The great Australian dream…..owing your own home. For most people owning a home is part of their dream for the future. For some of these people that make it a reality – know how to pay down their mortgage in less than 30 years, and some need a little guidance. But there are still the few that think it’s out of their financial reach – they put a mortgage in the “too hard” basket or don’t understand the financial difference in paying your own mortgage as apposed to paying off someone else’s. Below we look at the major differences in Renting V’s Buying.
So lets look at RENTING….
We all have to start somewhere right? Not many of us are able to come out of school/university and buy their first home (plus who has the 5-10% deposit at this age?). So we rent, pay someone else’s mortgage and save a deposit. But have you ever thought about how much rent you have paid in the last 3/5/10 years and how much of that could have been off your own mortgage? Recently a friend and I had a chat about this and the estimated amount that they have paid in the last 10 years in rent at about $400 a week is $208,000! Yep that’s right, sounds like a lot!? Wouldn’t you be happier knowing that came off your own mortgage and not someone else’s? In most cases the cost of a mortgage per week is similar to the cost of renting. You also need to think of the better financial position you will be in if this came off YOUR mortgage…..maybe you could use the equity to go on a big family holiday to Disneyland,buy a new car or start building your property portfolio to help with cash flow/retirement and buy an investment property. But with renting someone else’s home you don’t have this flexibility. Keep in mind also the restrictions with renting…. if you want to make any changes to the home or yard you need the owners approval first and then it’s even more wasted money. Then again if there are major repairs or renovations that need doing, this falls on the landlord and not you.
In Comparison to OWNING….
I certainly knew the feeling after I bought my first home….wow! It feels great! Your own place that you can do what you like with it, you want to paint walls – you can! You want to put in a pool – you can? Change gardens, add in extras – you can! Yes there is the $$$ aspect to it but the benefits can outweigh your financial concerns. With the right help of a mortgage broker they can make sure you have the best home loan option suitable to your situation not just now, but for the life of the loan. If you want to change some things in your home in a few years time, you get your mortgage re-assessed by your broker to make sure you have the best loan at the time and if you have enough equity you can draw this out and use it to your advantage. Paying the renovations/holiday/new car at home loan rates and not the high personal loan rates can also save you on interest payments!
If you are unsure what is best for you or you want to find out more about renting v’s buying give me a call anytime and I can help you get to where you need to be and show you how you can pay off that dream home sooner.
Choosing the right loan for you can often be daunting. There are many traditional lenders to consider when looking for a home loan, including small lenders or the Big Four banks; your mortgage broker can guide you through the choice of lenders.
Here we will look at the differences:
The Big Four banks are commonly known as ANZ, Commonwealth, National Australia Bank, and Westpac. These are the first-tier lenders and contribute 70% to 75% of the home loan market.
The Small Lenders are referred to as the second-tier lenders. These include Suncorp, Bank West, ING Direct, AMP, CitiBank, Bank of Queensland, Bendigo Bank, Heritage Bank, just to name a few.
Comparing Small Lenders to the Big Four Banks:
Interest Rates and Fees – Small Lenders whilst having fewer branches can often be more competitive with interest rates and fees. This is due to the Smaller Lenders having reduced overheads. However, don’t discard using one of the Big Four Banks as often your mortgage broker can negotiate a more competitive interest rate with them.
Home Loan Products – All lending institutions have something different to offer to potential clients.
Small Lenders often have niche products available that the Big Four do not. This may include accepting different types of employment (casual, part time, contractor’s as an example) However, the Big Four can offer professional package home loans that the smaller lenders cannot. An example of this is that a professional package will have an offset facility against the home loan which may not be available with a smaller lender.
Approval Times – When any lender offer’s such a great rate/product this can have a surge of applicant’s and weather you go with a small lender or one of the big 4 this can blowout approval times. Best practice with your broker is not only finding a suitable rate/product but also finding out approval times as this can be the big difference in being able to buy your home in front of other’s.
Customer Service – Generally, small lenders will only have branches in major cities and towns. This means customers have limited access to branches in regional areas. This can be an inconvenience; however most small lenders offer internet and phone banking. The Big Four will have multiple branches in major cities, towns and regional areas, along with internet and phone banking as well. With a smaller client database, Small Lenders often offer a more personalised service to their customers. This mean there is more chance you will be dealing with the same staff member each time you call. However, the Big Four have a larger number of employees so you will not always talk to the same person.
Whether you choose a Small Lender or one of the Big Four Banks is your choice and what is right for your situation. Remember your mortgage broker is there to help you through this process of choosing the right loan with the right bank. Call us at the office if you want any further info or think your home lone is due for a review, we are here to help!
