Refinancing traps to avoid

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Whether you’re after lower repayments or want to tap into the equity sitting in your home, refinancing can offer a world of benefits. Here are some things to be aware of so that you don’t find yourself hooked into a bad deal.

Don’t be fooled by the interest rate

Finding a lower interest rate doesn’t necessarily mean you’ve scored yourself a better deal. In fact, a product with more features may cost you a bit more in fees or interest, but could save you more in the long run. Including features such as an offset account will prove valuable as it will allow you to make larger repayments or put any extra cash against the loan. Products without this feature may charge a fee for early repayments.

Honeymoon rates are just that

Don’t be lured by offers with discounted introductory rates unless you’ve calculated the savings over the life of the loan. While a loan with a discounted interest rate seems a tempting offer, it’s only temporary. Once the introductory period is over, the interest will revert to a higher standard variable for the rest of the loan term. It may be more beneficial financially to negotiate a lower interest rate without an introductory discount.

Be aware of the fees

One of the main purposes of refinancing is to lighten the financial burden, however, that doesn’t mean that it’s not going to cost you. There are many fees involved, which may include discharge and application fees, a valuation fee, land registration fee, and mortgage insurance. You may also be subject to stamp duty depending on what state your property is located in. While these cannot be avoided, you must ensure that the costs involved are not higher than the savings, to make the process worthwhile.

While there are traps to avoid, a little expertise can take the stress out of refinancing to save you thousands, fund that renovation, or simply find a loan that suits your life a little better.

 

Give us a call on 1300 252 088 so that we can assist you through the process.

Six Ways To Fund A Renovation

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Any renovation project, large or small, can be all-consuming in terms of your energy and money. Here are six loan types that can help you with the financing.

Considering transforming your home from ‘blah’ to ‘brilliant’, but lacking the funds to support your major makeover? Here are a few different home renovation loans to help you turn your dream into a reality.

Whether you want to make a few finishing touches to your home with the help of a paint job or completely turn your home into something special, there’s an option to suit your needs.

 

1 Home equity loan

This is probably the most common way people borrow money when they want to renovate. It involves borrowing against the current value of your home, before any value-adding renovations. You won’t be able to borrow the full value of your home but, without mortgage insurance, you can usually borrow up to 80 per cent of its value if you own it outright. One potential problem is that the cost of your renovations may actually be higher than the equity you have available.

 

2 Construction loan

This is similar to a home equity loan, except the lender will take into account the final value of your home after the renovation. You won’t be given the full loan amount upfront, but in staggered amounts over a period of time.

 

3 Line of credit

This may be ideal for ongoing or long-term renovations. When you apply, you can establish a revolving credit line that you can access whenever you want up to your approved limit. You only pay interest on the funds you use and, as you pay off your balance, you can re-borrow the unused funds without reapplying. However, care must be taken not to get in over your head in terms of serviceability – make sure you can make repayments on the line of credit that will reduce the principle. Read more about Line of credit here

 

4 Homeowner mortgage

If you’re planning to completely transform your home and undergo a major makeover, this may be a good option as you can spread the cost over a long period of time. You could even possibly borrow up to 90 per cent of the value of your home and take advantage of mortgage rates, which are often lower than credit card and personal loan rates.

 

5 Personal loan

If you’re only making minor renovations – personal loans are usually capped at around $30,000 – this might be suitable, but interest rates on personal loans are higher than on home equity loans.

 

6 Credit cards

This option is only if you want to undertake really small renovation projects. The interest rates are usually much higher than on mortgages, but for a very small project that extra interest might actually total less than loan establishment fees.

 

One thing you should do

There are very few exceptions to the rule that your renovations should add more value to your home than they will cost to carry out. Think about how the money you spend on a renovation will increase the value of your property. For example, consider making changes that would appeal to the majority of potential buyers to help you sell your house faster and at a higher price.

 

Give us a call on 1300 252 088 to discuss which option best suits your requirements

Should you manage your investment property?

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While managing your own investment property can seem like a simple way to keep more of the rent flowing towards the mortgage, there’s a little more to it than making sure the house is standing and collecting the money.

Managing your investment property appears straightforward: you find a tenant, they pay rent and you keep a close eye on your asset. It’s cheaper, and may suit people with the know-how and available time necessary to sustain a financially viable real estate asset.

If you have a reliable tenant willing to pay market rates and you know how to protect your rights and your tenant’s rights in the event of a mishap, chances are your investment will run smoothly. But there are some very important factors to consider before donning the managerial hat.

Firstly, there’s a lot of legislation in place to protect tenants and landlords. If you don’t have the means to become familiar with the law, running the books on your own might not turn out well.

“Knowledge of the legislation is the most beneficial part of what we do for our clients. That is something that we encounter continuously: breaches and other issues,” explains Property Manager, Bernie Mitchell.

“The legislation is very grey. A professional property manager will have the experience and knowledge to guide their client as to each case and what the likely and fair outcome should be.”

