It’s been a very unusual couple of weeks as we all come to terms with the current COVID-19 situation.
With many people losing their jobs or working from home and social distancing, none of us know how long this will go on for.
There can be a huge amount of anxiety caused by the ongoing uncertainty and it’s important to check in with each other to support each everyone in this difficult time.
As far as paying your Mortgage, there is help on offer. All lenders have come up with support and ‘hardship’ arrangements and it’s important to know what these mean and how it may impact you now and in the future.
Most lenders are offering at least three months where repayments are not required simply by contacting them and making them aware of your situation. Some are offering a further three months after a check in point at the three month mark.
Do keep in mind when taking up these offers, that a 'repayment holiday' does not mean that your interest has been waived. The repayments (interest) are simply being deferred. The interest will be capitalised – i.e. be added to the loan. At the end of the deferment period either the loan term will be extended (e.g. from 30 years to 30 years and 3 months) or your repayments will increase to ensure the loan is repaid in its original loan term. It’s not something you would just do for the sake of it as it could add interest to your total loan cost.
But if you are struggling to make your repayments or know you will be in the future, do not be afraid to contact your lender and ask for help. I can help you prepare for the call.
Rest assured that these arrangements are NOT reported as defaults and will not impact your borrower’s credit score or your future lending abilities.
Some other options available to you are:
1. If you have funds in redraw or Offset accounts, you could consider using these up these funds first.
2. If you still do have a job, you could consider refinancing to take advantage of cheaper rates (there are some very competitive fixed rate on offer at the moment), a new interest only term or one of the current cash back rebates (up to $4,000) available.
3. Access your superannuation. Details of this below.
Australians suffering financial hardship during the coronavirus crisis will be able to access up to $10,000 of their superannuation early. They will be able to access up to $10,000 this financial year and $10,000 next financial year. Eligible people will be able to apply to access their super accounts through MyGov before July 1 2020. After that, they will be able to access another $10,000 throughout the next three months. The withdrawals from superannuation will be tax free - and available to people on benefits and to sole traders and casuals who have lost 20 per cent or more in working hours or income as a result of the coronavirus crisis.
You can seek to access government support first and only access your Super as a last resort. Using Super as “free money” now could severely impact future earning capacity of your fund.
But sometimes you do not have a choice and you need to do whatever it is that helps you get through this difficult time.
Here at Volare Home Loans we hope that you, your family and friends look after yourselves during this challenging time. Keep yourself safe and healthy and we will get through this.
Please give me a call if you would like to discuss any of this further or if you have any questions. Take care and be safe.
Catherine Thompson, Principal, Volare Home Loans
This is a crisis that no one really knows how long will last or how big it will get. Unfortunately, none of us have a crystal ball to be able to accurately predict the future.
We don't know how the Coronavirus health crisis will pan out globally. We also can’t be exactly sure how it will affect the Australian economy or our property market until we see an end to the crisis.
While currently Coronavirus is alarming equity markets the recent RBA interest rate cut seems to be working for the property market. We are yet to see if this a temporary or longer term position but at the moment demand surges amid strong market conditions, especially for first home buyers.
While circumstances, in this environment, can change daily and may be changing for many of you - your goals should always stay the same. Stick with focusing on what is important to you in the long run. If that is owning your own home then be ready. And in doing this I would always recommend to continue to focus on logic and sound decision making.
Start with the right mindset and approach and take emotion out of the equation. Do your homework, get a pre-approval so you are ready to pounce when do you do find the right property and the time is right.
So what are the key things to look for when buying a property?
1. Location, location, location. How far you’re willing to travel to get to work, family friends? How good are the local schools, shopping centers and other public facilities like parks and sporting grounds? How convenient is public transport? Is it in a growth area?
2. Neighbourhood. What’s the neighbourhood like? Take a walk around it and find out whether the neighbourhood is family friendly or not. Check out the neighbourhood at different times of the day and night. Find out what facilities the area has by asking around.
3. Schools or Universities. Homes near good education facilities often are very highly sought after. Check that there are good schools close by that are easy enough to get to. This could also make a big difference in resale value.
4. Public Transport and other Infrastructure
Is the location well-connected by tram, freeway or train networks? Are there amenities such as street lighting, telephone, internet connectivity and is access to parks easily available?
Whether this is parks, playgrounds, sporting fuels, dog parks or cafe's and restaurants think about what’s important to you and your lifestyle. You are hopefully going to be there a while so you may as well enjoy it!
And then when you think you have found the perfect place ALWAYS get an inspection done. A building and pest inspection is an absolute must. Definitely get one of these done before signing anything. Do not ever rely on how “pretty” the property looks. Get the experts to check its maintenance, repairs and renovations in detail. The total expense to fix things after you’ve bought can be significant.
Just remember it’s never too early to start this home buying discussion with me - even if it is by Zoom.
If you’d like a copy of my Guide to Buying a Home please do not hesitate to drop me an email or give me a call. And stay safe, getting through this is a team sport not a one person race.
This article in the AFR highlights what we all suspect. That the more loyal you are to a bank the more you will get charged. And it is so wrong! Is it complacency or just not knowing where to start? Thanks AFR, a good prompt for us all to take action by refinancing or renegotiating for a better deal.
1. Stop paying for something you don’t need
Most of us have one direct debit that comes off the credit card that we just don’t need to pay for anymore.
