3 Ways your broker can help you deal with debts

Juggling several debts can be stressful. If you’re struggling to keep on top of your debts or you simply want to save money on interest, we can help you solve the problem and get some peace of mind. Here are 3 ways your mortgage and finance broker can help you deal with your debts so you remain in control.

1) We can help you consolidate your debt

With debt consolidation, the idea is you take out a new low-interest loan and use it to pay off all your high-interest debts. We usually recommend one of two debt consolidation options.

Option 1: Refinance your home loan

In this scenario, you would refinance your mortgage and access some of your equity to pay off your debts. 

Pros

• Home loan interest rates are lower than those for most other types of credit.

• One convenient repayment that’s easier to manage.

• You can spread your repayments out over time to make them more affordable.

• You may be able to make extra repayments and pay off your debt quicker, thereby saving money on interest.

Cons

• Home loan terms can be 25 or 30 years. If you’re not careful, you may end up paying much more interest on your debts, even though the home loan interest rate is lower. Ask us to crunch the numbers for you.

• If you use the equity in your home to pay off your debts, you will have less money when you sell your home.

• If you turn all your unsecured debts (like credit cards) into secured debt (like your home loan), in a worst case scenario, you could lose your home if you get into debt again and can’t meet the repayments.

Option 2: Take out a personal loan

You could consolidate by taking out a personal loan with a competitive interest rate and using it to pay off all your other debts. 

Pros

• Interest rates for personal loans are generally lower than those on credit cards.

• One convenient repayment.

• Spread the repayments out over time to make them more manageable.

• At the end of the loan term, all your debt will be paid off.

Cons

• Personal loans come with higher interest rates than home loans (you may be better off by refinancing your home loan – ask us to crunch the numbers for you).

• If you are struggling financially, it may be more difficult to secure a competitive interest rate.

2) We can compare interest rates on any kind of loan

We can help you find competitive interest rates on other kinds of loans, besides your home loan. Want us to compare interest rates on your personal loan? Not a problem. How about your car loan? We can access a wide variety of lenders to help with that too.

To help you manage your debts, we may be able to refinance your existing loans to a more competitive interest rate, or a longer loan term that reduces the size of your repayments. Bottom line is you have nothing to lose and everything to gain by checking in with us.

3) We can help you create a budget and savings plan 

Having a solid understanding of your income and expenses will help you remain in control of your finances. We can help you set up a budget to pay off your debts and create a savings plan to reach your goals. We’ll also give you tips, like how eliminating credit cards could save you money, or how budgeting apps work.

The last thing you want is for your debt to spiral out of control. As your mortgage and finance broker, we can explain whether debt consolidation is financially worthwhile, compare the market to find you the most competitive interest rates and help you find ways to budget and save. Please get in touch today.

When is the right time to refinance an investment property?

Loan refinancing is a strategy used by property investors to access funds – usually to grow or improve the value of their property portfolio. The right time to do it largely depends on your strategy, plans and equity. In this article, we highlight some of the key considerations for this strategy and how savvy investors often use the funds. If you’re considering investing in property or taking the next step in your investment journey, remember your mortgage broker is a great source of information and support, so please don’t hesitate to give us a call.

Why refinance?

Refinancing your loan allows you to access the equity in your property. Equity is the proportion of the property you own – for example, if the property is worth $500,000 and you owe $200,000 to the bank, then you have $300,000 in equity. 

Savvy property investors use their equity for a variety of different purposes:

To renovate and add value to an investment property

As a deposit for their next investment property

To fund their lifestyle and living expenses.

Another popular reason to refinance is to secure a more competitive interest rate or a loan that better suits your needs. There may be loan features that can improve your interest savings or cash-flow, like offset accounts and redraw facilities. It pays to talk with your mortgage broker and reassess your property investment loans regularly, to ensure you’ve got the right loan to maximise your financial benefits and tax advantages.

Key considerations

1) Market value and equity
Generally, the right time to refinance your investment property is when the equity has grown sufficiently to take the next step in your investment strategy, or to fund your renovation plans. To get an idea of the value of your property, and how much your equity has grown, you’ll need to compare public sales data for similar properties in the area. Ask us for a free suburb and property profile report with the latest on-the-market information. 

You could also ask real estate agents for an estimate (make sure you hit up at least three different agents) or pay for a professional property valuation. Keep in mind that a lender’s valuation will be on the conservative side of any estimates, and a formal valuation will be required by the lender before they will allow you to refinance. 

2) Consider the costs
Switching lenders and refinancing your investment loan can help you achieve your goals, but there are costs involved. These may include break fees or discharge fees, establishment fees for your new investment loan, and valuation fees. Speak to us and we’ll run you through the costs and help you decide whether refinancing is worthwhile right now, or if it may be better to wait until your equity has grown further.

3) Investigate how the market is performing
Part of the decision about whether to refinance will depend on how the property market is performing for your investments. National dwelling values have been falling in many capital cities in recent months, while regional dwelling values have been edging higher. That may mean the location of your investment property will be a key consideration when deciding to refinance. 

