Why has my Investment Loan interest rate increased?

I’ve had many discussions with clients over the past few months about the increases to investment loan or interest only loan rates, in many cases where the increases have been substantial.

In short this has occurred because APRA, the banking regulator has placed limits on the amount of investor lender and interest only lending that the Banks can provide.

The Banks have implemented this in a few ways:

  • Tighter Lending Criteria
    Stricter assessment of applications to make it more difficult for customers to obtain finance.
  • Higher Interest Rates
    The old Demand & Supply lever – raise your rates and demand will soften. Interestingly, this has been applied to the Banks existing loans as well as new lending whereas the APRA controls relate to new lending.

The result has been marked differences between the interest rates charged for Owner Occupied lending and rates charged for Investment Loans – in some cases more than 1% difference.

So why isn’t the Government or the Reserve Bank doing something about it?

Quite simply, it’s what they want to happen. The Banks are doing some of the dirty work that the Reserve Bank (who control monetary policy) and the Federal Government (who control fiscal policy) don’t want to do.

The Reserve Bank doesn’t want to lift rates across the board because many parts of Australia are not seeing the prosperity and growth that households are enjoying in Sydney and Melbourne. Unfortunately they can’t have one policy for regional Australia and another one for the major cities.

The Government wants to be able to say that investors are paying their fair share, and that there is no need to wind back Capital Gains concessions or Negative Gearing. For them it’s political as much as economical. Perversely, the higher interest rates will only result in higher deductions against rental income and bigger tax returns for investors.

So what should I do about it?

1) Check to make sure that your Owner-Occupied Home Loan is classified as such and not classified as an investment loan. You’ll save a lot by making that change. There are other tips and techniques you can use to pay down that loan faster.

2) Check to see that any increases, top ups or variations to your loan have been priced and classified correctly. If you are unsure best to check with a Broker

3) If you are paying interest only and can afford to change it to Principal & Interest, it may be worth doing so, particularly if the loan is in relation to your main home. If the interest is not providing you with a tax deduction you should strongly consider switching to Principal repayments as well.

Finally, let a Broker have a look and see whether you have the optimal set up and rate structure across your Owner Occupied and Investment Lending. Savings are likely available. There are options available to have your investment loan priced as if it were a owner occupied loan. You just need to know where to find it.

Douglas Piening is a Mortgage and Finance Broker with Choice Home Loans and is passionate about providing advice you can trust. Whether it’s buying a home, refinancing a loan, investing, building or renovating, Doug brings a wealth of knowledge and expertise to assist with your lending needs. 

You can contact Doug at (e) douglas.piening@choicehomeloans.com.au or (m)  0408 671 524.

Want to hear what clients have said about working with Doug? Take a look at these reviews from LinkedIn and Facebook.

This information is of a general nature only and does not constitute professional advice. You should always seek professional advice in relation to your particular circumstances.

Tips for saving for a deposit

For first home buyers, saving a deposit can be tough, here are three winning tips to help set you on your way to home ownership.

 

Put your goals in writing

Setting a financial goal will make it much easier to plan and save successfully. Make a conscious effort to track your expenses so you can see where your money’s going and cut back where you can. Small sacrifices, such as taking the bus instead of a taxi, cutting back on buying coffee or bringing your lunch to work can also go a long way towards helping you save.

 

Beat the credit monster

Credit card debt, unpaid bills and personal loan repayments can be major setbacks to your saving efforts. As part of your saving strategy get these debts paid off. Start by paying off debts with the highest interest rate – typically your credit card. If you can’t pay it off in one lump sum, ensure that you pay more than the minimum monthly repayment. You’ll not only slash your debt, you’ll also have extra funds to channel into other debt commitments or savings.

 

Make your savings work harder for you

Making cutbacks on your lifestyle is one thing, but putting that money to use is another. Remove the temptation to spend your savings by arranging a set amount to be taken out of your pay each month and put directly into a savings account. Shop around, and seek a high interest rate savings account to get the best returns – many banks offer an online high interest account that you can squirrel those savings in to.

