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WOULD you like to shave 10 years off your mortgage? How much interest could this save you?
It’s not rocket science, it’s simply a matter of making more repayments more often and making sure you’ve got the best mortgage for your situation.
Of the millions of homeowners, only some are getting out from under mortgage payments years, sometimes decades, before their neighbours. How?
They make an effort to pay off their mortgage early.
The average home loan is now about 0,000, but living mortgage-free is not a pipe dream.
You may only need to find an extra $ 200-$ 500 every month so that you can exceed your mortgage payments. While many think they can’t afford that, you’d be amazed at how much money you can save on a monthly basis.
KNOW YOUR BUDGET
Suncorp Bank executive manager of personal lending Tony Meredith says many people don’t know exactly where their money goes.
“Get to know your incomings and outgoings, and identify where savings can be made. You may be astounded to learn just how much you’re spending on eating out, takeaway or coffees each month,” he says. “By paying even an extra $ 20 per fortnight off your mortgage, you can make a significant difference to the balance.
“Spend your tax returns wisely. For example, depositing a $ 2000 tax return as a lump sum into an average $ 300,000 mortgage can potentially shave about eight months off a 30-year-term, saving a mortgage holder almost $ 12,000. Do this each year and watch the years drop off your loan.”
WORK IT OUT
There are plenty of free online mortgage payment calculators which will show you exactly how much money you can save by ramping up your repayments.
The monthly repayments on a $ 300,000 mortgage over a 25-year term at 7.25 per cent are about $ 2168. But a person could pay the loan off 10 years earlier and save $ 158,277 in interest by increasing their monthly repayments by $ 575.
Finding the extra money might not be easy, but it’s surprising how much people can reduce their incidental spending if they scrutinise their household budget. Ask yourself if you really need it, or do you just want it?
PAY FORTNIGHTLY INSTEAD OF MONTHLY
AMP financial planner Dianne Charman says on a $ 300,000 mortgage, a person can cut four years and six months off the life of the loan and save $ 82,823 in interest simply by swapping to fortnightly repayments.
“The loan is reduced faster as there are 26 fortnightly repayments each year, instead of 12 monthly repayments. If the person was to also boost repayments by $ 180 a fortnight, it would shave 10 years off the mortgage,” she says.
LUMP SUM REPAYMENTS
People can also attack their loan faster by making lump sum repayments whenever they can.
Charman says tax returns, work bonuses or inheritance money can all be pumped straight into the mortgage to help reduce interest.
“On a $ 300,000 mortgage, one lump sum payment of $ 5000, made five years into the loan, would save $ 15,681 in interest and reduce the term by 10 months,” she says.
“While it’s tempting to spend cash windfalls, people should try to stay focused on the main prize, that is to be debt free sooner.”
Brontie Chambers, manager of products and member value at Community CPS Australia, says even $ 5 extra each week can save you thousands of dollars in interest over the life of the loan and reduce your home loan term.
“However, make sure your loan allows you to make additional repayments without penalty,” she says. “Fixed-rate and basic (or ‘no-frills’ loans) often have restrictions on extra repayments or charge a fee for the privilege.”
KEEP YOUR SAVINGS IN AN OFFSET ACCOUNT
Since the global financial crisis, Australians have started saving again. While many people choose to park cash in high-interest online accounts or term deposits, it may be better to save in a 100 per cent mortgage offset account.
Any money in the offset account will be working to reduce interest and pay the loan off faster.
Another advantage of mortgage offset accounts is the cash can be easily accessed if necessary.
CONSOLIDATE YOUR DEBTS
You could can end up paying less interest because home loan interest rates are often much lower than personal loan, credit card and store account rates.
Chambers says that by reducing your monthly repayments into just one home loan repayment, you could reduce your monthly commitments so that you have extra cash available to make additional repayments off your home loan.
“However, this option requires discipline around future use of credit cards and store accounts, such as reducing limits or closing the account,” she says.
SWITCH CAREFULLY
Home loan exit fees have been abolished on all mortgages taken out from July 1, 2011, making it easier for consumers to shop around for a better deal.
However, people with loans taken out before this date need to carefully consider the costs associated with moving a mortgage.
There can be numerous exit and set-up charges which include early termination fees, application fees, discharge and registration fees, mortgage insurance and valuation fees.
Before making the switch, it’s important to check whether all these costs will outweigh the potential savings from having a lower interest rate, and how long it will take to break even.