Interest only V’S Principal & Interest – What’s the difference?
In light of the current low interest rates, many of our clients have been asking us whether it is better to adopt interest only (IO) or principal & interest (P&I) repayments on their loans. On face value, paying P&I makes sense when rates are low, as it allows you to repay the loan faster. However, there are situations when IO may be the better strategy to adopt. Firstly, let’s clarify how they both work.
With Interest Only repayments, you are only required to repay the interest portion (plus any fees) on the loan over the chosen Interest Only period offered by the lender. Upon expiry of the original IO period (usually from 1–5 years), you must request and negotiate a new Interest Only term if desired. To ensure you are not caught out, it is important to know what your lender allows at the Interest Only term’s end before it comes around.
Principal & Interest
Principal & Interest loans are designed to repay your loan over the defined loan term – usually 30 years. Your lender calculates your repayments including the interest charged for the repayment period and any loan fees, plus a portion of the principal balance. Under Principal & Interest; as your loan balance reduces, so does the interest component (assuming the interest rate remains constant), meaning your scheduled repayment pays off more of the loan principal, as the loan term progresses.
When can Interest Only help me?
There are some situations where Interest Only can benefit you, for example if you are a First Home Buyer that is building. The time that the home is being constructed the repayments are usually set at Interest Only, this can be extended to be anywhere from 1-5yrs in total.
If during the term of the loan your work situation changes for a short period of time, for example if a woman is going on maternity leave for 1yr, this can also be a time for Interest Only repayments.
You also need to keep in mind that over a 30yr term most banks will not let you do more than 5yrs of Interest Only repayments, so if you feel you need this please discuss it with your broker before you make any decisions.
What Should I Choose?
This is where it is best to sit down with your broker and discuss your current financial position and where you wish to be in the next 3 – 5yrs. No one can predict what the cash rate will do with the government, nor can they predict what the banks will do if they choose to do a rate increase or decrease. So, make a plan with your broker and they will help find the best suitable option for you.
Call our friendly brokers here at Blue Wave to have a chat about what is the best option for you and if you are getting the best out of your current rate. Either call the office on 07) 5443 8773 or drop us an email HERE
As some of you may know – well over 50% of mortgages these days are taken care of by a broker and, well, why not? We are in the industry that can offer you the best package / rate / product to suit your needs. Some might argue that all brokers have access to all lenders / deals and so forth. So what sets us here at Blue Wave Property Strategies apart from the rest?
Well as all brokers do – we have access to over 30 lenders so we do all have lots of options, but some brokers may only use 3-4 of these lenders. Why is that you ask? The reason being, is that these particular banks pay a higher commission than others, making your mortgage a better deal for the broker. You might be thinking how dare they? Well yes I agree, instead of putting what is in their client’s best interest they are putting their own best interest first. The broker you want to look after you is the one who offers you 2-3 options that are most suitable to you no matter what percentage of commission they get paid. Commissions are the furtherest thing from my our minds when we are trying to get the best deal for our clients.
Then there is the hidden “Service Charge Fee” that some brokers may charge as well. This “fee” is where the broker charges you a set amount for the work involved in securing you the most suitable loan. The chosen bank pays the broker a commission on your loan once it settles – which is in a sense – your “Service Charge Fee”. So to charge this fee to their client on top of what the bank pays them in commission is definitely a broker who does not have their clients best interest at heart.
A lot can be said about a broker from their reputation and recommendation from others. This is what drives a great broker to do more and go that extra mile for their clients, helping them be the best they can. Not only just at the start to secure the loan, but for the life of the loan and future of the clients.
This comes from an experience I had at a car dealership on the weekend. After formalities and establishing the type of car we where after the salesman offered to search for other cars similar that his contacts may have and email them to me. He offered to go out of his way to help not only us find the best car, but he offered a great experience. Unfortunately, he could not say the same about his broker in the recent purchase of his home. He had many delays in getting the finance approved which put a spanner in the works with his builder and this in turn delayed the build itself. Then just before he moved into his new home his broker sent him an invoice for a $1,000 “Service Charge Fee” so you can imagine that this salesman will not be recommending that particular broker to anyone in a hurry!
So yes, each Broker is different and we all say we can help you but do your research first. Ask around and see if friends or family can recommend a great broker that they have had a positive experience with. Reputation, efficiency and follow through will show you to the right broker for you.
If you are looking at refinancing or purchasing a property, consider us us your broker – I can assure you will will always have your best interest at heart! Give Chris or Nikki a call at the office today! 07 5443 8773 or drop us an email HERE
Choosing the right home loan with the best interest rates can help you save thousands of dollars. It is so important to concentrate on comparing and contrasting home loans and rates to determine which one meets your individual requirements and needs before making your decision.