 

If you are looking at buying a first home, be sure to get in touch to talk through your options. You can contact Doug at (e) douglas.piening@choicehomeloans.com.au or (m)  0408 671 524.

Douglas Piening is a Mortgage and Finance Broker with Choice Home Loans and is passionate about providing advice you can trust. Whether it’s buying a home, refinancing a loan, investing, building or renovating, Doug brings a wealth of knowledge and expertise to assist with your lending needs. 

Want to hear what clients have said about working with Doug? Take a look at these reviews from LinkedIn and Facebook.

This information is of a general nature only and does not constitute professional advice. You should always seek professional advice in relation to your particular circumstances.

 

Tax Time Tips for Property Investors

If you are one of the 2 million people in Australia* that have investment property, whether negatively or positively geared, tax time means getting your things in order to maximise your deductions, including your loan interest expenses.

Here’s 5 Top Tips this tax time:

1) Understand all of the deductions categories.

Expenses include; mortgage interest, bank charges, council rates, water rates, cleaning, pest control, gardening, repair and maintenance cost, insurance, body corporate fees, advertising for tenants and agent management fees, capital works, depreciation, insurance, land tax and travel to inspect or maintain the property. Whilst you may have a good accountant, it is important for you to have an understanding of what can be claimed in order to provide them with the best possible information for deductions.

2) Don’t forget depreciation and capital works.

You can claim depreciation for the decline in value of the assets in your investment property such as hot water systems, carpets and heating and cooling systems. You may also be able to claim capital works expenses from the construction of the property, usually over 25 to 40 years. These deductions can be significant, particularly in new properties. The easiest way to understand and calculate depreciation and capital works, is to invest in a tax depreciation report from specialists such as BMT.

3) Ensure you keep records.

If you rent your investment property through an agent, they may handle the vast majority of your property expenses and provide you with an annual statement with these classified according to the taxation requirements. It is likely though you also incur expenses; such as interest on your investment property loan, bank charges, insurance, travel expenses and possibly land tax. The ATO is known to audit investment property owners and adequate receipts and records including those provided by your agent need to be kept for a minimum of 7 years.

4) Don’t forget the impact of capital gains when it comes time to sell.

There can be substantial tax advantages of investing in property, however keep in mind when it comes time to sell there may be tax payable on any capital gains. For property owned over 12 months, the 50% discount applies. It may also be possible to time capital gains with other capital losses. It’s best to speak to your accountant before making plans to sell your investment property to plan for the capital gains impact.

5) Have a great accountant!

Last but not least, make sure you have a good accountant that is across all aspects of investment property to keep you on the right track and maximise your investment deductions.

For more information you can refer to the ATO’s guidelines on expenses and depreciable assets or talk to your accountant.

 

Douglas Piening is a Mortgage and Finance Broker with Choice Home Loans and is passionate about providing advice you can trust. Whether it’s buying a home, refinancing a loan, investing, building or renovating, Doug brings a wealth of knowledge and expertise to assist with your lending needs. 

You can contact Doug at (e) douglas.piening@choicehomeloans.com.au or (m)  0408 671 524.

Want to hear what clients have said about working with Doug? Take a look at these reviews from LinkedIn and Facebook.

This information is of a general nature only and does not constitute professional advice. You should always seek professional advice in relation to your particular circumstances.

 

* Source: ATO https://www.ato.gov.au/About-ATO/Research-and-statistics/In-detail/Taxation-statistics/Taxation-statistics-2014-15/?page=5

Home Loans 101: Understanding loan options

Loan options can be confusing to those new to mortgages, or sometimes even those that have had home loans for years.

Here’s a 101 to get you up to speed on loan types:

1) Basic home loans

Basic home loans or ‘no frills’ loans offer borrowers a loan with a low interest rate. This interest and principal repayment loan can be popular with first home buyers. A basic home loan’s interest rate can be half to one per cent below the standard variable rate, which is sometimes combined with minimal ongoing fees. Potential drawbacks can include limited features, less flexibility, and additional charges if you decide to switch loans or pay the loan off sooner.