It’s important to be aware that if do you refinance after your property’s value has decreased, you may be facing negative equity territory. This is when the value of your investment falls below the outstanding balance on the mortgage. In this situation, it may be better to wait until the market recovers before you refinance.

4) Other considerations
The investment lending landscape has seen many changes in recent times. In April, the Australian Prudential Regulation Authority (APRA) announced the 10 per cent limit on bank lending to property investors (in place since 2014) would be removed for lenders that could demonstrate prudent lending. As a result, we’re seeing interest-only investment loans becoming easier to obtain, and interest rates being reduced by some lenders. That means now may be a good time to reassess your investment strategies and refinance requirements.

Talk with your mortgage broker first

If you’d like to access equity to grow your investment portfolio or renovate, or you just want to know you’re getting the best deal, it’s worth having a chat with your mortgage broker. You’ll find we are a wealth of information – and it’s always best to make a fully informed decision. If the time is right for you to take the next step in your investment journey, we’ll help you find the right refinance option to help you achieve your goals. Call us today!

Which option is right for you – to rent or buy?

To rent or buy? For some, renting makes good financial sense. For others, it’s just money down the drain. For you it may be a question of short-term convenience versus long-term financial growth, which can make it a difficult decision to make. In this article, we break down the pros and cons of renting and buying, putting it into simple terms. We also let you in on a little secret – how to get the best of both worlds! Remember, your mortgage broker is a great source of support and information – if you need help to decide which option is right for you, then please get in touch.Pros of renting

• You can live wherever you want
  Career and lifestyle are important considerations, whether you’re single or a family. Renting a place in a suburb or location that is close to your work, friends and ideal lifestyle amenities (like schools or shopping) can often be much more affordable than buying there. 

• Flexibility
  If your work or lifestyle require you to be ready to up stumps and move at short notice, then renting gives you greater flexibility and mobility. Or if your situation changes and you find you need less expensive digs, you can quickly find a rental that fits your new budget.

• Lower costs and less hassle 
  Renting is usually cheaper than buying and you won’t have to worry about ongoing expenses like rates, body corporate fees, maintenance, repairs and building insurance. 

Cons of renting

• The ‘dead money’ argument
  Have you ever heard the phrase ‘rent money is dead money’? Many argue it’s much better to pay off your own home loan than someone else’s. It’s certainly true that capital gains on a property can potentially grow your wealth, and you can look forward to living ‘mortgage free’ within 25 – 30 years. 

• Restrictions
  Common complaints from renters include living with the landlord’s décor, not being able to put hooks in walls, restrictions on pets, or even the number of people who live with you. 

• Uncertainty
  Rental properties don’t offer long-term certainty. Moving can be expensive and you’re vulnerable whenever the lease ends or the landlord decides to renovate or move back in. 

• Inspections
  Most rental properties require you to submit to inspections by the landlord or agent every six months. These can be stressful and inconvenient. 

What the statistics say * Based on the 2016 census

Percentage of Australians renting  –  30.9%
Percentage of Australians who own their home outright  –  31%
Percentage of Australians paying off their home  –  34.5%

Pros of buying

• Freedom to do what you like with the property
  Buying your own property means you have the freedom to do whatever you want with it. You can decorate any way you like, and add value by renovating. 

• Capital gains and wealth-building opportunities
  You’ll own an asset eventually, and while you’re paying it off the property could potentially increase in value. What’s more, you may be able to use the equity in your home to build wealth through property or other investments.

• Certainty
  You’ll have the security and certainty of knowing where you’ll be living for years to come. You’ll also obtain a degree of financial certainty – because you’ll own a substantial asset.

Cons of buying

• Affordability constraints and costs
  High housing prices and low wages growth have made buying difficult for some people. However, there are incentives available like the First Home Owner Grant to help you get started. Ask us if you’d like to know more.

• Added responsibility
  Becoming a home owner means you’ll have new financial responsibilities (such as paying your mortgage repayments and bills in a timely manner). 

You may not be able to afford to buy where you want to live – As a home buyer, you may have to compromise on location or property type to find a property that suits your budget at first. However, once you get a foot on the property ladder, the potential capital gains could help to make your next property purchase more ideal.

Have you considered rentvesting?

Just because you want to live close to the action doesn’t mean you have to forfeit your dream of owning property. Rentvesting is a strategy that allows you to live where you want and buy an affordable investment property elsewhere! You could potentially get a foot on the property ladder now, enjoy the benefits of capital growth and having a tenant to help you to pay the mortgage, but still live wherever you like. 

Talk to us about what’s right for you

Whether to rent or buy comes down to your personal situation and goals. If you’ re considering buying, then talk to us and we’ll help you decide what’s right for you. Keep in mind that even if you don’t have a 20% deposit saved, there may be other ways to get you over the finish line to buy a home or kick off your rentvesting strategy. We’re happy to explain everything you need to know, so please get in touch today!