There are few things in life that you will commit to that are as big as a home loan. Taking on such a financial obligation can seem daunting at first, and it can often lead you to feel weighed down by debt for years to come
And as your life circumstances begin to change, so will your home loan needs!!!
Perhaps you find yourself struggling with the amount of your home loan repayments. Or, on the flip side, you may find yourself in a better financial situation – resulting in more money to be put towards anything you want.
It would be a good idea to keep an eye on your home loan health throughout your life, because home loan refinancing could put you back in control of your investments and keep you in the strongest financial position possible.
For example, if you’re finding it difficult to make your weekly repayments, it could be worth speaking to a financial expert about the options available to you. For example, it could be possible to reduce the required repayment amount, giving you more breathing room.
However, keep in mind that undertaking this route will make your home loan last slightly longer, which could result in an overall higher repayment amount when you factor in interest being charged on your remaining balance.
The same applies to increasing your repayment amounts. This can help you to get debt free faster, while cutting into your overall balance in a big way and aiding your mortgage efforts.
As always, I am more than happy to run through your personal financial numbers to see what savings can be made…speaking with an expert is the best way to ensure you make the right refinancing decisions and find yourself in the best possible financial health for your situation.!!!Read more
The home loan market is booming at the moment and I am just flat out. This activity is indirectly the reason behind our email today.
Competition between the banks and non bank lenders is at an all time high and this is generating record low interest rates. The reason for this discounting is simple….THEY CAN AFFORD IT!!!
The following chart demonstrates what we are getting at.
As you can see, during the period between 1999 and 2008 the interest rate margin between the RBA cash rate and what you paid for a variable home loan was around 1.20%. That margin has grown to around 2.60%!!!
Back in 2008, we were usually impressed if we managed to negotiate a 0.70% discount off a banks standard variable rate. We are now negotiating rate discounts that we would not have dreamed of in 2008.
If you have not reviewed your existing home loan for a few years, it is time to put us to work. Remember, my mortgage broking service is at no cost to you and the savings can be very surprising!!!
For example, a recent client of mine had a $380,000 home loan on 5.08% p.a.. Now, this seemed like a pretty competitive rate. I put them on a 3 year fixed rate at 4.69% p.a. with another lender. This saved them just over $1,400 per annum.
The above example is why you should have a Fear Of Missing Out (FOMO)!!!Read more
Most media outlets have already informed you about the RBA’s decision to keep the cash rate on hold…you can check out the statement from the Governor of the RBA here – http://www.rba.gov.au/media-releases/2014/mr-14-10.html
However, very few of these media groups dig any deeper than the headline announcement. The mainstream financial media can be a strange collective beast. After predicting doom and gloom for the Australian economy for the last 6 months (as mining investment tapers off), the headlines were suddenly full of confidence yesterday when exports showed a strong lift for the quarter.
Disappointingly, as soon as there is the slightest hint of economic growth, the pundits start predicting interest rate rises.
So, as we often do, we have looked at what the real experts think of yesterday’s growth data. The experts that put their money where their mouths are. As at the close of business yesterday, the ASX futures market was predicting the next cash rate rise in SEPTEMBER 2015…14 MONTHS AWAY!!!
Of course, the futures market can be wrong, especially if there is a world economic shock like a GFC, however, this ASX forecast is a long way from yesterday’s mainstream media predictions.
Please give me a call if you would like to know if your loan is still competitive, or working as hard as it should be for you!!!
As home loan profit margins expand for the banks, discounts can become easier to negotiate. Put me to work NOW…I could save you plenty!!!Read more
Purchasing a first home is an exciting time in any Australian’s life. Owning property is a huge step towards independence and being in complete control of your life as an adult. When you secure your first home loan, this locks you into one of the largest financial commitments of your life – and this can be particularly daunting!!
However, after a while, if you’re not entirely satisfied with your mortgage situation it could be worth getting in contact with a financial professional about the home loan refinancing options available to you. This can help to change the features associated with your mortgage, allowing you to make some changes to your overall commitment.