DIY property managers also need to manage lease agreements, rental payment authority, bond lodgement forms and property inspection reports. In the case that something goes wrong, the correct implementation of these documents could be the difference between a win or loss at the relevant tenancy tribunal.

Property managers also market the premises in order to ensure that you get a good price, and the property may be more appealing simply because renters know they will be dealing with a professional rather than an owner.

Prospective tenants usually prefer to deal with an agent. They tend to shy away from self-managed properties because they like to have the middle-man.

While self-managing is right for some, having a professional manager available to handle inquiries, damage or a broken lease can pay off for other owners. It all comes down to whether or not you can commit the time and effort needed to ensure your investment needs are met, as well as the rights of your leasing tenant.

Reserve Bank of Australia keeps cash rate on hold at 1.5%.

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7th February 2017

 

At its meeting today, the Board decided to leave the cash rate unchanged at 1.50 per cent.

Conditions in the global economy have improved over recent months. Business and consumer confidence have both picked up. Above-trend growth is expected in a number of advanced economies, although uncertainties remain. In China, growth was stronger over the second half of 2016, supported by higher spending on infrastructure and property construction. This composition of growth and the rapid increase in borrowing mean that the medium-term risks to Chinese growth remain. The improvement in the global economy has contributed to higher commodity prices, which are providing a boost to Australia’s national income.

Headline inflation rates have moved higher in most countries, partly reflecting the higher commodity prices. Long-term bond yields have also moved higher, although in a historical context they remain low. Interest rates have increased in the United States and there is no longer an expectation of further monetary easing in other major economies. Financial markets have been functioning effectively and stock markets have mostly risen.

In Australia, the economy is continuing its transition following the end of the mining investment boom. GDP was weaker than expected in the September quarter, largely reflecting temporary factors. A return to reasonable growth is expected in the December quarter.

The Bank’s central scenario remains for economic growth to be around 3 per cent over the next couple of years. Growth will be boosted by further increases in resource exports and by the period of declining mining investment coming to an end. Consumption growth is expected to pick up from recent outcomes, but to remain moderate. Some further pick-up in non-mining business investment is also expected.

The outlook continues to be supported by the low level of interest rates. Financial institutions remain in a position to lend. The depreciation of the exchange rate since 2013 has also assisted the economy in its transition following the mining investment boom. An appreciating exchange rate would complicate this adjustment.

Labour market indicators continue to be mixed and there is considerable variation in employment outcomes across the country. The unemployment rate has moved a little higher recently, but growth in full-time employment turned positive late in 2016. The forward-looking indicators point to continued expansion in employment over the period ahead.

Inflation remains quite low. The December quarter outcome was as expected, with both headline and underlying inflation of around 1½ per cent. The Bank’s inflation forecasts are largely unchanged. The continuing subdued growth in labour costs means that inflation is expected to remain low for some time. Headline inflation is expected to pick up over the course of 2017 to be above 2 per cent, with the rise in underlying inflation expected to be a bit more gradual.

Conditions in the housing market vary considerably around the country. In some markets, conditions have strengthened further and prices are rising briskly. In other markets, prices are declining. In the eastern capital cities, a considerable additional supply of apartments is scheduled to come on stream over the next couple of years. Growth in rents is the slowest for a couple of decades. Borrowing for housing has picked up a little, with stronger demand by investors. With leverage increasing, supervisory measures have strengthened lending standards and some lenders are taking a more cautious attitude to lending in certain segments.

Taking account of the available information, and having eased monetary policy in 2016, the Board judged that holding the stance of policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time.

For further information click here

HECS Debt? Paying off your education is no reason to put off buying property.

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You can remember it now: sitting in a chair at the back of the lecture theatre, chatting to your friends and ignoring the debt that each day at university was plunging you into.

But now you’re older and wiser, and reality has set in. You want to buy a property, but you’re unsure how your student HECS or HELP debt could impact your ability to take out a loan.

When you apply for a home loan, you’ll need to reveal information about your liabilities, poor credit ratings and any other debts you have. This is where you need to start worrying about your student debt.

If you chose to defer any of your HECS/HELP payment, you don’t need to start paying it off until you’re earning an annual taxable income of $54,869 or more.

At this point your employer is required to hold a percentage of your taxable income and direct it towards your HECS/HELP loan. The percentage increases with your income but tops out at 8 per cent when you earn over $101,900 annually.

Essentially, this decreases your net annual income.

By having the ability to compare several lenders at the one time, we at Brickhill Financial Solutions can recommend a product suitable for your individual needs.

During our initial discussion, we will complete a “fact find”, enabling a comprehensive financial analysis to be conducted. From there, guidance can be given on paying down or consolidating debt to reduce outgoings and increase borrowing capacity.

If you’re getting ready to buy a property for investment or to live in, there’s no need to hold out because you’re still paying for your education.

 

Give us a call on 1300 252 088 to find out more.