Here are the main differences between fixed and variable rates….
Fixed Rate Home Loans
A fixed home loan rate means you can establish a certain fixed interest rate. This means whether the interest rate falls or rises, you will have to pay the established fixed rate. Let’s see what are the main advantages to opting for a fixed rate home loan.
• You can benefit from knowing exactly the repayments you will have to make, as well as the possibility of establishing your interest rate for a longer amount of time.
• Opting for fixed rate home loan will make it easier for you to budget your future finances – you know the exact sum you need to pay.
• If the rate rises above your paying interest, that won’t affect you in any way – you’ll be paying the fixed rate, which is less than the variable rate, so that’s a plus.
Now let’s take a look at the main disadvantages that come with choosing a fixed rate home loan.
• If the interest rate decreases, you will be paying your fixed rate that is more than the variable rate. Thus, you won’t be able to take advantage of the rate decrease.
• You won’t be able to benefit from making unlimited repayments. Most banks have a capped limit of extra repayments that you can make to the fixed loan. Still, this might be a viable option if you choose to pay an additional fee.
• In case you decide to alter or pay off your fixed home loan, you will be required to pay for additional break fees and penalties. This can be thousands of $$$$$
Variable Rate Home Loans
A variable rate, as its name already indicates, is the rate that may either rise or drop during the period of the loan, depending on a wide range of factors such as the official interest rate. This official interest rate is established by the Reserve Bank of Australia. So, the main disadvantage that comes with this option is that the rates fluctuate, and they might increase month by month. So, you don’t have any certainty regarding the sum of money you have to pay every month.
But what are the benefits?
• You can benefit from a wide range of extra options such as flexibility, repayment holidays and introductory rates.
• If you have the ability to make extra repayments that will shorten the life of the loan, you can opt to do that, without having to pay for any additional fees.
• You have the redraw option, be it the case you need money for emergencies/house repairs/bills/holiday
• The savings in your transaction account can contribute to decreasing your loan balance. This is what Banks call an “Offset account”
I have had clients in the past do both in a loan split, part Fixed and part Variable. This can also be helpful if you are unsure on what you will be doing in the near future of your home.
There are many reason in which way you choose but the best option before you do anything is to speak to us at Blue Wave Property Strategies to discuss your options and help you find the right loan that suits your needs.
We are here to chat about anything finance – we are not financial planners and wont give you advice in that area but we can definitely have a look at your current home loans and make sure you are getting the best possible deal. We are 100% confidential and you can be assured anything you discuss with us stays that way! Let us help you save some cash today!
Call Nikki today on 0400 124 229 or drop us an email HERE
Bank pain, we’ve all had it at one stage of our financial life – but what have we done about it? Some people complain about it at their local branch and maybe get a fee refunded or waived every now and then. Some people just like complaining about it to their friends or family but few will get up and do something about it.
When was the last time your bank called you to let you know about a great offer they currently have on home loan rates? Or even new savings account or term deposit that has a better interest rate than your current one? Never, that’s when! They don’t, why would they? It’s simply because they hope that you fall in to the group of “set and forget” so they can kick back and make as much money off you as possible.
Welcome the Mortgage Broker, your number 1 friend in helping you to not only make sure that you have the best home loan solution now but also well into the future. Showing you how you can own your home sooner than 30 years, doing regular reviews of your home loan to make sure that you are getting the best rate available at the time. Then if you want to begin to create real wealth, showing you how to purchase your own investment property and eventually an entire property investment portfolio.
Why a Mortgage Broker you ask? “I have been with my bank for years and never had an issue”….that’s great but when have they gone out of their way to help you reduce your debt? Earn more interest on your savings? As a Mortgage Broker we work for you, for what’s in your best interest and always going out of our way to show you how you can better manage and reduce your debt.
A simple review on your home loan can save you thousands, let’s take an average mortgage of $500,000 that has been with the same bank for the last 5 years. If you have not revised your fixed term loan, at today’s current rates of around 4% you could potential save $37,000 in interest over the life of your loan. That would be a great family holiday! or a new car? or even a deposit towards your first investment property. Keeping in mind that is only with one review, we at Blue Wave Property like to do a review on our client’s loans every 2 years or so and this can lead to a lot more than the $37,000 saved in interest.
I aim to show all my clients how best to manage their debt, save them money in all areas possible and one day show them how to build their property portfolio, if this sounds like a good idea to you – give me a call and we can discuss your financial future. It costs you nothing for an informal chat that could lead to saving you thousands of dollars in the future!
Look forward to catching up soon – Nikki
To read a bit more about Nikki see HERE