Edwards Marshall Financial Solutions manager Grant Edwards says one of the biggest mortgage-busting tips is to make sure that your interest rate and bank fees are competitive.
Reduce or stop using your credit cards it’s too easy to spend other people’s money. Any reduction in discretionary spending will reduce credit card repayments and the money saved can then be allocated to increased mortgage repayments.
“Don’t spend your tax refund, pay it off your mortgage. Make sure your gas, electricity, phone and internet providers are the best deals you can get,” Edwards says.
“Allocate whatever you can save on these costs to increasing your mortgage repayment. If you’re offered overtime or a second/part-time job, consider taking it and allocate the increased income to reduce your mortgage.
“Even if it might not seem like much, every extra dollar you pay off your mortgage goes off the principal, which is the real driver to mortgage reduction. For example, a 10 per cent increase in mortgage repayments will reduce the term of the mortgage by 20 per cent.”
LOW MORTGAGE RATE AND INTEREST RATE
Make sure you have the best interest rate you can find. Most home loan mortgage rates should be offered at between 7 and 8 per cent interest. If you are higher, refinance now. Keep track of every penny that you spend for a month or two and you’ll be amazed at how much of it is frivolous.
PLAN AHEAD
It is a good idea to factor in further rises in interest rates and, if possible, start making contributions at the higher rate. It will ease the stress when repayments do increase and will also put you ahead of the scheduled loan term.
Alternatively, if rates decrease you should keep your repayments at the higher amount to enable you to pay off your loan sooner.
Source: News.com.au
Like to know more … simply download our free report and video series and learn how to correctly set up your bank accounts and link them the right way…
Any questions? Email me at andrew@thehomeloanadvisory.com.au , we’re here to help …
Regards,
Andrew Krauksts -
Property in Sydney and Melbourne run hot amid winter
SYDNEY realtors defied the gloomy winter weather, with auction clearance rates hitting a 10-month high on the weekend.
Home-buyers braved Saturday’s rain, spending $ 117.7 million on 148 properties across the city, pushing up the clearance rate to 63.5 per cent from 52.6 per cent the week before. It was the highest rate since September, The Australian reports.
The Sydney clearance rate has only topped 60 per cent on six occasions since September 11, when it hit a high of 69.5 per cent.
The Melbourne market also rose, with realtors clearing 61.7 per cent at auction on Saturday, generating $ 60.3m as 92 properties sold under the hammer.
A week earlier, 130 properties were sold, netting $ 73.3m, with a clearance rate of 55.1 per cent. Melbourne’s highest rate in the past 10 months was on October 30 last year when 72.7 per cent of properties were cleared at auction.
Real Estate Institute of Australia acting president Pamela Bennett said the upturn was due to vendors being more realistic about meeting buyers’ price expectations, as well as people’s desire to move on in life.
“It is always difficult to know all the indicators, but the market has been quiet and low for a while and it gets to a point where people want to move on with their life; they see what they like and they want to buy,” Ms Bennett said.
Source: news.com.au
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Lenders slash fixed rates
In a bid to ramp up their competitive presence in the mortgage space, lenders have slashed their fixed rate products to all new lows.
According to new data from RateCity, the new average three year fixed mortgage rate is now 7.35 per cent – 3 basis points lower than 1 July 2011 and just 5 basis points above the average standard variable rate.
Some of the most recent lenders to have dropped their fixed rates include Citibank, which yesterday lowered its three year fixed rate 33 basis points to 6.99 per cent.
Last week, ANZ also lowered its three year fixed rate, cutting 5 basis points to take its new rate to 7.19 per cent.
RateCity’s chief executive officer Damian Smith said the gap between the average three year fixed rate and standard variable rate hasn’t been this tight for at least the past two years.
“Some fixed home loan rates have actually been falling for some time. Average three year fixed rates dropped during 2010, and we’ve seen them fall by 8 basis points this year to a new low of 7.35 per cent on average,” he said.
Source: theadviser.com.au
Currently we are seeing fixed rates as low as 6.79% pa from major lenders … Please contact us for a free quote!
Regards,
Andrew Krauksts -
Westpac predicts home loan interest rate cuts
Westpac’s chief economist Bill Evans has shocked the market by forecasting a series of interest rate cuts.
Mr Evans said low consumer sentiment could force the Reserve Bank of Australia to slash the official cash rate by up to 1 per cent in 2012.