2) Fixed-rate home loans

Worried about rising interest rates? A fixed-rate home loan will allow you to fix your interest rate for a specific period, usually from one to five years. It can be a sound option when interest rates are on the rise, or in times of economic uncertainty. Should interest rates plummet, however, you’ll still have to pay off your mortgage at the fixed-rate until the end of the agreed fixed-rate period. Additionally, keep in mind that you may be charged a fee commonly called a break cost or economic cost, should you decide to break your fixed term or switch to another product. You may also be limited in making extra repayments.

3) Standard variable-rate home loans

A popular mainstream choice, standard variable-rate interest and principal home loans allow you to borrow money for a set period of time, during which you make regular repayments. The interest rate can vary depending on fluctuations in the official cash rate, so it is likely to go up or down depending on the market cycle.

4) Split-rate home loans

Want the best of both worlds? A split-rate home loan offers both flexibility and security. A good product for both first time and existing borrowers, split loans allow you to customise your loan’s interest rate as you see fit: fixing a portion of your interest rate to give certainty to your monthly repayments during the fixed-rate term should rates increase, but also flexibility through taking out a variable-rate portion.

5) Interest-only home loans

Interest-only loans offer borrowers lower repayment options, while maintaining many of a traditional loan’s features. This type of loan allows you to pay only the interest component on a mortgage; it does not reduce the principal component. They are a popular choice for investors seeking good capital appreciation on their investments.

6) Low-doc home loans

If you’re self-employed, a contractor or a seasonal worker and do not have a regular income, a low-doc loan may best suit your situation.

 

Different home loan options may or may not suit you depending on your circumstances. It may also be a matter of personal choice, whether you prefer to fix in your rates for certainty, or prefer to stick with the market rate with a standard variable loan.

If you have any questions about loan types don’t hesitate to ask.

 

Want trusted advice on which loan type best suits your needs and circumstances? You can contact Doug at (e) douglas.piening@choicehomeloans.com.au or (m)  0408 671 524.

Douglas Piening is a Mortgage and Finance Broker with Choice Home Loans and is passionate about providing advice you can trust. Whether it’s buying a home, refinancing a loan, investing, building or renovating, Doug brings a wealth of knowledge and expertise to assist with your lending needs. 

Want to hear what clients have said about working with Doug? Take a look at these reviews from LinkedIn and Facebook.

This information is of a general nature only and does not constitute professional advice. You should always seek professional advice in relation to your particular circumstances.

 

Six winning strategies for auctions

Auctions are competitive and stressful for most bidders. Here are six smart strategies that could improve your chances of winning.

1. Dont show your hand

Revealing your maximum bid limit to the agent before the auction could encourage them to push you a little further. For example, during the auction the agent might indicate you’re close to meeting the vendor’s expectations, to try to persuade you to bid above your limit. It’s in their interest because they’re usually earning a commission based on the sale price.

2. Ask if the reserve has been met

Bids must reach the vendor’s reserve price before the property is officially ‘on the market’ and then sold to the highest bidder. If the property doesn’t meet the reserve it will be ‘passed in’.

The reserve price is usually set on the day of the auction, or the day before. The auctioneer often doesn’t know the reserve until just before the auction begins, and they don’t have to reveal it to bidders – but you can still ask.

If you discover the reserve, you can wait to bid until it’s reached. This tactic might even persuade the vendor to lower the reserve during the auction if they’re not getting enough bids.

If you’re the highest bidder for a passed-in property, you may be invited to negotiate with the selling agent. Be wary of high-pressure sales tactics here, and remember that cooling-off periods don’t apply to contracts signed on auction day.

3. Ask questions (but know the rules)

You can talk to the auctioneer during the auction to find out information that may be helpful in winning. For example, Consumer Affairs Victoria says you can ask the auctioneer a ‘reasonable’ number of questions, and you can ask them to identify who has made a bid. You can also ask whether the property is ‘on the market’ yet (has it met the reserve price?). Be visible and within earshot of the auctioneer to avoid miscommunication.

