Does this home loan look cheap on me?

Does this home loan look cheap on me?

Everyone loves a bargain.  And we like that feeling of having something for nothing.  The sort of satisfaction that comes with “take now – pay later” options.

One long-lived example of the don’t-pay-anything-yet initiative is the interest-free payment plan.  Frequently offered by the big home goods retailers like Harvey Norman, these purchases require zero deposit.  They also give you the flexibility to pay off your invoice over time – without incurring any extra fees.  1000 days interest free sounds like a dream come true!

But there’s a catch.  The fine print states that, should you miss a payment, inflated interest rates immediately kick in on your entire outstanding balance.  And that currently stands at around a whopping 26%!  You may also be up for late payment fees.

Credit card providers hit you with much the same thing.  And it’s great for a while.  The benefits of up to 26 months of zero interest are clear.  Pay off your debt at your leisure, without having to pay the bank anything extra. But beware the hidden costs and escalating interest rates slapped on after your interest-free period.

These days, of course, we have the likes of Afterpay.  Their payment plans allow you to access your goods without paying a cent for two weeks.  After that, you pay off your purchase in fortnightly instalments.

The one thing the above all have in common is the need for cash flow.  You still need to budget and ensure you have the funds to pay for your purchases.  It’s easy to get carried away with the rose-tinted notion of owning a fancy new, high-tech 292-inch Samsung TV.  But remember – you will eventually have to pay that $16,000.

This brings us to the government’s latest incentive to open up another 10,000 spots for cheap first-time home loans.  Rather than having to fork out the usual 20% deposit for a home, first-timers have the opportunity to secure a property with just 5%.  While this gives families a shot at the great Aussie dream, what it means is – they essentially need to borrow 95% from the bank.

The thought of owning their own home is extremely appealing for most.  And if they can get their hands on one sooner rather than later (without having to cough up the extra 15% deposit), they’ll take it!  But again, that’s a huge outstanding loan accruing for the best part of their younger lives. Can they really afford it?

So, whether you’re a first-timer, or you’re still paying off your regular mortgage – it’s worth doing it as quickly as possible.  And that’s where GSA can help.

Give us a call, and we’ll walk you through our powerful and rewarding investment strategy.  The consultation is not just cheap – it’s free!

Home loan influx as banks loosen up

Home loan influx as banks loosen up

Christmas is a time for giving and helping others.  And that’s just what was happening over the holidays, with mortgage brokers swamped by home loan applications.  It was festive cheer all round due to property market growth, interest rate cuts, and relaxed lending conditions.

It seems the bulk of applicants were up-sizers and first home buyers – eager to take advantage of the current market climate.

According to Mortgage Broker, Will Unkles – “Deals are going through far easier; there are less questions from banks.  Lenders are being less critical.”

The buzz was fuelled by the Federal Government’s First Home Loan Deposit Scheme, seeing first-timers in a race against the clock to get on board.  Given there are only 10,000 approved loans under the scheme each year, there has been a flurry of activity at this end of the market.

But, even with all their rosy dreams and extra pennies, the property market still has a tight squeeze on smaller investors. Which is surprising given there are so many factors working in their favour.  Yet, property market growth goes hand in hand with price growth, meaning those looking for their ideal home still can’t afford it.  Whether a complete newbie or hopeful up-sizer, many are being forced to compromise or give up.

So, although the initial deals are going through with great gusto, buyers are still left floundering. It all sounded good in theory. Turns out – the reality is something else.

If you’re one of the lucky ones to have secured the Federal Government deposit scheme loan or are simply perusing your market options, come and have a chat to us.  What we offer is a guaranteed financial leg up if you’re not quite ready to commit to a full-time mortgage.  It’s an easy, care-free opportunity to grow your wealth and buy your dream property sooner.  And it’s our gift to you.

Older Aussies add mental stress to list of ailments

Older Aussies add mental stress to list of ailments

It’s official: the unrelenting burden of mortgage debt is leading to significant mental stress for older Australians.  And the strain is not likely to ease any time soon.

