If you’ve had a mortgage for some time, you’ve probably thought about refinancing at least once or twice. It could be because you’ve had a bad experience with your bank treating you more like a number than a customer. Or perhaps you want to borrow more money but your current bank hasn’t presented any enticing offers.
Whatever the reason, refinancing is often about finding a better deal. But most people don’t get beyond thinking about it because they fear it’s a costly exercise. However, this is an all-too common misconception.
It doesn’t have to cost you the earth
Refinancing costs have dropped significantly over the last few years. This is great news if you think you’ve found a better offer.
If you’re in this boat, follow these easy steps to get on the right refinancing track …
3 simple refinancing steps
- Review your current bank loan: Make sure you fully understand all associated fees (including deregistration and valuation fees) and your current interest rate.
- Reflect on how you use your existing bank accounts: Do you need an offset feature or a linked savings account? What fees are you paying (for instance, to use ATMs, a monthly account charge etc)?
- Speak to a mortgage broker: Being professionals, they’re in the best position to advise on what’s out there and whether you can get what you really want. They may even be able to direct to you a deal you didn’t know existed. Another advantage is they can manage the entire process for you – saving you time, stress and most importantly, money!
Unsure of what to do next in your refinancing journey?
If you’re still a little confused about the process or need further assistance locating the right deal, then contact us for an obligation-free chat. We’ll use our years of expertise to provide you with a diverse range of refinancing options to ensure you get the best fit for your needs today.
Starting a family is a very exciting time in your life. It’s also a time when you start thinking about upgrading your home. But can it be done on a reduced income when your partner takes maternity leave? In this post, we address this important question and hope to provide you with some advice to help you answer it.
The loan term matters
When you take on a mortgage, the bank don’t expect you to repay it back quickly. It’s not really in their best interest if you do! That’s why they offer you a 30 year loan term.
Thirty years is a long time. Consider all the things that will happen to you over that period. We guarantee you will experience all sorts of significant changes and starting a family (and the resulting reduced income) is just one of them.
A longer-term approach
Making a decision to extend your current home or upgrade to a new one shouldn’t be based solely upon a one or two year period when your partner is not working. A wiser move is to look further than that.
Sit down and discuss what your situation might look like post-maternity leave beyond the first few years. Consider reduced work hours, reduced income and who’s going to look after the kids if your partner goes back to work. Think about the change in expenses too when you go from being a double-income-no-kids unit to one with a young family.
After these discussions, you’ll have a good feel about what you can and can’t afford post-maternity leave. You can then start to consider your upgrading options: whether to purchase a new property or even extend your current one.
This is when a mortgage broker can be of most benefit. It’s our job to help you see into the future and help you forecast and budget for big life events such as upgrading your lifestyle. Ready for some help? Then contact us for an obligation-free chat.
We wish we could say there was a magic formula or easy way to pay your loan off fast. But we can’t (well, we could but that would be a lie and we don’t roll that way!). It simply takes time and hard work. However, we can offer you some numbers that may put a smile on your dial. The following example scenarios illustrate how you can still save hundreds of thousands of dollars in interest if you make a sound financial plan and commit to it.
The working example
Let’s assume you have the following:
- loan amount: $500,000
- monthly repayments: $2,400pm
- 30 year loan term
- interest paid over life of loan: $360K
Now take a look at each scenario below to see how the numbers stack up.
Scenario 1 – making extra repayments
- loan amount: $500,000
- increase your monthly repayments to $3,000pm
- pay off loan in 20 years (not 30)
- interest paid over life of loan: $225K
- save around $135K in interest & pay off loan 10 years earlier
Scenario 2 – increase repayments according to CPI increase (3% PA repayment increase)
- loan amount: $500,000
- monthly repayments: $2,400pm
- year 1 – pay $2,470pm; year 2 – pay $2,550pm; year 3 pay $2,620pm etc
- pay off loan in under 20 years
- interest paid over life of the loan: around $250K
- save around $110K in interest & pay off loan 10 years earlier
Scenario 3 – combine scenario 1 & 2
- loan amount $500,000
- increase your monthly repayments to $3,000pm + add in CP increases each year
- pay off loan in 15 years
- interest paid over the life of the loan: around $185K
- save around $175K in interest & pay off loan 15 years earlier
What this all means for you
Scenarios 2 and 3 are effectively a nifty forced saving plan. By choosing either of these options, the principle amount you pay off results in huge savings to your hip pocket. You reduce the loan term by 10-15 years thereby saving all that interest. Imagine what you could do with all the extra cash?
These scenarios are just one of the great tools in our investment arsenal that we can help you employ to keep your repayments on track. Connect with us as we’d love to share them.
There are a few different reasons to fix your mortgage rate but in our opinion, not all of them are valid. Let’s see if you can pick the right one:
Should I fix my rate to:
- Beat the bank and interest rate market?
- Save money?
- Manage risk?
If you answered C, you’re a winner!
To understand why, think about this. What would your budget look like if rates were to rise by 0.5%, 1% or even 2%? If that thought gets your heart racing a little bit, then it just might be a good idea to think about fixing.
At Professional Partners, we offer a complete interest rate sensitivity analysis service for our clients to help them see the impact of a rate rise on their budget. With rates more likely to go up – rather than down – in the next few years, it might be a good time to contact us to take advantage of this service and give your budget a good ol’ tune-up.
Having a baby brings much anticipation and joy. But it can also be stressful too as you start to think about juggling your mortgage with all the new expenses a family can bring – not to mention a reduction in income when your partner goes on maternity leave. There are, however, a number of ways to manage this and keep your finances on track.
Top tips to managing your budget when you start a family
- Plan ahead – make sure you understand your employer’s maternity leave policy and what you are entitled to in terms of government benefits.