Make sure you know the rules, as it’s illegal to disrupt an auction. The auction rules are generally made available at least 30 minutes before the auction, and the auctioneer should also announce the rules before bidding starts.

4. Bid like a pro

Bid with confidence and state the full price to let your rivals know you’re serious. A confident call of ‘$500,500’ (as opposed to a quiet ‘500’) will remind the room of how much is at stake.

You can also try ‘knockout’ bids and offer well above the last bid or the auctioneer’s suggested figure, to intimidate less-confident buyers. If bids are being made quickly you might want to try to slow things down by bidding in smaller increments than the auctioneer suggests.

Pre-auction tip: Ask the selling agent how many people have requested property reports. This will give you an idea of the number of serious bidders.

5. Employ a professional

You can enlist a buyer’s agent (also called a buyer’s advocate) to bid for you. They’ll have no emotional attachment to the property and should only bid what they believe it’s worth (within your limit). They should also have plenty of auction experience and know the tricks of the trade. The Real Estate Buyer’s Agents Association of Australia offers some tips for choosing a buyer’s agent.

You could also ask a friend or family member with auction experience to bid for you. But remember that you’re the one who has to pay, even if they win by exceeding your limit.

6. Be prepared to cut your losses

Accept property reports and legal fees as sunk costs that are part of the auction process. You’re better off spending a few hundred dollars checking a property than bidding hundreds of thousands without doing the pre-auction groundwork. On auction day, if you hit your limit, walk away to avoid temptation.

Auctions can be challenging, especially when there are emotions involved. Sensible, practical strategies can give you the best chance of being the last person standing – or at least stop you from overcommitting – on auction day.

 

Douglas Piening is a Mortgage and Finance Broker with Choice Home Loans and is passionate about providing advice you can trust. Whether it’s buying a home, refinancing a loan, investing, building or renovating, Doug brings a wealth of knowledge and expertise to assist with your lending needs. 

You can contact Doug at (e) douglas.piening@choicehomeloans.com.au or (m)  0408 671 524.

Want to hear what clients have said about working with Doug? Take a look at these reviews from LinkedIn and Facebook.

This information is of a general nature only and does not constitute professional advice. You should always seek professional advice in relation to your particular circumstances.

Understanding first home owner grants and concessions

 

Clients of mine recently purchased an apartment off the plan for $550,000 in Melbourne. As (1) they had never owned property in Australia (2) the property they were purchasing had never previously been lived in and (3) the property was valued at under $750,000, they were entitled to a $10,000 First Home Owners Grant from the Victorian State Government. In addition to the First Home Owners Grant, they were also entitled to a Stamp Duty Concession – a 50% reduction. As they had purchased the property off the plan, the Stamp Duty was approximately $3,000, so with a 50% reduction, they saved around $1,500 in Stamp Duty. 

Before you start searching for your first home, it pays to know where you stand on any government concessions that might help you out. These concessions tend to vary state by state and situation by situation, so if you need an explanation, please get in touch and we can discuss how they work.

First Home Owner Grant

The First Home Owner Grant (FHOG) scheme was introduced on 1 July 2000 to offset the effect of the GST on home ownership. Under the scheme, a one-off grant is payable to first home owners that satisfy all the eligibility criteria. Although it is a national scheme, it is funded by the states and territories and administered under their own legislation.

For information on the FHOG in your specific state you can visit firsthome.gov.au .

Stamp duty breaks and concessions

Some of Australia’s state governments have concession waivers of the stamp duty associated with a property purchase.

Stamp duty is a tax applied to certain property transitions. When land is sold, transferred or leased, for example, stamp duty is generally payable. It is usually the buyer, not the seller, who is liable to pay stamp duty. Payment must generally be made within three months of entering into the contract for purchasing the property. The amount of stamp duty payable depends on the value of the property and the amount for which it is sold, transferred or leased. It is calculated on its market value or the price paid by the buyer.