According to findings from Curtin University, almost half of 55 to 64 year-olds are still paying off their home loan.  And it’s predicted that in the next decade or so, more and more of these Aussies will be requiring rent assistance as they are forced out of their homes.

Over the past 25 years, the average mortgage debt has risen by a whopping 600%!  One of the main drivers is, of course, the significant rise in housing prices.  Property values have been increasing at a much faster pace than incomes, leaving homebuyers having to take out higher mortgage debt.  Curtin University’s Professor Rachel Ong ViforJ estimates the current mortgage debt to income ratio to be around 200%.  In other words, the average debt is DOUBLE the income of mortgagees.  Compare that to the rate 20-25 years ago at only 70%, and you can see why the Great Australian Dream is rapidly slipping away.

So, you’d have to take your hat off to people for trying to find a way out of this dilemma, though the strategies they’re employing are not exactly doing them any favours.

Many older Aussies are expecting to either work longer or draw down on their super.  But neither plan of attack is a sustainable solution.  The assumption that they can work for as long as they like does not take unexpected illness or lay-offs into consideration.  And those hoping to draw down their super upon retirement are merely eating into their future savings – money which is meant to see them through well into their golden years.

It’s hardly surprising then, that older mortgagees are suffering increased levels of mental health issues compared to those who already own their home outright.  And it appears to be more severe amongst women than it is amongst men.

The sad news is a number of older Australians are likely to need the government’s help with housing and rent assistance after mortgage stress tips them out of homeownership.  Studies anticipate that about 650,000 older Australians will need this financial assistance by 2021, with a likely risk of insufficient or secure housing in the private rental sector, and an increase in homelessness a very probable outcome.

The idea of vagrancy or even carrying unsustainable mortgage repayments into retirement is enough to bring you to your knees.  Luckily, GSA has a two-pronged solution: pay off your debt sooner AND grow your retirement nest egg faster.  Think of us as your financial shrink. Call us to find out how we can help end your financial anguish.

How much can I afford?

How much can I afford?

Have you ever daydreamed about having your perfect home in the ideal location?  Or maybe you’ve been hoping to embark upon a lucrative investment portfolio.  While these musings may get your pulse racing, you still need to ask yourself just how much of this sort of outlay you can actually afford.

I hate to say it, but once again, the banks seem to have the upper hand.  It is up to them to determine your borrowing capacity and to dictate the terms of their lending agreement.  It’s certainly advisable to gain an understanding of the kind of loan you can comfortably repay.

With most household budgets under pressure, how do you find enough room between the purse strings to make ongoing mortgage repayments?

You can take several preliminary steps to work out what you can afford.  Let’s look at a few of the basics.

 

1. Balance income and expenses

It’s fairly self-explanatory – work out how much money you currently earn, and deduct every cent you spend.  This includes any outstanding debt, such as credit card payments. Be ruthless.  Are you wasting money on unnecessary sundries?  Could you make a few adjustments?  Keeping a thorough account of your incoming and outgoing finances is paramount.

 

2. Use an online calculator

A mortgage calculator is a nifty tool that can help you better understand your financial situation.  It works out your estimated loan amount, monthly repayments and upfront costs.

 

3. Check your credit rating

Your credit score can affect your borrowing power.  A lender needs to factor in your ability to meet potential repayments on other loans, and whether you have applied for credit in the past and potentially defaulted on any payments.

 

4. Don’t forget about interest rates

Lower interest rates are a great incentive to service a loan at a lesser expense.  It usually means you can borrow a little more too.  However, you should also be aware that an increase in rates could significantly impact your repayments.  And once you convert to principal payments on top of interest, you could be hit with more than you can handle.  A lender will factor all of this into the equation.

 

5. It’s good news for savers

The bigger your deposit, the more you can afford.  Savings, gifts and equity on your existing property will all work in your favour.  If you can borrow under 80% of the home’s value, you’re already ahead.  Needing to borrow any more than that will require you to take out lenders mortgage insurance.

