want to set up a comp for your work, keep an eye out in newspapers in the coming weeks for a big foldout tipping table – it’s always great to have an actual leaderboard on hand to point to when bragging.

Otherwise there are the online options below, which also offer prizes.

AFL: AFL Tipping (official AFL site).

NRL: NRL Tipping (official NRL site).

Final word

As you can see, there are plenty of ways to enjoy the weekend footy without having to stake a chunk of money on it.

Also, it’s never fun to brag about how much money you won (or most likely lost) betting on a match. Beating your friends and family in a tipping comp though? You’ll have fun milking that for the entire off-season!

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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Top 5 tips for standing out on Airbnb

Mortgage Broker KellyvilleThe short term rental market is booming. Each year, tens of thousands of Australians list their properties on Airbnb to make a tidy buck on the side. Here are our top five tips on how to stand head and shoulders above your competition.

Most people who own an investment property prefer to rent it out long term. It’s more of a set and forget approach, if you like.

But for some, such as those who own one home and/or those who travel for long periods, renting out their property on platforms such as Airbnb and Stayz is becoming an increasingly appealing option.

In fact, in 2017 more than 30,000 people listed their homes on Airbnb across Sydney and Melbourne alone.

These numbers have made the Australian Taxation Office (ATO) sit up and take notice. So much so that the ATO recently declared they’ll be ramping up their enforcement activities and will undertake 4,500 audits of taxpayers they suspect may not be declaring Airbnb income.

Suffice to say, when the ATO starts paying attention to a marketplace, you know money is being made.

Here are our top 5 tips on how to make more money than the next person.

1. Professional photos

First impressions last, and these days the first impression is the webpage impression on your Airbnb listing.

You don’t see real estate agents walking around with outdated camera phones taking dank snaps of the living room. And neither should you!

A good photographer has the skills and equipment to highlight the beautiful little details that makes your property sing, and crop out the less than desirable qualities that may turn a potential guest away.

Obtaining high quality images from a professional real estate photographer costs between $150-$300 via websites such as Snappr or Airtasker.

If they get you just one extra two to three night booking they’ll have already paid themselves off.

2. The devil is in the details

There’s no point in having a photographer take wonderful photos of your property only for the guest to show up and feel like they’ve been conned by the old bait and switch!

You need to put in that extra bit of effort to make their stay memorable. After all, they’ve chosen your place ahead of a hotel, not to mention all the other Airbnb competition out there.

There’s a good chance your guest is visiting your local area to check it out. So try and include as much (classy) local artwork, local guidebooks, decorations and information as possible.

The bathroom should also always be spotless, make sure good quality tea and coffee is available for free, and ensure all the basic kitchenware is easy to find.

Other tips include providing menus for local takeaway, tips for local sightseeing, entertainment such as books and boardgames, all necessary electrical appliances such an iron and hairdryer, and some basic cleaning equipment and products in case something gets spilled.

3. Play host, but don’t smother your guest

It’s important that you’re available to your guest should they need to check anything.

That might range from “where is the frying pan?” all the way to “where’s the local hospital?”.

It’s critical that you never show irritation, no matter how trivial or inconsiderate a guest’s inquiry might appear.

That’s because one scathing review can undo a lot of the money, time and effort you’ve invested.

It’s equally important to give your guest the privacy they require. Be on hand to offer any simple tips or suggestions, but don’t pin them down for hours on end chatting to them about your own travels.

This is their holiday after all!

4. Consider using a property management service

If you’re going to be away from your property for a while it’s worth considering taking the hassle and stress out of trying to manage your property from afar by outsourcing to a professional service.

There are plenty of options out there to choose from, including (but not limited to) Hey TomHometimeHomeHost and Airsorted.

Expect to pay about a 15% to 20% (+ GST) commission to them, however most boast that they can help increase your Airbnb income.

5. Thank guests for their reviews

Taking the time out to thank every single guest for their review shows you’re a super attentive host who’s always aiming to please.

The best thing is it also gives you the opportunity to further highlight the positive aspects of your property.

For example, if a guest writes in their review that they had great ocean reviews, reply: “Thanks for the review Craig! Stoked that you enjoyed the ocean views from your bedroom!”

The best thing about this trick is that it even works for negative reviews.

