There are many different ways we can buy things – some better than others.
There are also some that can end up costing you way more than you might realise.
To give you a few new ideas, please have a look at my short “9 Ways to Pay for My Racehorse (or holiday, pool, car …)” PDF article. https://www.mortgageaustralia.com.au/email/files/9waystopayformyracehorse.pdf
Have you ever wondered how some people manage to retire at such a young age? Have you heard stories about people creating wealth through property investment but you don’t really know how they manage to do it?
Well, meet Lisa. Lisa is 32 years old, and she has a property portfolio that’s already worth about $2.1million. She has a pretty good job – as a photographer for a bridal magazine, but she certainly doesn’t earn a six-figure salary.
So how did she manage to achieve so much at such a young age? It all started when Lisa was 25 years old and she bought her first property. Lisa applied for a loan to purchase a modest 2 bedroom unit in a block of four. She paid $230k back in 2007, and within a few short years she was on her way to an excellent collection of investment properties, all achieving strong growth and producing a good rental return.
Here is the timeline:
2007- Purchased Property A – 2 bedroom unit. Purchase price – $230k
2009 – Property A valued at $320k. Used the equity to purchase another unit
2009 – Purchased Property B – 3 bedroom unit. Purchase price – $310k
2011 – Property A valued at $350k, Property B valued at $420k. Used equity to purchase a house
2011 – Purchased Property C – 3 bedroom house on 800m2. Purchase price – $405k
2013 – Property A valued at $390k, Property B valued at $460k, Property C valued at $580k (after $40k renovations) used equity to purchase another house
2013 – Purchased Property D – 3 bedroom house on 700m2. Purchase price $450k.
Today – Total value of all properties is $2.1million.
If you’ve been thinking about investing in property, there’s no time like the present. A reputable Mortgage Broker can help you work out your loan options, and an Accountant or Financial Planner can help you to decide if property investment is the right decision based on your personal situation.
If you think there may be a few property bargains just waiting for you to check them out, why don’t you ask me to confirm your borrowing capacity before you go and have a look around?
There have been lots of changes in home loans too, so a bit of homework could be worthwhile.
It doesn’t cost anything to find out and usually only takes a few minutes. The least I can do is point you in the right direction and the privacy act ensures our conversation is entirely confidential.
Some of my more astute investors take the opportunity during these times to purchase more investment properties while the market conditions are good.
If you’d like to know more about this, contact me about using your equity to purchase an investment property.
An email or a phone call is all it takes.
When the National Consumer Credit Protection Act came into effect in 2010, it was designed to help regulate lenders and prevent consumers from getting out their of depth with debt.
One of the spin-offs has been increased scrutiny on would-be borrowers.
Lenders now look to an individual’s credit file to help determine if they are a good or bad risk.
Yes, that’s right – a credit file. It sounds very FBI and, in some ways, it is. Your credit file includes your personal information, including your full name, date of birth, driver’s licence number, gender, addresses and employer information.
It also records any credit applications you have made in the past five years, such as home loans or store financing of household goods, plus any bills you have defaulted on and any financial matters on public record, including any bankruptcies or directorships.
Home lenders will look at your credit file to verify your reliability. Being aware of what’s on your file and how you can keep it clean, will go a long way to helping you secure a home loan.
Previous credit applications
A previously declined credit application can leave an unwanted stain on your credit file. If you are declined a credit card or a loan, find out why and take steps to rectify the situation before applying for new loans or credit.
While your positive actions may not erase the blemish, you can at least demonstrate responsibility with the new lender, which may convince them to give extra weight to other criteria, such as income and a strong employment record.
Payment defaults
Don’t think that unpaid phone bill from your previous rental matters much? Think again. A payment default is an account of $100 or more that is 60 days or more overdue.
Payment defaults can only be included on your credit file if the credit provider has tried to recover some or all of the overdue amount. This means they must have sent a notice in writing to your last known address and requested payment.
Payment defaults stay on your credit file for five years, even after you pay the overdue amount.
If you don’t pay a bill but can’t be contacted, you may be declared a clearout. Before you can be listed as a clearout, the credit provider must make reasonable efforts to contact you, either in person (including over the phone) or in writing to your last known address.