- Watch your savings – if you have savings, ensure you adequately manage them by adding to your account wherever you can, rather than ‘dipping in’. If you have to dip in then pay yourself a set amount via a direct transfer each month. This way, you won’t be tempted to pull out more and more on an ad hoc basis which can quickly eat into your savings nest egg.
- Keep a tight rein on debt – avoid running up credit cards and personal loan debts. Use the direct transfer method to keep it under control.
- See if you qualify – your bank may offer a ‘repayment holiday’ for up to 12 months if you’ve had your mortgage with them for some time or have extenuating circumstances. Contact them to see if you’re eligible.
These are just some of the ways you can manage your mortgage repayments as you welcome a new family member. For more, speak to one of our mortgage brokers here at Professional Partners. We can offer you lots of great advice from helping you forecast your budget to innovative tools to assist with repayments.
So you’re at the stage where you’re thinking about upgrading to a new home. But you’re a little unsure about taking on the debt that comes with it. In this post, we explore the good reasons why you shouldn’t wait to upgrade to the property of your dreams, even if it means taking on a little more debt.
Address the basics first
Before you make the decision to upgrade, it’s a good move to have a chat to your mortgage broker or financial adviser about whether you’re in the right financial position to upgrade. If you’ve done that, here’s some reasons why doing it now is the best option.
Two great reasons to upgrade now rather than wait
- Once you start wanting it, you’ll always want it
When it comes to upgrading, most people do it because they’re driven by an emotional desire to change their lifestyle – not purely for investment reasons. They might:
- need more space (to start a family or for older children)
- want a bigger house simply because they can now afford it
- do it as they’re friends and family are upgrading too
Our 13 years of real estate experience have led us to this conclusion: once the desire for an upgrade hits, it stays! You might put the decision on hold for a few years but it will stick with you, looping back into your mind again and again, keeping you wondering ‘what if?’.
- Waiting costs more money
If you wait, prices go up. Not only will your hip pocket suffer, so will your lifestyle. Why spend years worrying about upgrading when you could be spending them in the house you truly want, enjoying the life it offers?
Shifting your debt mindset
Once you’ve ticked your ‘budget and affordability’ boxes, you can then move on to accepting upgrading means more debt. In our opinion, debt isn’t necessarily a bad thing; provided you can afford it and you don’t over capitalise. The big positive is it will bring you a wonderful new lifestyle, one you can truly enjoy and be thankful for right now.
If you’re still unsure about upgrading, connect with us today. One of our experienced brokers can run you through your options and help you make the decision to get into your lovely new home.
We’re in the midst of an inner-city housing affordability crisis. But we believe there is a solution – one that rests on the shoulders of the IT sector, big business and government.
The ‘why’ of the inner-city housing price hike
Property prices within 15km of the CBD have doubled over the past 5-7 years as population increases have placed a huge demand on houses. It doesn’t really matter what the government does to try to encourage people to live further out, people will continue to choose to live close to the CBD to reduce their work commute (which is where the majority of jobs are located).
As we see it, three big sectors of society can combine to address the inner-city housing problem. Here’s how:
- Big business & IT
Large companies and the IT sector can create multiple ‘regional hubs’. Companies such as Telstra, ANZ, CBA, IBM and PWC can join forces with the ‘techies’ to utilise technology to set up remote satellite offices in regional areas such as Bendigo, Ballarat or Geelong. Staff can work from any of these satellite offices, ‘dialling in’ to head office to work with their team. So an employee at the CBD ANZ office could choose to move to Bendigo and work there, but still continue to remotely connect with their colleagues in the CBD and beyond. This eliminates the need for the entire team to be in the same office.
Imagine a future where Bendigo has 20-30 satellite offices of the ASX top 30 companies. And the same exists in Geelong, Ballarat etc. These new regional hubs would reduce demand on inner-city properties, thereby easing the housing affordability crisis.
- The government
Government can also play a huge role. They can offer tax incentives to big businesses – or even joint partnerships – to facilitate these changes and assist with associated costs. Rather than spending billions making bigger highways and adding to the inner-city crush, they can spend it on establishing thriving regional hubs. Places where people can live and work from – rather than concentrating on CBD offices as the only option and placing a strain on the inner-city housing market.
If you’ve got some more innovative ideas about how to solve the inner city housing crisis, please feel free to connect with us and share them. We’d love to hear your suggestions.
You’re ready to upgrade to a new home but you’ve hit a substantial brick wall. What do you do first – buy your new property or sell your current home? There are many variables and scenarios to consider in this situation but overall, our opinion is you go for the ‘buy first and then sell’ option. Here’s why:
Finding a new house is no easy task. When upgrading it can take months, or even up to a year, to find a suitable property. If you sell first, you may find out yourself out in the cold – literally! – for a long period as you hunt for the right property.
Price is another consideration too. The higher up the property market you go (i.e. the more expensive the property) the less supply available. Limited supply means a higher demand for these properties so often the one you have your eye on sells for a much heftier price than expected. If you sell first and end up underestimating the purchase price upgrade, how will you cover the shortfall? And where will you live in the meantime?
Only take this option if ….
Our recommendation therefore is to always buy first and then sell. But this all depends one big factor – are you a strong enough financial position to afford this option without putting an added burden on your situation? To work this out, you need to understand your cash flow and bridging options but most importantly, seek bank approval. Will they allow you to buy first without a sale contract on your existing property?
An extra tip: when doing your sums be conservative in the expected sale price of your current property. You don’t want to end up with a shortfall due to lower-than-budgeted-for sale price.
We’re here to help
Still unsure about the ‘ins and outs’ of whether to buy first and then sell? Connect with us today so one of our experienced brokers can run you through the options to help you make your decision.