“We were all talking not long ago that rates could go up, but if the consumer remains subdued there may be interest rate reductions and if that occurs that would be a very strong stimulus for the
consumer to save less and spend a little bit more,” he said.
But it seems not everyone shares Mr Evans’ view on rates.
Last week ANZ’s head of Australian economics and property research Ivan Colhoun said he expects the Reserve Bank to keep the official cash rate on hold at 4.75 per cent until February 2012, when it will start raising rates again.
Source: theadviser.com.au
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Reasons to refinance your home loan Now!
If you’re looking to refinance your loan, then it’s never been a better time. Here’s why.
Everybody is doing it
A recent survey from Bankwest/MFAA Home Finance Index has revealed that one in four have refinanced their mortgage in the past two years. Figures from AFG, the country’s largest mortgage broker echo this finding – the mortgage broker revealed four out of ten mortgages processed last month were for refinancing – a level not seen since December 2010.
Exit fees are out
While the exit fee ban officially came into existence 1 July, many lenders anticipated its arrival by dropping these fees in the early part of 2011. Mortgage borrowers with loan agreements made prior to the ban will still be on the hook for existing loans, but some lenders have also offered to pay fees incurred by borrowers refinancing to their own financial institution in the interim.
Banks are hungry
June mortgage data from AFG reveals that major banks increased their market share to 82% from 80% in the previous month. Driving that increase is the increased number of borrowers looking to take advantage of new offers.
ANZ recently announced a $ 1,000 offer towards the cost of switching your home loan to its Simplicity Plus or Breakfree Package mortgages. The offer includes a waiver on the application fee for Simplicity Plus, which saves customers $ 600, and a $ 375 waiver on the Breakfree Package fee (for the first year only). ANZ also reduced rates on its Breakfree standard variable rate loan by 80bps and 15 bps on fixed rates until the end of September.
CBA also cut rates on its recently launched “no fee” home loan – shaving it down from the already discounted rate of 7.24% to 7.11%. Meanwhile, NAB is continuing its “break-up” campaign – offering to pay fees incurred by borrowers if they make the switch and giving them a cheaper interest rate. Westpac has announced cuts to its fixed rates on Home and Investment Property Loan for two to 12 years. The two- and three-year fixed rate products will drop by 20 bps, while the four- to 12-year products have been cut by 10 bps.
While there are some great deals around, borrowers should think carefully before refinancing to another lender for a cheaper rate. Sometimes you can get just as sweet a deal by negotiating with your current lender. As well, rate is but one part of a good home loan – you’ve got to also consider loan features, repayments and accessibility. In addition, when setting up a new loan you could be looking at paying application fees, lenders mortgage insurance, registration fees and account fees.
Make a sound decision based on both your short and long term needs by going over costs, risks and benefits.
Source: yipmag.com.au
Simply click on the Initial Consult button and request a free quote today…
Andrew Krauksts
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Rents to remain flat
Rental prices have stagnated in capital cities, an Australian Property Monitors report shows.
Echoing findings of NAB’s newest Residential Property Survey, the APM Rental Price Series Quarterly Report has found rental prices remained flat across most capital cities. Rental prices for units rose by a marginal 0.3 % over the quarter, while rental prices for houses fell 0.2 %. APM senior economist Andrew Wilson said reductions in buyer activity have not resulted in the rental increases which were expected to follow, a result he put down to cost of living increases. He commented that the trend of flat rental growth was expected to continue.
“The good news for renters is the flat growth in rental prices will continue in most capital cities, as an expected increase in buyer activity will take the pressure off the rental market by decreasing competition for available rental properties and motivating investors to re-enter the market,” he said.
Source: brokernews.com.au
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CBA to launch offset account!
The Commonwealth Bank of Australia will move to strengthen its product suite in the near future with a fully functional transactional offset account.
Speaking to The Adviser, CBA’s executive general manager, third party and mobile banking Kathy Cummings said the bank was currently replacing its core technology platform.
MsCummings said the new platform will allow the bank to develop more innovative product solutions including an offset account.
“The Commonwealth Bank has been undergoing a replacement of its core technology platform which has already led to the introduction of ‘real time’ banking,” Ms Cummings said.
“We are now transitioning business banking onto the new platform and, in late 2012, we will be moving our retail lending products on to the platform. This will enhance our ability to develop innovative products including a fully functional transactional offset account.”