 

Of course, even without insurance, there will always be other expenses to factor in such as stamp duty, legal fees, agent fees etc.

That’s a lot to consider.  A property purchase can be a life-changing event, and you should approach it with caution.  But if you’d like a way to pay off your mortgage sooner or fast-track your investment portfolio – without all the extra expenses – GSA has the answer.  Call us to find out how.

Wind up these key priorities before winding down your mortgage

Wind up these key priorities before winding down your mortgage

As exciting as the prospect of being completely debt-free is – there are a few things you should review before making that last home loan repayment.

After all your efforts to reach this coveted destination, the last thing you want is to have to deal with a heap of loose ends that could leave you high and dry.

Here are three practical steps you should take well ahead of cracking open the champagne.

 

1. Check your insurance

When was the last time you reviewed your home and contents insurance?  Research shows that 40% of households are underinsured, and a whopping 29% don’t have insurance at all!

The chances are – your home and contents worth has changed over the years.  Save yourself any financial setbacks by attending to this early.

 

2. Revise your title

Get on top of this sooner rather than later, particularly if you are hoping to sell your property quickly.

The bank holds the Certificate of Title until you have repaid the full loan – essentially meaning the lender has ownership of your property.  As you approach the tail end of your mortgage, you need to discharge your home loan and get that piece of paper in your hot little hands in your name only.

 

3. Review your estate plan and will

If you don’t yet have a will, it’s advisable to get one.  Even if you do have a plan, you should be reviewing and updating it regularly, according to any significant life changes.

If you don’t get this sorted, the court will appoint an administrator to handle your affairs – which can end up being a timely and expensive exercise.  Similar to insurance, it’s a good idea to protect your assets now and in the future.

 

Attending to these factors should be relatively straightforward and easily accomplished.  Because when that crate of champas hits your doorstep – you want to savour the moment, knowing you can truly take a load off.

In the meantime, come and have a chat with us about ditching your mortgage sooner than you think.  Cheers!

Credit insurance: another reason to slam the door on your mortgage

Credit insurance: another reason to slam the door on your mortgage

Do you have credit insurance?  Are you even aware that it exists and how it works?  Much like health insurance, consumer credit insurance (CCI) is money put aside with the bank to cover your mortgage, should your financial situation change.

 

Perhaps you don’t think you need it, but what would happen if you no longer had the income to make good on your home loan repayments?  Sometimes unforeseen circumstances can hinder your ability to live on the same earnings to which you’ve become accustomed.

 

Unemployment, sickness, injury, or even fatality can take you and your family from a position of being financially comfortable to one of extreme difficulty in a flash.

 

So, credit insurance certainly sounds like a worthwhile investment – until you hear what the Australian Securities and Investment Commission (ASIC) has to say.  In its latest report, ASIC claims that “CCI products sold by eleven of Australia’s major banks are of poor value, and sold using harmful sales practices”.

 

ANZ, Australian Central Credit Union, Bank of Queensland, Bendigo and Adelaide Banks, Citigroup, CommBank, Credit Union Australia, Latitude Financial Australia and Latitude Personal Finance, NAB, Suncorp, and Westpac have all come under fire for offering “extremely poor” value for money.

 

The commission found that not only were sales staff using unfair sales tactics, consumers were also being incorrectly charged.  In addition to this, CCI was being sold despite borrowers’ ineligibility to claim under the policy.

 

While ASIC continues to investigate these findings, it may be some time before the banks are finally held accountable.

 

In the meantime, your mortgage is not going anywhere, and you could be at risk of paying for an inferior and financially damaging product or worse – facing the burden of accumulating debt without an insurance policy in place.

 

It truly makes sense to get rid of your home loan as soon as possible.  Give us a call – this is what we do.  Kick your mortgage out the door, and open a brand new window to freedom.