Each state government has its own rules surrounding stamp duty on property purchases. For this reason, the exemptions and concessions available differ from state to state.

Some first home buyers, vacant land holders, and farm buyers may be entitled to some exemption or discount on stamp duty. You can check out whether any apply to you by contacting the revenue office in your state or territory (see the list below for details).

More information

You can also find further information on the First Home Owner Grant or details on stamp duty breaks on your state’s relevant government office website.
ACT – revenue.act.gov.au
NSW – osr.nsw.gov.au
NT – nt.gov.au/ntt/revenue
QLD – osr.qld.gov.au
SA – revenuesa.sa.gov.au
TAS – sro.tas.gov.au
VIC – sro.vic.gov.au
WA – osr.wa.gov.au

 

Don’t worry if you find eligibility criteria for First Home Owners Grants and Stamp Duty Concessions confusing – you are not alone! Get in touch and we will let you know (in an jargon free way!) how these might apply to the purchase of your first home. You can contact Doug at (e) douglas.piening@choicehomeloans.com.au or (m)  0408 671 524.

 

Douglas Piening is a Mortgage and Finance Broker with Choice Home Loans and is passionate about providing advice you can trust. Whether it’s buying a home, refinancing a loan, investing, building or renovating, Doug brings a wealth of knowledge and expertise to assist with your lending needs. 

Want to hear what clients have said about working with Doug? Take a look at these reviews from LinkedIn and Facebook.

This information is of a general nature only and does not constitute professional advice. You should always seek professional advice in relation to your particular circumstances.

*Note: Details are current as at publish date and should be confirmed with your local Office of State Revenue or equivalent body.

Understanding Lenders Mortgage Insurance (LMI)

Clients of mine who are first home buyers have saved a $50,000 deposit and are looking to buy a property for around $550,00. Given that their deposit is around 9% of their purchase price, they are required to pay Lenders Mortgage Insurance (LMI). Based on their deposit amount and property purchase price, the LMI is approximately $13,450, which they will add to the total cost of their loan and pay off over the life of the loan. 

 

As a general rule, if your deposit is less than 20 per cent of the value of the property, you will need to pay for Lenders Mortgage Insurance (LMI). There are also some specific cases that require a higher than 20% deposit, depending on the type and style of property you’re purchasing – for example, some inner-city apartments or rural land.

Why do lenders insist on LMI?

The lower your deposit as a percentage of the purchase price of the property, the higher the lender views their risk in the event that you fail to meet mortgage payments and the property needs to be repossessed and resold. It is important to be aware that LMI only covers the lender if you default on your loan payments (and the lender is unable to secure the full outstanding debt still owing, when they sell your property). LMI does not provide you with any cover.

How much does LMI cost?

The bigger the percentage of the property’s purchase price you have to borrow, the greater the amount you’re likely to pay for insurance.

A handy site that offers an approximate guide on how much LMI may cost is the LMI Premium Estimator on the Gemworth website. For a more exact calculation on LMI, it is best to get in touch to work through what it might be for your specific situation.

 

How is LMI paid?

LMI is usually paid as a one-off lump sum at the time of settlement but in many cases it can also be added into the loan amount and paid off over the life of the loan – a term known as capitalising the LMI. LMI is always paid directly to the lender as part of the settlement and the lender then uses their preferred insurer.

Why would you pay LMI? Why not wait until you have 20% deposit?

Lenders Mortgage Insurance (LMI) allows some buyers to enter the market earlier than they could if they had to wait until they have the required deposit to ‘avoid’ LMI. For first home buyers, particularly those struggling to save a deposit in an environment of rising house prices, but more than comfortable to meet their mortgage repayments, it can be a key tool to break free from renting and get into the property market.

 

If you need any information on Lenders Mortgage Insurance, or are looking at buying a first home, be sure to get in touch. You can contact Doug at (e) douglas.piening@choicehomeloans.com.au or (m)  0408 671 524.