For example, it’s entirely possible for you to change the size of your repayments. If you find yourself struggling to make ends meet, it could be worth looking into reducing your weekly repayment amounts until you get back on your feet.
On the other hand, if you find yourself in a strong financial situation, increasing your repayment amount could help you get debt-free faster. Not only this, but you’ll be able to save money on the interest spent on these repayments – the faster you pay off your mortgage, the faster you stop paying interest, which can go into your savings for a rainy day.
Changing your interest rate is also a potential option when refinancing. In fact, now could be the perfect time to secure a fixed-rate home loan, as the latest official cash rate decision has been retained at 2.5 per cent. This is translating into low interest rates, which can help you make savings on your repayments in the long term.
If you know anyone who would benefit from understanding more about the pros and cons of starting off modestly, versus buying a more expensive property, please feel free to pass on my details…or just give me a call. I am only too happy to help out.Read more
Most media outlets have already informed you about the RBA’s decision to keep the cash rate on hold…you can check out the statement from the Governor of the RBA here – http://www.rba.gov.au/media-releases/2014/mr-14-07.html
However, very few of these media groups dig any deeper than the headline announcement.
Here at Smartline, our aim is to let you know how each RBA decision impacts on YOUR mortgage and the choices that YOU can make.
The first point we can make about this latest decision is that the 2.50% cash rate is now into its 10th consecutive month. This is an unprecedented stretch at a record low rate. The ASX Futures market is predicting a lot more of the same (see below).
In fact, the prediction is for 12 more months at 2.50%!!!
The following chart gives us a historical perspective. As you can see, the three year fixed rate is at a significantly low point.
WHAT THIS CHART DOES NOT SHOW IS THE COMPETITION THAT IS RAGING OUTSIDE THE MAJOR BANKS!!!
Whilst the average three year fixed rate on the above chart is 5.05% p.a. (for the major banks), one of our lenders is currently offering an incredibly low 4.69% p.a. 3 year fixed rate. Another non major is offering 4.89% p.a., 3 year fixed, with a 100% offset account.
As always, please give me a call if you would like a review of your finances…don’t be afraid to put me to work for you!!!Read more
- Terry Ryder, Founder, hotspotting.com.au, pleads that ongoing misinformation about the real state of Australia’ property markets is unhelpful;
- Cameron Kusher, Senior Research Analyst, RP Data, explains that rental growth has slowed, which has seen gross rental yields ease over the past year; while
- Michael Witt, from ING Direct, feels that the RBA is happy with the economy where it is, although the RBA may start increasing rates towards the end of 2014; and finally,
- John McGrath, CEO, McGrath Estate Agents, feels that many first home buyers are buying for investment, rather than owner-occupation.
Click on this link to find out all the details - Smartline Report – April 2014
State governments have been enjoying a revenue bonanza from the stamp duty that is levied on our homes.
Under our progressive stamp duty system, we pay a higher percentage of duty if we buy a more expensive home. This tax system was designed to make sure that luxurious homes are taxed at a higher rate than average homes.
This system sounds relatively fair…HOWEVER…Governments seem to have forgotten that they need to regularly adjust the threshold limits as our home values increase. As a result of this forgetfulness, we are now paying “luxury” stamp duty amounts on average homes!!!
Take NSW as an example. The average stamp duty amount in 2006 was $14,485 per home. Fast forward eight years to 2014 and the average NSW stamp duty amount is $23,058…that is a 59% increase over 8 years, an average increase of 7.4% each year!!!
Other states have experienced this same phenomenon.
We are certainly not arguing that all taxes are an abomination. The revenue from taxes are absolutely necessary to provide a whole range of important government services. BUT THIS TAX IS NOW BECOMING UNFAIR!!!
The chart below demonstrates how much stamp duty would be charged in each state and territory if you were to buy a $500,000 home (NOTE: this table excludes 1st home buyers).