That’s because most negative reviews will also mention something positive about the property. So make sure you thank them for that, acknowledge their complaint and thank them for bringing it to your attention, and advise that you’ve taken steps to rectify the issue for future guests (and actually do so!).

This shows other guests that you’re a very reasonable person who takes all concerns seriously – and will be approachable if they need you during their stay.

Guess who else is approachable?

We are!

If you have any queries or questions about your property and think we might be able to help out, don’t hesitate to get in touch – we’d love to help 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.

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Property Buyers Turning To Mortgage Brokers

Property buyers are increasingly
turning to mortgage brokers

marketing graph showing the increased popularity of mortgage brokers with property purchasersExcuse the humble brag, but property buyers are turning to mortgage brokers in record numbers. Here’s why that’s great news for the both of us.

Ok, ok, sure, we know we’re beating our own drum a little here.

But there’s a good reason why, we promise.

Firstly, it’s fantastic to see that at a time when the royal commission is dominating headlines and consumer confidence in the big banks is tanking, our industry is proving worthy of people’s trust.

During the September 2018 quarter, mortgage brokers settled an unprecedented 59.1% of all residential home loans.

That’s up from 53.6% in 2016 and 55.7 per cent in 2017 over the same period.

MFAA CEO Mike Felton points out that the result reflects not only the trust and confidence customers have in their mortgage broker, but the systemic importance of the mortgage broking industry.

“As banks have persisted in making it more difficult to secure a loan, turning many would-be borrowers away, consumers have continued to increasingly utilise the broker channel for experience, expertise and greater market choice to secure access to credit,” Mr Felton says.

Take that, banks

The figures emerge as the big banks continually try to curb the effectiveness of mortgage brokers. And it doesn’t take Einstein to figure out why: mortgage brokers promote a more competitive lending market at their expense.

According to Deloitte Access Economics, over the past three decades brokers have contributed to the fall in net interest margin for banks of over 3% points. This saves you $300,000 on a $500,000 30-year home loan (based on an interest rate fall from 7% to 4% pa).

Furthermore, on average, mortgage brokers have 34 lenders on their panel, and 28% of the time arrange residential loans through lenders other than the big four banks.

“In addition to providing customers access to a panel of 34 lenders on average, brokers are ideally positioned to help customers, especially those with more complex lending scenarios, to understand the ever-evolving application process and provide the information necessary to meet changing lender requirements,” adds Mr Felton.

Current model under threat

There’s been a recent push by at least one of the big four banks to make the customers pay for the services of a mortgage broker. If they had their way, that would be an industry-wide standard.

However, news that more and more customers are flocking to mortgage brokers under the current system will hopefully help us both out in the long run.

Better yet, a recent report shows that 9 out of 10 customers are satisfied with the services provided by mortgage brokers, so we sincerely thank you for your support.

Got a minute help us out a little more?

Besides continuing to use our services, and recommending us to family and friends, another way you can support us is by contacting your local MP to let them know you’re happy with the mortgage broking service we’re currently providing.

By letting your local Federal Member of Parliament know this you can help prevent the cost of our future services being transferred from the bank over to you – and you’ll also be showing your support for us.

If you’d like any more information on this issue don’t hesitate to get in touch. We’d love to speak to you more about it.

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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.

New Year New You

Mortgage BrokerEach Year we Make New Year’s Resolutions that Focus on
Our Health and Wellbeing.

But how often do we think about improving our finances? Here are five financial New Year’s resolutions that could help you start 2019 with a bang!

You might have missed it over the silly season, but the good news for mortgage holders is that many economists are tipping that we won’t see the RBA announce a rate rise in 2019.

Indeed, three leading economists now believe we may even see an interest rate cut this year. (Although, as we saw in 2018, that doesn’t necessarily mean the banks will follow suit).

But instead of sitting around waiting for the RBA and the banks to make a move that could save you money, here are five New Year’s resolution ideas to help you out in 2019!

Resolution idea #1: Cut back on the credit card purchases

The average card holder is paying around $700 in interest per year if their interest rate is between 15 and 20%, according to ASIC.

That $700 is nothing to sneeze at. It’s enough to purchase a new suit or outfit to help you land that new job, fund a year’s worth of home and contents insurance, or take the family on next summer’s camping trip.