If you can’t be contacted, the credit provider can immediately list the debt on your file as overdue, even if it hasn’t been overdue for 60 days or more. Clearouts remain on file for seven years from the date they are listed, even when you have paid the overdue amount.
Avoid unpaid bills blighting your credit file by:
– Paying on time or at least when overdue notices are sent.
– Providing a change of address to all creditors/billers if you move.
– Leaving someone to manage your bills if you need to be away for a month or more.
Hardships
They say it’s often better to seek forgiveness than permission, but most lenders are happy to discuss what can be done to help if you hit hard times. Far better to fess up to a creditor or lender if you can’t make one or two payments than have them whack a black mark on your credit file due to lack of contact.
Talk to your Mortgage Broker
Borrowing via a Mortgage Broker is one of the best ways to navigate the credit crunch. A broker will have a good understanding of what financial attributes various lenders are looking for in their borrowers.
For example, a lender may give kudos to long service in a job and a solid savings record, which may help offset an unpaid bill from three years ago that appears on your credit file.
Your broker can also advocate and negotiate on your behalf. Just remember, it pays to be honest. If you have a mark against you, be up front so your broker can consider the best lender and loan for your situation.
Whether we realise it – or care to admit it – Australians are very loyal to our big banks. In fact, more than 80 per cent of home loans in Australia are held by one of the big four or their subsidiaries.
But there are other options out there in the form of non-bank lenders. Haven takes a look at how non-bank lenders work and what they can and can’t offer home owners.
What is a non-bank lender?
The term non-bank lender is a little confusing because it implies any financial institution that isn’t a bank, such as a credit union or a building society, falls into this category. The term broadly covers financial institutions that only deal in loans and do not hold deposits.
A building society, for example, where you can have a loan product and a savings account, is technically lumped in with banking lenders. However, most consumers would consider a credit union or a building society to be bank alternatives.
How do they work?
Because non-bank lenders don’t hold deposits, they have to rely on other sources of funding for their loans. While all lenders borrow money on the wholesale market, non-bank lenders have to rely solely on this funding stream.
Banks, credit unions and building societies, on the other hand, are able to prop up their lending to some extent with the funds from customers’ savings. This distinction is important because it affected non-bank lenders’ ability to weather the GFC, and why their market share fell from around 12 per cent before the crisis to around just 2.5 per cent afterwards.
But non-bank lenders have bounced back and are being sought by many consumers as an alternative to traditional lenders, largely due to the post-GFC support of the
Australian Office of Financial Management. Realising the importance of creating competition in the home loan market, the Federal Government decided to invest in home loans, creating a safety net for non-bank lenders.
So supportive is the government of this increased competition, the government declared non-bank lenders the fifth pillar of our financial system.
Are they safe?
The GFC raised concerns about the flow-on effects of financial institutions who went belly up because they failed to manage their loan portfolios.
Here in Australia, banks and other institutions that take deposits are regulated by the Australian Prudential Regulation Authority, while non- bank lenders come under the scrutiny of the Australian Securities and Investments Commission, which can intervene if you feel a lender has acted illegally.
All consumer credit products, including home loans, are governed by the Uniform Consumer Credit Code, which ensures lenders make borrowers aware of their rights and obligations and put sufficient checks and balances in place to ensure borrowers can repay their loan.
At the end of the day, if a lender folds, there is minimal risk to borrowers because the mortgage will be taken up by another lender. If you’re not happy with that lender, the ban on exit fees means you can take your business elsewhere.
Advantages of non-bank lenders
Better rates
Despite what many consumers may think, non-banks are usually able to offer lower standard rates. This is because they are looking for ways to claim market share and generally operate with lower overheads than banks. They are also usually not publicly-listed entities, so are not under the scrutiny of investors anticipating dividends or increased share prices.
Traditionally, non-bank lenders offered lower rates and then relied on exit fees to deter borrowers from jumping ship. But since July 1, 2011, exit fees on consumer loans have been banned, curbing one of the competitive levers for non banks.
Even though the new role was designed to drive competition, market watchers were concerned non-bank lenders would have to hike their rates if they could not charge exit fees. But any negative impacts of this change appear to have been offset by a boost to the wholesale funding market, allowing non-bank lenders to access funds at a competitive rate, which in turn benefits their customers.