Douglas Piening is a Mortgage and Finance Broker with Choice Home Loans and is passionate about providing advice you can trust. Whether it’s buying a home, refinancing a loan, investing, building or renovating, Doug brings a wealth of knowledge and expertise to assist with your lending needs. 

Want to hear what clients have said about working with Doug? Take a look at these reviews from LinkedIn and Facebook.

This information is of a general nature only and does not constitute professional advice. You should always seek professional advice in relation to your particular circumstances.

 

 

 

Will interest rates increase in 2017?

Interest rates have been at historical lows for such a long time, home owners could be forgiven for forgetting what it is like for rates to rise.

 

In recent weeks though, major lenders have increased their fixed term rates, across several loan terms (two, three and five year terms). A rise in fixed rates usually signals a rise in the cost of funding, which may translate into rises in variable interest rates as well. Westpac, Bank of Melbourne, Ubank and Commonwealth have all increased some of their fixed loan products, some up to 60 bases points higher.

 

While you probably need a crystal ball to accurately predict if rates will rises or fall, there is increasing noise from some industry experts that variable interest rates will rise in the back half of 2017.*

If this the case, it will be the first time the market will have had a rate rise since November 2010.

Predicting whether the RBA will change the official interest rate requires complex consideration of the Australian economy in terms of inflation, industry sector growth or decline and unemployment or wages growth and the impact of the global economy. Against this backdrop though, there is the school of thought that there is significant risk in a continued lending boom which fuels housing growth and negatively impacts housing affordability.

 

So if interest rates rise what does it mean for you?

 

The impact of rate rises really comes down to your individual circumstances. Some of the things you could do to prepare for possible interest rate rises:

 

 Mini house with money on blue

Build yourself a buffer

One of the best things you can do to minimise the impact of a rate rise, is to pay off your mortgage faster than your required repayments and build yourself a buffer. That way if rates rise, you are paying less interest from either a reduced principle, or the impact of more money in your offset account. And if you find yourself in need of extra cash to make repayments, you have this available to you. It also gets you used to paying at a higher rate so you don’t feel the impact of any rate rises.

 

Interest Rates

Lock in a fixed rate

This may be an option for you if you want certainty and to hedge your bets against any rises. There are some disadvantages to locking in a fixed rate which you need to be aware of though, you can read more here on fixing loans. Given that fixed rates have already gone up though for many lenders, the horse may have already bolted. I am not the biggest fan of fixed rates but they can provide certainty for a locked in period of time.

 

Plan ahead

It can help to plan ahead to determine the impact on you if rates were to rise on your current loan. Look for an online calculator to see the impact on your repayments if interest rates were to go up, or ask your broker to calculate this for you. Would this amount cause issues with your current budget? Or are there are things that are changing for you in the future that might impact on your ability to pay your mortgage, like a new baby, or a change to your work circumstances? If you think there are things that might impact on your ability to service your mortgage you might want to look at possible strategies, like restructuring your loan.

 

We will have to wait and see if the predictions are true on rate rises. If you have any questions or need any information on current rates, please get in touch.

 

You can contact Doug at (e) douglas.piening@choicehomeloans.com.au or (m)  0408 671 524.

Douglas Piening is a Mortgage and Finance Broker with Choice Home Loans and is passionate about providing advice you can trust. Whether it’s buying a home, refinancing a loan, investing, building or renovating, Doug brings a wealth of knowledge and expertise to assist with your lending needs. 

Want to hear what clients have said about working with Doug? Take a look at these reviews from LinkedIn and Facebook.

This information is of a general nature only and does not constitute professional advice. You should always seek professional advice in relation to your particular circumstances.