Additionally, as of January 1, banks and credit providers are now required to check your debt-servicing capacity more thoroughly before issuing a credit card.

That means if you’re planning to load up on one credit card, and then transfer the debt to a card with a lower interest rate, you might find yourself out of luck.

With that in mind, the next question to ask yourself is: do I really still need a credit card if a debit card will suffice?

Resolution idea #2: Get a home loan health check

Whether the rates go up, down, or stay where they are, it never hurts to get a home loan health check to make sure there’s not a more suitable home loan out there for your situation.

Because while the RBA kept their rates on hold throughout 2018, not all banks did too.

In fact, every single one of the Big 4 Banks increased interest rates in 2018. To make sure you’re still happy with the rate you’re paying compared to what’s available in the market, give us a call.

Resolution idea #3: Purchase less take-away coffees, alcohol and other items

Buying a $4 take-away coffee each day costs you a whopping $1460 per year. Making it yourself using a French Press or Moka Pot can cost just $260 – a saving of $1200.

The lure of micro-transactions – purchases that are low in cost and trivial in nature – can be a real obstacle for those trying to achieve their financial goals.

Other micro-transactions that most families can cut back on include alcohol, take-away food, gym memberships, and multiple entertainment subscriptions such as Spotify, Netflix and Foxtel.

Resolution #4: Ask your employer about salary sacrificing

Salary sacrificing – also known as salary packaging – is generally tax-effective for people who earn more than $37,000 a year.

It helps you save on tax by allowing you to forego your salary in return for non-cash benefits, including car leases, childcare, student loans or superannuation contributions.

It all depends on your employer and the industry you work in but there are three broad categories of things that can be packaged: things that attract fringe benefits tax (FBT), those which do not, and superannuation.

If you’re interested in exploring your options, make an appointment with your employer when you get back into the office this month to see if they can make it work for you!

Resolution #5: Review your insurance, superannuation and banking costs

Whether it’s your home and contents insurance, your car insurance, or a life insurance policy, by calling three or four insurance companies, getting quotes, and then comparing, you can save hundreds of dollars each year.

While you’re at it, make sure you don’t have more than one superannuation fund. If you do, consolidate it by following these steps to avoid doubling up on fees.

Finally, look into your banking fees. Just like a home loan there’s often a better deal out there, so make sure your bank isn’t taking you for a ride!

Final word: Set a financial goal
If you’re not back at work yet, then use this precious time to carefully consider what financial goals you want to achieve in 2019.

It could be saving up for a long overdue holiday, putting away more money towards your kids’ education, or buying an investment property.

If you’re stuck for ideas, come in and have a chat to us. We’d be more than happy to help you identify goals, and can also help with some of the suggestions listed above.

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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.

Bank Wanted Mortgage Broking Fees Transferred to Customers

mortgage broker sydney - demonstrators holding up placards saying; I wish this was fake newsA big four bank almost overhauled its broker remuneration model so that the cost of mortgage broking services would be transferred to the customer, the royal commission heard. Here’s how to prevent that from happening.

The Royal Commission recently revealed that back in 2017 the Commonwealth Bank planned to replace commissions paid to mortgage brokers with a flat fee, but baulked at the last minute.

CBA’s CEO Matt Comyn told the royal commission that CBA believed the most attractive model was one where “customers would pay a broker”.

The move would have saved CBA $197 million over five years if everyone in the market moved with them.

However, without regulator intervention to drive an industry wide move to this model, CBA feared they’d be left hung out to dry by the other big three banks.

“We came to a view that nobody will follow and we will suffer material degradation in volume,” Comyn said.

Not only would this model be a major disadvantage to consumers going forward, it would reduce a new broker’s revenue on an average loan to about a third of what it currently is.

Basically, the only real winner would have been the big banks.

Not the customers. Not the mortgage brokers.

The banks.

Some interesting stats

Here are some interesting statistics from Deloitte Access Economics that may explain why CBA was looking to limit the growth in the mortgage broking market:

– Over the past three decades brokers have contributed to the fall in net interest margin for banks of over 3% points. This saves you $300,000 on a $500,000 30-year home loan (based on an interest rate fall from 7% to 4% pa).