These are not small amounts of money. This cost is certainly enough to keep people from owning their own homes.
The most notable figure on this table is from Queensland ($8,750). Owner occupied stamp duty in the SUNNY STATE is less than half that of the other states.
THIS IS A SMART MOVE!!!
Queensland benefits from a migrating population that has been educated and supported by the other states. This amounts to an incentive scheme that drains the other states of their young and aspirational citizens.
Now we know what that slogan “The Smart State” was all about!!!Read more
As you would be well aware, the hot topic at almost every weekend barbecue at the moment is “house prices“. CBA have just published the attached economics report outlining pretty much all you need to know about the current state of the housing market.
I love my charts, so here are my pick of the best from the report:
After a long period of declining growth that started in 2010, now comes the growth (since the start of 2013).
Population growth is still very high, which is good for demand.
Interesting to note that low doc loans (where you don’t have to prove your income level) have virtually disappeared. These loans are basically what caused the GFC in the US.
While, little has changed over in the last seven years in terms of household debt levels.
When compared to household income, dwelling prices have not lifted for 10 years.
So this weekend, when the topic invariably arises, you can say with confidence “I know the facts about the housing market“!!!
This is of course straight after you say “ you should talk to my Smartline Personal Mortgage Adviser now“!!!
You can read the full CBA report here:Read more
With the recent RBA decision to hold the cash rate at 2.5% again, we now have a unique opportunity to make a simple but SMART financial decision.
Most people will have heard the phrase “spend money to make money“. This email is a variation on that sentiment.
Our first point is extremely important.
“Current interest rate levels represent enormous savings to borrowers”
At 5% a $300,000 mortgage will cost a borrower around $72,114 in interest over the first five years. That same $300,000 mortgage would cost around $102,149 at 7.00% p.a..
Note: 7.00% p.a. is the approximate average variable home loan interest rate over the last 15 years. This 2.00% discount represents a $30,000 saving over 5 years. Are you using this saving wisely?
Our second point is even more important.
“There has not been a better time to make additional repayments on your mortgage for 20 years”.
Let’s continue to use that example of a $300,000 mortgage. The normal weekly repayment would be approximately $372 based on a 30 year term at 5% p.a.
What happens when you spend an extra $100 per week ($472 instead of $372)?
1. You pay your home loan off 11 years faster.
2. You save $115,000 in interest compared to making the minimum repayment over 30 years.
The table below demonstrates the progressive power of paying an extra $100 per week.
Now is the time to pay down debt more aggressively. Whilst interest rates are low they absorb less of your repayments. This reduced interest expense frees up more of your repayment to reduce your debt.
As the old saying goes…MAKE HAY WHILE THE SUN IS SHINING!!!
As always, I am more than happy to run through your personal financial numbers to see what savings can be made!!!
SMART IDEAS REQUIRE ACTION!!!Read more
Home buyers who start their property investing by purchasing modest properties with smaller home loans can be financially better off than those who buy more expensive properties with associated larger mortgages.
Starting small can be a smart financial move, with the added benefit of considerably less risk AND stress.
There’s a lot to be said for buying something reasonably basic initially, to get that first foot on the property ladder. The goal should be to start off with a smaller loan size and work hard to put as much of a dent in your home loan balance as quickly as possible.
This is because in the early stages of a loan, the majority of your repayments are being consumed by interest whereas extra repayments go straight off the principal.
If you have a large loan where you can afford to pay only the minimum repayment, it will take a lot longer to make inroads than if you had taken out a smaller loan and paid extra. The following example in the table below illustrates our point:
Taking a ‘stepping stone’ approach whereby you build up equity in a modest property and then use that to upsize to a more expensive home with the benefit of having a significant deposit is a sound strategy. It means that at some stage you will have the ‘dream house’ but you minimise the associated interest bill that could total hundreds of thousands of dollars.
If you would like specific advice about the pros and cons of starting off modestly, versus buying a more expensive property, please do not hesitate to give us a call.Read more