Ms Cummings said the lender’s broker partners had long been asking for a transactional offset account and the bank was more than happy to deliver on this.
“I always get asked at PD days when we will launch an offset account and now I can say ‘very soon’.”
Ms Cummings said she hoped the transactional offset account would complete CBA’s overall service proposition.
Source: theadviser.com.au
In the past CBA have offered an offset account called MISA (Mortgage Interest Saver Account). The challenge with their previous offset account hindered people in paying their mortgage out of their offset account, and the only way you could use the offset account was by making transfers via internet banking. This made it extremely difficult to use in an effective manner.
This change will make it a lot easier now to apply our rapid mortgage reduction strategies. For our entry level rapid mortgage reduction strategy and how to find the best home loan, download our free report. Simply enter your details on the right and instantly download our free report and video series.
Regards,
Andrew Krauksts -
Have you got the right car insurance?
CONSUMERS are being bombarded with advertisements for cheap car insurance, with one company even offering to give you cash if they can’t give you the cheapest price – but short-term savings may prove costly for some
“Price is obviously important for people but we strongly recommend that people look at a range of features alongside price and don’t make their decision on price alone,” RateCity chief executive Damian Smith says.
Smith says the cheapest insurance products tend to suit drivers deemed to be in the lowest risk categories.
“The low-cost policies are more appealing to those with lower-value cars who probably aren’t driving as much and for whom the car is less critical,” he says.
Consumers could save between $ 200 and $ 300 by switching to the cheapest deals available, but some features may be missing, Smith says.
This includes things such as the option of a replacement car if yours is damaged which, for those who rely on their car daily for work or other responsibilities, is vital.Smith says eliminating the option of a hire car in a policy can reduce the premiums by as much as $ 100 a year.
Smith says among the cheapest insurers are Budget Direct, Youi, Real Insurance and Progressive Direct.
“For some kinds of drivers in some situations, each of those four will probably have lower prices,” he says.
“But what you need to do is compare those features and make sure that the whole of the policy is right for you.”
RateCity’s website allows consumers to compare car insurance quotes but the two major insurers, IAG and Suncorp, refuse to allow their data to be used on comparison sites. Quotes are usually available from their own websites.
AAMI, which is owned by Suncorp, says people should take great care when buying any insurance product and question the details of the policy.
A spokesman for AAMI says people should ask what the size of the excess is, because a larger excess usually means a cheaper overall price.
He says people should also check if the policy includes windscreen cover, how much cover you have if people break into your car and steal valuables, do their repairers use only genuine parts, and will emergency costs be covered if you break down in a remote location.
“Perhaps most importantly, accidents can be stressful experiences, so it’s really important to reduce the stress of those situations by managing the process for our customers and keeping them informed at all times.”
Source: news.com.au
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REVEALED: What Home Lenders Really Want To Know About You
ASK people in the street what you need to get a home loan and they will probably tell you: a deposit and a full-time job.
But today’s lenders are looking for a lot more than that, putting the complete financial history of an aspiring home-buyer under the microscope to determine whether they are ever going to get their money back. Credit cards, personal loans, HECS/HELP debts, rental history: all these payments are pored over by lenders before they give a `”yes” or ‘no”.? According to the financial comparison website ratecity.com.au, the number of lenders requiring only a 3 per cent deposit for a home loan has doubled to 5 per cent since January.
Despite this, lenders are still keen to avoid the kind of risky loans that precipitated the global financial crisis and comply with new responsible lending practices.
Redfern homeowner Kai Lebens, who was approved for a $ 450,000 loan for his two-bedroom unit last year, says his stepfather gave him sound financial advice.“He told me to not, under any circumstances, take up the banks’ offers of increasing my credit-card limit,” he says.
“They will assume that if you have a $ 30,000 limit you will spend that after you’ve taken out a loan. They consider the worst-case scenario.”
Lebens never maxes out his credit card. He pays his bills on time and paid off his HECS when he had the chance. Earning $ 130,000 a year in a steady job worked in his favour as well. ??A credit-risk manager at one of the big four banks, who asks to remain anonymous, says an applicant’s credit scores — obtained through credit agency Veda Advantage — is one of the biggest determinants of whether they will offer a home loan.