– 27.9% of residential loans are arranged through lenders other than the big four banks and their affiliates, providing competition and more choice for consumers.

– On average, mortgage brokers have 34 lenders on their panel and use 10. It’s this additional choice that adds competition in the market. The only winners from less competition are the big banks.

– 56% of residential loans were settled by mortgage brokers in the September quarter in 2017. This is up from 44% since 2012.

– 70% of a broker’s business comes directly or indirectly from existing customers, demonstrating high levels of customer satisfaction.

– 9 out of 10 customers are satisfied with the services provided by mortgage brokers.

It’s still a live issue

Basically, the only reason CBA didn’t pull the trigger on the move was because it was worried that if it did, the other lenders wouldn’t join them. Instead, they’d swoop in and steal their business.

However, if the regulator enforced a flat fee model, then all the lenders would have to get onboard.

That’s exactly what could happen if it becomes a royal commission recommendation, which is a possibility considering the extensive line of questioning from the royal commission’s counsel assisting, Rowena Orr.

How can you help?

The best way is to contact your local MP to let them know you’re happy with the mortgage broking service we’re currently providing.

By letting your local Federal Member of Parliament know this you can help prevent the cost of our future services being transferred from the bank over to you – and you’ll also be showing your support for us.

Additionally, head over to the The Adviser and Momentum Intelligence survey to share your experience with us. It’s anonymous and only takes two minutes to complete.

If you’d like any more information on this issue don’t hesitate to get in touch. We’d love to speak to you more about it.

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Stress tested your home loan recently?

 Don’t stress

Best Mortgage Brokers - showing the back of a lime green school bus that has the hash tag message written on it - never stressSeven in 10 Australian mortgage holders have not stress tested their home loan. But don’t stress, it’s much easier to do than you think.

Deloitte Access Economics’ latest report makes for pretty interesting reading.

It turns out the average Australian has a “wide-ranging hesitancy to make any sort of change” when it comes to their mortgages and other financial products.

“Why is it that educated consumers who know they’re not getting the best deal on many of their household products are so unwilling to take action to improve their household finances?” asks a surprised Deloitte.

Interesting mortgage stats

It turns out that 41% of Australians with a mortgage don’t check for interest rate changes because they either have no interest, don’t know what the RBA cash rate is, or do not see its relevance.

Even more interesting is that 68% of people say they have never stress tested their home loan.

“This is a particular worry,” says Deloitte.

“Recent estimates show that a 0.5% increase from current interest rates would cause mortgage stress to jump from one in four mortgaged households to one in three.”

Worse still, a 2% increase would throw half of all mortgaged households into stress.

Now, that might sound like a big increase, but don’t forget that it wasn’t so long ago that interest rates were at that level. In fact, it was only six years ago in June 2012.

So how do you stress test a home loan?

Simple.

Calculate how much extra a 0.5%, 1% and 2% increase on your mortgage would cost you each month and whether your budget can allow for it.

If you’d run into trouble, give us a call and we can work through some risk mitigation options with you, which could include locking in a home loan rate.

Why don’t people care about getting a better deal?

Interestingly, 1 in 3 people know there are better deals out there, while 1 in 5 don’t bother to check for a better deal.

It turns out there are three key reasons people don’t change to a home loan that would see them better off financially, with the first being decision making paralysis.

“Too often, many consumers get stuck before making a choice – and then they do nothing,” explains Deloitte.

Another big reason is people “hate feeling dumb”.

“Consumers also hesitate when they fear or worry about the possibility of making a bad decision. This, coupled with the fact that people tend to avoid what makes them nervous,” adds Deloitte.

The final key reason is that people simply put it off.

“Outcomes set in the distant future typically lack a sense of urgency in contrast with everyday needs, making it easy to defer decision making to a tomorrow that never arrives,” says Deloitte.

How can you overcome these barriers?

Well, here’s the good news. We can help you overcome all three.

For decision making paralysis we can come up with a shortlist of options, reducing the choices you need to make.

Worried about feeling dumb? I bet you we’d feel pretty dumb if we did your job for a day too. But we make it our business to help educate you and bring you up to speed in this market.