More flexibility
Being leaner, non-bank lenders are often more nimble when it comes to service and responsiveness, although this can be difficult to measure. They are also often more open to consumers who have been knocked back by one of the banks due to previous credit issues or self-employment.
Disadvantages of non-bank lenders
Limited products
If you are looking to house all of your financial products with one institution, a non-bank lender may not work for you. Although they tend to offer a solid range of mortgage products, they are unable to hold deposits, so you won’t be able to set up a transactional account and credit card with the same lender.
Some non banks do offer offset accounts by setting them up with a banking partner. The offset account acts like a savings account, where the funds reduce the balance on the loan and the amount of interest charged.
Inconsistent offerings
Because non-bank lenders have no deposits to support their loans, they often rely on a range of wholesale loans to source their funding, increasing their exposure to market fluctuations.
This means the interest rate and terms offered to one customer with a non-bank lender may differ from what’s offered to another.
The simplest way to work out if a non-bank lender is right for you and your circumstances is to talk to your Mortgage Broker. Brokers act as a one-stop shop, with access to a wide range of lenders, including banks and non-banks, and hundreds of home loan products.
Every year more than 20,000 homes in Australia are broken into – the majority during the day time when people are at work. That’s the bad news.
The good news is that there are plenty of simple, low-cost steps you can take to greatly reduce your chance of getting burgled. Remember, it’s all about making your home a harder target to break into than other people’s. Most burglars enter via a garage door, back door, kitchen or bedroom window. Burglar-proof these and you’ll significantly improve your chances of never suffering from a break-in.
1. Door locks
Have key-operated two-cylinder deadlocks fitted to all external hinged doors. A quality knob-inlock set will have a ‘dead latch’ mechanism to stop burglars using a credit card to open it.
While looking at external doors, you may also want to check that they are solid and robust. If not, perhaps you should replace them, or add a security screen. You may also want to consider fitting a wide angle peephole on your front door.
2. Sliding doors
A favourite point of entry for burglars! Fit key operated locks or patio bolts to all external sliding doors, such as patio/veranda doors.
Sliding doors can also be made more secure by inserting a wood or metal dowel into the track to limit movement.
3. Windows
An open window, visible from the street, may be the only reason that your home is chosen by a burglar. Ground floor windows are more susceptible for obvious reasons.
Make sure you have a security grill, security screen or burglar bars applied to all accessible windows, or alternatively have key-operated single cylinder window locks fitted.
4. Warning stickers
Place highly visible stickers on or near front doors and windows, which indicate an alarm system, dog or membership of neighbourhood watch. Your local police station should have an anti-crime adviser who can help provide these.
5. Light timers
Install light timers to switch on automatically if you aren’t home when it gets dark, or have gone away for a few days. The timers should mimic when you would usually switch lights on or off. They are not expensive and are available at most hardware stores.
6. Exterior lighting
Exterior lighting is also a good deterrent, provided it is switched on and off as though someone is at home. Make sure the approach to your house, especially any entryway, is brightly lit, controlled by a light timer if necessary – this also makes it safer and more comfortable if you come home after dark.
7. Motion sensor lights
These are useful to install, especially at the back of a house or apartment. Infra-red motion sensor lights are also easily available and not very expensive. An unexpected light going on is a definite deterrent to a burglar who will wonder what other security devices you have in place.
8. Alarm systems
Burglar alarms definitely increase the potential and fear of being caught by the police.
There are a wide variety of alarms available – you need to make sure that the one you choose has visible signage and is properly programmed, installed and maintained.
Some alarms are routed to a police station or alarm control centre. If yours relies on neighbourhood response, make sure your neighbours are able and willing to respond.
9. Home safes
Burglars know all the hidey holes to look for keys, valuables and important documents. The price of a good home safe is falling, so setting one up could be a good investment. Home safes need to be anchored into the floor or permanent shelving, and should not be kept in the master bedroom or cupboard. Use the safe regularly, so it becomes routine and keep the code secret.
10. Protect your ID
It’s a good idea to take photographs around your house of all your valuables – important proof for an insurance claim if you ever need to make one. This can be kept in a safety deposit box, safe, or with a relative. Receipts for bigger ticket items are also useful to keep for the same reason.
Consider taking photocopies of your passport, driver’s license and all the cards in your wallet and store these in a safe place.