 

Sources:

  1. http://www.domain.com.au/news/the-five-things-on-the-agenda-for-sydneys-property-market-in-2017-20161211-gt8v8g/
  2. http://www.afr.com/news/economy/get-ready-for-2017-reserve-bank-of-australia-rate-hikes-says-oecd-20161128-gsz5k4
  3. http://www.afr.com/real-estate/residential/syd-melb-house-prices-to-rise-but-building-boom-to-end-hsbc-20170110-gtopcs
  4. http://www.abc.net.au/news/2016-12-09/interest-rates-on-mortgages-likely-to-rise/8106180

5 simple financial New Year’s resolutions

The new year is here and after an indulgent holiday break most of us are happily fixated on health goals. Kale sales will no doubt sky rocket in the next couple of weeks, along with gym memberships, as we all vow to lose five kilos. But what about ‘financial health’ resolutions for 2017?

With a little focus and thought (while jogging at the gym in the first couple of weeks of January?) we can also get our finances in great shape.

Here’s 5 simple ways that each take 15 mins or less.

 

  1. Calculate your net worth

The new year is a good time to get a clear picture of where you are at financially. Calculating your net worth is the financial equivalent of putting yourself on the scales. Add up your assets and liabilities and get yourself to a net worth figure as the starting point for your financial resolutions for 2017. And by assets I mean your house, investments, shares, superannuation (we are not talking assets of the genetic variety unless you happen to be a Victoria Secret model). Debts are thing such as credit card debt, personal loans, mortgages and investment loans.

Time = 10 minutes

 

  1. Work out what it’s all for

Many Australians put financial goals in the too hard, or ‘I’ll get around to that’ basket. If you don’t have clear financial goals, sit yourself down for 15 minutes, alone, or with a partner or your family and work out what it is that you want. Do you want to own your home by 50? Head to Europe for 6 weeks next year? Build a new house by 2020? Take a year off work? Write down your short and long term goals. If you do have financial goals already set, the new year is a great time to review these and see if they still apply and how you tracked against them in 2016.

Time = 15 minutes

 

  1. Get the credit card under control

How are the credit cards looking? Were they hit hard pre Christmas, or the boxing day sales?! We all know credit card debt has significantly higher interest than residential mortgages and repayment minimums are set low. It is easier than ever to rack up credit card debt.

If you have $4,400 of credit card debt and only make the minimum repayments, it will take you 31 years to pay it off and cost you around $14,900 in interest.*

Set yourself a goal to get any credit card debt paid off as soon as possible. If it is all looking a bit difficult, you can look at consolidating debt to make it one payment at a lower interest rate. If you need any advice or assistance with debt consolidation please get in touch.

Time = 10 minutes

 

  1. Pay extra off your mortgage

In the classic ‘pay yourself first’ way of saving, can you make additional payments on your mortgage in 2017? For example, a couple with a $400,000 mortgage could save around $50,000 and pay off their debt almost four years earlier by contributing $200 extra monthly,’ If you decide you want to make extra repayments, consider automating your payment, that way you’ll be saving without much thought, and have no excuse for not making payments.

Time = 10 mins to set up automatic payment

 

  1. Start planting some ‘investment’ trees

In the words of billionaire investor Warren Buffet “Someone’s sitting in the shade today because someone planted a tree a long time ago.” If you don’t currently have investments, you could start thinking about or researching investing. While there is no guarantee on any investment asset type, whether that’s property investment, shares, having either equity (cash) or debt (loan) funded investments can be a significant way to build wealth over time. If you already have investments, take the time to stop and review your current investment strategy – are you happy with your current leverage? (debt to equity ratio), investment mix and amount of investments? And don’t forget, your Mortgage Broker can also assist with investment loans for property or shares.

Time = 15 minutes

 

So skip the Netflix binge for a night and set yourself up for a financially healthy 2017! A small investment of your time can pay big dividends.

 

Douglas Piening is a Mortgage and Finance Broker with Choice Home Loans and is passionate about providing advice you can trust. Whether it’s buying a home, refinancing a loan, investing, building or renovating, Doug brings a wealth of knowledge and expertise to assist with your lending needs. 

You can contact Doug at (e) douglas.piening@choicehomeloans.com.au or (m)  0408 671 524.