And how can you overcome avoidance? Simple. Give us a quick call today and we’ll get the ball rolling for you. You’ll be surprised how little time and effort it takes.

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How much does it cost to own a pet?

mortgage broker sydney - Chinese Shar-Pei dog playing in long grassWe thought we’d have a little fun this week and look at how much it costs the average Aussie family to own a pet. After all, two in three households have one and very few budget for them!

Let’s be honest, owning a pet goes hand-in-hand with the great Australian dream of property ownership.

So let’s be clear here: we’re definitely not making a case against pet ownership. However as Christmas time usually coincides with a spike in pet purchases, it’s a good time to look at the monthly cost factor.

Because if you’ve decided to take on the responsibility of welcoming a pet into your household, then it’s something you oughta plan for and do right!

First, how many of us own pets?

Believe it or not, but two in three Australian households own a pet.

Yet how many of them do you think run a proper budget for it? Probably very few.

And when you consider that more than $12 billion is spent on pet products and services every year, that’s a lot of unallocated money!

So if you’re looking to get a pet for your family, here’s the most common options available, listed from most expensive to cheapest.

Dog

If you’re looking at adding a puppy or rescue dog to your very own wolf-pack as 38% of Australia households have already done, expect to pay about $1475 per year.

Basically, you’re looking at an average of $123 a month for food, vet care, health products, grooming and boarding.

To avoid any vet bill blow outs, it might also be worth considering pet insurance, which will cost an extra $293 per year. Or $25 per month.

And while we’re at it, here’s a fun fact: the number one thing that dogs eat that makes them sick is underwear! So be sure to keep them out of reach!

It’s also worth noting that the above figures don’t factor in upfront costs, which can range from $1000-$5000 to purchase a select breed, or $300-$500 to adopt an RSPCA dog.

Cat

If you’re more of a cat person, like 29% of Australian households, expect to pay $1,029 per year. That’s about $86 a month.

Pet insurance is slightly cheaper for cats, coming in at $20 a month, but then again – cats probably aren’t underwear connoisseurs!

It costs between $100 and $300 to adopt a cat from the RSPCA – depending on their age – while a select breed will cost you between $1,000 and $2,500, and sometimes even more.

Bird and fish

If you’re looking to ease yourself into pet ownership, welcoming a bird or fish into the fold is a much cheaper option.

It costs just $115 per year on average to own a bird, while fish are even cheaper at $50 per year.

Final word

As you can see, purchasing a pet is unlikely to cost you an arm or a leg (so long as they have adequate play toys!).

However, you can minimise the impact it has on your bottom line by including the monthly amount in your family budget, and protecting against vet cost blow-outs with pet insurance.

If you’d like to know more about budgeting, get in touch. We’d be happy to help out.

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6 Christmas Tips to Help You Save this Silly Season

mortgage brokersydney -lady with facial and head christmas attire holding a sandwich plate and a milky drink glassMost of us roll our eyes when we start seeing shopping centres spruik Christmas merchandise in November. While it’s important not to get caught up in the festivities too early, now’s actually a great time to start prepping to ensure your budget doesn’t blow out over the silly season.

The best bit? By following some of the below tips, you can turn the retailers’ early mind games against them and save money instead!

1. Buy food ahead of time

Christmas time tends to lead to a lot of socialising. Even if you aren’t the one catering, requests to bring a plate can add up over time.

Make a point of keeping an eye out for food and drinks specials ahead of time and buy items like boxes of chocolates, long life snacks and drinks when they are on special. That will make it much easier to stretch the food budget over Christmas.

2. Opt for Secret Santas

For people who have a large family or friendship circle, Christmas can lead to a long list of presents to buy. Many people prefer not to get extra clutter for their kids, so suggest a Secret Santa arrangement instead of buying for every person.

This way you can put more thought into each gift as well as not creating more stress.

3. Homemade wrapping paper

If the end of term results in your kids bringing home sheets of artwork, why not recycle these and use them for wrapping paper for the extended family?

Not only does this mean that the kids get to see their artwork being passed on to loved ones, but it also saves you money on buying wrapping paper that will be in the bin by Christmas morning.

4. Shift the focus

Rather than dwelling on social media posts of the perfect Christmas morning with matching pyjamas, shift your focus to the true meaning of Christmas: helping others who are less fortunate.