Enjoy that new car smell longer.
There is something special about buying a brand new vehicle – the smell… the pristine paint… the purring of a well timed and perfectly balanced motor.
… So how do you ensure that feeling is not soured as you drive out of the car dealership?
Car dealerships can be a very high pressured sales environment. The salesperson has a number of techniques they will utilise to ensure their bottom line is better than yours.
The most important factor to ensure you obtain a ‘good deal’ is to do your research before you start negotiating.
When buying a new vehicle, generally a number of individual transactions take place:
1. purchasing your new vehicle,
2. selling your old vehicle, and
3. organising finance.
When negotiating, you should strive to win on each of these transactions.
Before entering negotiations with the salesperson it is recommended you complete the following steps, which are outlined here in my latest factsheet: “Enjoy that new car smell longer!”
https://www.mortgageaustralia.com.au/email/files/enjoythatnewcarsmelllonger.pdf
In March this year Australian workers had more than $1.8 trillion stored away in superannuation funds, in part thanks to a system that generally requires employers to pay a contribution on employees? behalf. From July 1, this required employer contribution jumped .25% to 9.5%.*
For many wage and salary earners who benefit from these compulsory super contributions, super is often something they think about once a year when their statement arrives in the mail. But we could all benefit from paying more attention to what are essentially our future funds.
According to MoneySmart Week, a not-for-profit movement set up to boost our financial literacy, one of the best ways to get a better handle on your superannuation is to consolidate your super accounts.
We?re part of a group that is proud to be a key supporter of MoneySmart Week (September 1-7) set up to encourage Australians to take simple steps to make their money work harder and go further, now and well into the future. Here?s our guide to building a better financial future by consolidating your super funds.
Why Consolidate?
Firstly, you may save by paying just one set of fees. Secondly, superannuation balances build on contributions and compound interest. The more you have in your best-performing fund, the higher your returns, which are rolled back into your account.
Locate Your Super:
The first step is to find out where your super is located. If you have worked for multiple employers, especially since the compulsory super guarantee came into effect in 1992, then chances are you have more than one super account. If you are unsure what you have where, visit the Australian Taxation Office?s SuperSeeker service and follow the steps to source your funds:
https://www.ato.gov.au/calculators-and-tools/check-your-super/
Pick Which Fund?
Most people can choose which fund their super contributions are paid into. However, if your super is paid as part of certain industrial relations agreements or you are in a defined benefit fund, you may not be able to choose. Do some research if you are unsure.
A superannuation fund is a vehicle to hold your investments, so you can generally choose investments within your super fund according to your needs and appetite for risk. Remember, superannuation assets are usually held over a very long term.
So, when doing your research, look at a fund?s performance over many years, not just the recent one or two. You should also compare annual fees, including termination or exit fees, should you wish to move your funds again.
You can also manage your own super with a self-managed super fund (SMSF). These funds are broadly treated the same as any other, only you make the investment decisions. It also means you carry all of the risks and the fund?s legal responsibilities, so you need to be prepared and able to devote the necessary time and effort into making sure you manage your fund appropriately.
If you?re considering an SMSF, make sure you get the advice of a qualified professional.
Do the Paperwork:
There is some paperwork required to transfer your super between funds but it?s worth the effort to consolidate. You can either contact the super fund you are transferring to for the necessary forms or do it all online through the ATO?s SuperSeeker service https://www.ato.gov.au/calculators-and-tools/check-your-super/
Your current fund will process the transfer and you will then typically receive a rollover benefits statement. Check it?s accurate and keep it with your superannuation paperwork.
If you have multiple accounts to consolidate into one, you will need to complete the same process for each.
New Job?
If you start a new job, make sure you let your employer know you have a preferred super fund. Your employer will provide forms outlining which details they require. It?s also worth checking out your new employer?s preferred fund, as it may perform better than yours. Just make sure you won?t be penalised by high exit fees or if you are, make sure they are offset by gains in the long run.
* APRA – March 2014 Quarterly Superannuation Performance.
** Tax information: the information in this article does not constitute advice. As taxation legislation is complex, we recommend you speak with your financial advisor, tax advisor or contact the ATO for further details and expert advice regarding your personal circumstances.
http://https://www.ato.gov.au/calculators-and-tools/check-your-super/