Want to hear what clients have said about working with Doug? Take a look at these reviews from LinkedIn and Facebook.

This information is of a general nature only and does not constitute professional advice. You should always seek professional advice in relation to your particular circumstances.

*Source: ASCI Moneysmart https://www.moneysmart.gov.au/borrowing-and-credit/credit-cards/credit-card-debt-clock

 

 

Insurance and protecting your family home

Why do I need life and income protection insurance?

One of the questions Mortgage Brokers ask clients is whether they are insured – not just car insurance or house insurance (which everyone should have by the way) but life insurance and income protection insurance.  Brokers are obliged to get clients thinking about how they would pay for their mortgage in a worst case scenario.

No one likes to think about it, but what would happen if something happened to you? Either an accident or an illness that meant that you were unable to work or worse permanently incapacitated or even deceased? In this situation, how would you ensure that your family could continue to meet loan repayments and stay living in the family home?

It is important to note that a qualified insurance professional will be able to tailor your insurance to meet your individual circumstances. As with all things in life, if you want the best outcome you need to seek the best advice.

Here are some of the types of insurance available which can assist in providing security for you and your family:

 

1) Income Protection Insurance

Also known as salary continuance, Income Protection Insurance provides a means by which some of your income can continue to be paid to you in the event of illness or injury for a period of time to allow for recuperation. It is especially valuable for individuals whose business or income relies heavily on their own skills and ability to perform duties. Most policies will cover up to 75% of Gross (before tax) income and will be limited to a timeframe of around 2 years. The precise terms will vary from policy to policy and on how much the premiums are.

 

2) Total and Permanent Disability Insurance

In the event that you are seriously injured or sick and cannot perform your income producing activities for an extended period of time, Total and Permanent Disability Insurance may provide a means through which you can continue to support yourself and your family.   The precise terms of a policy, including what constitutes Permanent Disability will vary across different insurance providers. It is best to consult an expert in this field who will be able to provide the alternative that is best for you and your circumstances.

 

3) Life Insurance

It’s not a topic we like to give much thought too, however what would happen if you were to pass away. If you die with financial obligations such as a mortgage or other loans, then those left grieving may also be responsible for the ongoing repayments. Life insurance can be taken out to ensure that if you were to pass away that your loved ones would receive payment to enable them to continue to pay the mortgage, school fees or life’s other costs.Costs of these policies will vary and are generally defined by the waiting period to receive benefits and the benefit that will be applied. A qualified insurance professional will guide you through the options.

4) Home Loan Insurance

Providers like the ALI Group provide Insurance specifically related to your home loan. This cover means that they will pay your home loan in the event that you are unable to due to some unforeseen event (usually sickness or death). This type of cover may be in conjunction with other insurances but more specifically relates to your mortgage commitment.  This insurance is available through your Mortgage Broker

 

Now I’m feeling a bit worried…

It’s often uncomfortable to think about worst case scenarios and to sweep the thought ‘under the carpet’. Addressing your insurance needs shouldn’t make you worry though, it should actually provide you and your family with peace of mind. With the right policies in place, there are ways to ensure that life’s unexpected events need not be catastrophic to your personal finances and future lifestyle.

It is best to speak with a good Financial Planner about your insurance requirements as sometimes what you have through Super may not be sufficient. If you would like to speak with an expert, please get in touch and we can point you in the right direction.

 

You can contact Doug at (e) douglas.piening@choicehomeloans.com.au or (m)  0408 671 524.

Douglas Piening is a Mortgage and Finance Broker with Choice Home Loans and is passionate about providing clients with lending advice they can trust. Whether it’s re-financing an existing property, buying a new or next home, or investing, he brings a wealth of knowledge and expertise to assisting clients with their lending needs. 

Want to hear what clients have said about working with Doug? Take a look at these reviews from LinkedIn and Facebook.

This information is of a general nature only and does not constitute professional advice. You should always seek professional advice in relation to your particular circumstances.