For instance, instead of getting new books for Christmas Eve story time you could choose books from the library and make a donation to charity that helps literacy in at-need communities.

5. Keep a track of your spending

With a large percentage of Australians overspending at Christmas (and feeling guilty about it), it’s important to keep a budget for Christmas and any associated events – like holidays – over that time.

By following a budget, and starting now, you can spread out your spending – $200 a week over five weeks is much better than $1000 in the week before Christmas.

6. A final few tips

– Create a list of who you need to buy for and brainstorm present ideas before you go shopping.

– Make your own gifts.

– Buy online when sales specials are on. This can help you avoid pressure from sales staff and impulse purchases.

– If hosting a Christmas day event, organise it early so attendees can help out with the food and drinks.

Want some extra help?

If you’re struggling with your budget and don’t know how you’re going to make the money stretch over Christmas, give us a call.

We’d love to help you come up with some strategies to ensure that you and your family get to make the most of the silly season ahead.

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Keen to Jump into a Property Hotspot?

On the up and up. Keen to jump
into a property hotspot?

master broker sydney - looking down on a pair of feet in sand shoes parachuting down to earthWith housing values falling across half of Australia’s capital cities over the past year – and the media well and truly letting us know all about it – it can be all too easy to forget many regions are doing well. Here’s where property prices have recently experienced healthy growth.

The good news is that almost half of Australia’s 88 sub-regions have experienced growth in housing values over the past twelve months, according to CoreLogic.

These sub-regions are more formally known as SA4 sub-regions, which have populations between 100,000 and 500,000 people.

“Half of these regions have recorded a higher rate of annual capital gain relative to their five year average rate of growth, suggesting some acceleration in market conditions,” says CoreLogic’s Tim Lawless.

“In fact, 35% of the SA4 sub-regions have recorded an improvement in their rate of capital gain over the past 12 months relative to their five year average rate of growth.”

So where’s hot?

Two words: regional areas.

In fact, 57% of all regional areas recorded a rise in dwelling values over the past twelve months, while only 39% of the capital city sub-regions recorded an increase.

Here’s a list of the top 10 healthiest growth markets, all of which outperformed their five-year average.

1. Geelong, Victoria, 11.8% growth

2. Hobart, Tasmania, 10.7% growth

3. South East, Tasmania, 9.9% growth

4. Launceston and North East, Tasmania, 9.3% growth

5. Ballarat, Victoria, 7.1% growth

6. Central West, NSW, 6.1% growth

7. Sunshine Coast, Queensland, 6.0% growth

8. South Australia Outback, SA, 5.8% growth

9. Latrobe – Gippsland, Victoria, 5.3% growth

10. Northern Territory Outback, NT, 5.3% growth

Why are regional markets healthier?

The ‘healthier’ conditions across regional markets can be attributed to a range of factors, says Lawless, including:

More sustainable growth conditions: “Most regional areas have seen relatively sedate housing market conditions compared with the heroic gains across Sydney and Melbourne. The more sustainable history of price growth has kept a lid on housing affordability and made these markets attractive to migrants,” says Lawless.

The ripple effect: “A ripple of demand has been emanating from the largest capitals towards the satellite cities where housing is generally more affordable and lifestyle factors can be appealing.”

Sea change: “Many coastal and lifestyle markets have benefited from a rise in buyer demand, either from those looking for a new residence, second home or investment option.”

Bounce back: “Many of the hard hit mining regions have now levelled out and are now showing some growth.”

Capital Cities that have Experienced Growth

There are some capital cities also doing well, says Lawless.

In Brisbane, seven of the nine SA4 sub-regions have seen a rise in values over the past year.

In Adelaide, three of the four SA4 sub-regions have recorded an annual gain.

Hobart is also experiencing significant growth (10.7%), as seen by its second place spot on the list.

“While conditions are broadly slowing, especially around Sydney and Melbourne, many areas of the country are benefitting from a history of more sustainable growth rates, improving demand and reasonably strong economic conditions,” says Lawless.

Interested in Finding Out More?

If you’re a first home buyer or an investor looking to purchase property in an area that’s recently experienced growth then get in touch.

We’d love to help you source a great home loan and help make your property ownership dream become a reality.

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