”We also discriminate on postcodes as well, with more remote postcodes and certain areas presenting a higher risk for the bank,” he says. ”We also look at bills that haven’t been paid on time and see if there’s a pattern. ”??With age, he says, even a 70-year-old would probably have a loan approved if they had a good credit history.Other factors considered are whether applicants have been in steady jobs for longer than six months and their assets and liabilities.
Professional mortgage adviser Simon Orbell says potential home-loan borrowers need to take action now to ensure there are no skeletons lurking in their financial closets.“Get a copy of your credit report from Veda Advantage (mycreditfile.com.au) if you suspect there may be some previous misdemeanours on your file,” he says.”Knowing about them up front allows you to overcome any issues that may arise in the credit-application process. Take up a My Veda Alert subscription from the website to maintain and take measures to keep your credit file clear. ”Orbell says the subscription also protects against identity theft. “Also, make sure you notify all current or potential creditors — company, personal or otherwise — of changes to your address details to ensure that bills don’t get lost,” he says. ”Finally, and most obviously, ensure all bills are paid on time and set up direct debits for bill payments wherever possible to automate this process to keep your credit file as clean and tidy as possible.
”But just because would-be property buyers get knocked back from one lender, that doesn’t mean they should not shop around.??There are more than 100 banks, credit unions and mortgage companies competing.
TIPS FOR A CLEAN CREDIT FILE:
* Understand where your money is going and pay on time.
* Pay bills and minimum repayments before or on time to help prevent unwanted fees.
* Have a budget and stick to it. Lost motivation? Consider what life would be like if you
couldn’t apply for a home loan or other credit in years to come.
* Just say no. Credit providers may tempt you to increase your limit. Resist this unless absolutely necessary.
* Pay more than the minimum owed every month on your credit card. This reduces the interest paid
and looks better to lenders.Source: News.com.au
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Interest Rates Must Rise
* Inflation on way up – RBA
* July data holds the key
* Rates likely to rise in August
RESERVE Bank governor Glenn Stevens has issued a stark warning that interest rates must rise, despite signs that many Australian households are struggling to make ends meet.
The market interpreted the central bank chief’s strong words as dramatically increasing the likelihood of an August interest rate rise, sending the Australian dollar surging more than US0.8c.In his first public appearance in two months, Mr Stevens said yesterday the Reserve Bank’s latest analysis showed inflation was more likely to rise than fall in the next few years.
“This central expectation – subject to all the usual uncertainties inherent in forecasting – suggests, as we said at the time, that ‘further tightening of monetary policy is likely to be required at some point for inflation to remain consistent with the 2-3 per cent medium target’,” he said in an address to the Economic Society of Australia in Brisbane.Mr Stevens hinted the Reserve Bank would consider an interest rate increase in August after official inflation data for the three months ended June 30 was released next month.
“As far as prices are concerned, we will get another comprehensive round of data in late July,” he said.Answering questions after his speech, Mr Stevens also said the Reserve Bank would look beyond the one-off impact of the carbon tax on inflation when setting monetary policy, suggesting the new regime would not push up interest rates.
The Australian dollar soared from a low of $US1.0634 in the hours before Mr Stevens’ speech, to a high of $US1.0716 during his address as traders punted on the chances of further interest rate hikes.
The RBA has kept the official cash rate at 4.75 per cent since November following signs of a slowdown in the Australian housing market.
Economists expect the central bank to start tightening monetary policy again in the coming months to rein in inflation, or price increases for consumer goods and services, flowing from the mining boom.
Reflecting the prevailing view among economists, Stephen Walters from JP Morgan forecast the Reserve Bank was most likely to raise interest rates in August, but stressed that every meeting was “live” from this point.
“Which part of this narrative is not clear? The Reserve Bank retains a very clear bias to tighten policy,” he said.
In the latest sign that households outside the mining boom are doing it tough in the two-speed economy, the Westpac-Melbourne Institute index of consumer sentiment hit a two-year low this month.
Source: News.com.au
Now is an important time to assess your budget and see what extra funds you can contribute to your home loan repayments. Once this is established you can work out how much your buffer will cover in interest rate rises. If you are unable to cover 2% to 3% of home loan rate increases it could be time to consider a fixed rate strategy e.g. 60% fixed, 40% variable.
Please navigate to our calculator section and use our budget calculator to assist you. Need more help and certainty, request a consult today to explore your options.
Warm regards,
Andrew Krauksts
How To Find The Best Rate And Save $160,700 In Interest* Off Your Home Loan ... guaranteed!
Home Loan Advisory