We used to go to the gym and that’s fallen by the wayside or a channel on pay TV that we never watch. See if you can find one thing that you can give the boot.
A small change to some of your bigger expenses can make a huge difference to your cash flow. By checking out better deals on your mortgage (let me do this for you) you might be able to save even a quarter of a percent. On a $400,000 mortgage that saves you $1,000 a year. By knowing what other lenders will offer you can even approach your existing bank and ask them to give you a discount to stop you moving, might save you both money and hassle.
Choice’s new research has estimated that switching your shopping from Woolworths and Coles to Aldi can save you 50% off your grocery bill. A typical family can easily save $100 a week on the grocery bill, a whopping $5,000 a year. As a fairly passionate Aldi shopper for the past couple of years I have been really impressed by quality of the meat and veges, not just the packaged goods. It takes a while to get used to their range and for particular specialty or branded items you might need to duck into a rival to complete the list every now and then, but the range at Aldi is getting better and better and I’m finding much less reason to shop at the big two these days.
For me it’s time to revisit my electricity deals. Since I last did this the Victorian State Government has introduced a couple of really nifty measures. I plan on claiming my $50 bonus when I use the independent comparison tool to find out the best deal for me. Furthermore I’m fairly impressed at their new Default Offering which is mandating a fairer price for those consumers who have been a bit disengaged and may not be getting a good deal on their electricity prices. If you live in Victoria you might like to check out the Victorian State Government’s programs including the $50 rebate and comparison tool.
3. Making the most of your tax refund
If you are lucky enough to get a tax return this year, what are you going to do with it? If you’re like most of us it either goes on a bit of a splurge or disappears into the vacuum of your bank account never to be seen again. How about using it a little more constructively this year? You don’t need to be a complete miser though. How about agreeing now that half is you to enjoy now and half later. When you’ve worked out how much it’s going to be, be disciplined about both the spending and the saving. Make sure you enjoy your ‘now half’ whether it’s the size of a dinner or a new handbag or only stretches to that book you’ve been promising yourself or a ticket to the movies. Then make sure that you deliver on your commitment to enjoying the ‘later half’. You can make an extra contribution to your super or into the part of your mortgage you can’t easily get your hands on.
While your doing you your tax return this year keep one eye on what you could do better for the next year. Is it keeping receipts when you donate money? Or keeping a log bog for your car mileage? What can you do now to make next year’s tax time easier and more rewarding? So you’ll have more money for now and later next year!
Thinking of putting your hand up at an Auction any time soon?
Deposit Power have created this handy guide of tips when bidding at an Auction. Click on the picture to open the guide.
BUT my key advice to you is - before you even think of putting in an offer or bidding, come and talk to me. I can help you work out how much you can comfortably afford to lend and which lender will suit your needs best.
I can even organise a pre-approval so you can confidently bid without losing your deposit if something goes wrong and your loan is not approved.
Let’s start with the costs involved
While the costs aren’t significant, they do exist. Most lenders will have a Discharge fee which is typically around $300-$350. Then there are Government fees of around $250.
But that’s not all. There could be application fees (but not always) for the new lender and these generally range from $0-$600. Application fees often cover the valuation, legal fees and settlement fees.
So, in total you need to be better off by at least $600 plus any new application fee amount to make a change worthwhile.
Unfortunately, many lenders increase your interest rates the longer you stay with them. i.e. NEW customers are able to take advantage of ‘special’ rates that you can’t access.
So let’s look at some examples to see at what point it does become worthwhile changing your existing lender:
Repayments on an average $400k loan.
Let's look at monthly repayments for a loan with a 3.5% interest rate as a minimum. I would be horrified to think that anyone is paying 5% (unless extenuating circumstances like a low credit score) so let’s use that as a maximum and go from there.
- The new interest rate needs to be at least 0.22% better than what you are currently paying, if you want to be better off after one year,
- The new interest rate only needs to be at least 0.11% lower if you are happy to be ahead after a two year period.
If your loan size is $800k, the savings double so you would be in a better position financially in just one year if the new interest rate was 0.11% lower. I think you may be getting the picture.
In most cases achieving a 0.22% better rate should be possible but of course it depends on your individual situation and lender preference. There are often ‘specials’ running to encourage you to move lenders and as long as you do your figures (or let me run them for you) you could be better off in a very short period of time.
For some of my clients, I have reduced their interest rates by up to 0.8%. With interest rate decreases of that level you could save a whopping $67k on the life of the loan. So in these cases if would be crazy NOT to refinance.
But before you jump on the phone and call me to refinance, give your existing lender a call. Tell them that you are looking at moving and ask them if can they do any better than your current rate? If they can – great you just saved money by making one phone call. If they won’t budge at least you know where you stand. Then give me call. I’m a big believer of “if you don’t ask you don’t get”.
How complicated is it?
Well that depends on many things but very simply if your income, through all sources are more than the loan repayments and expenses combined and you have a good credit record then you should be fine. Before any submission is made to a lender, serviceability is calculated and all evidence is completed reviewed to ensure your loan will be approved before it is submitted to the lender. You don’t want to have any unnecessary credit inquires on your file as every credit inquiry you make impacts your credit score and may not be looked upon favorably by lenders.
What do I need to supply to apply to refinance?
- Your two latest payslips (if PAYG) or two years Tax Returns and Notice of Assessments (if self-employed)
- Six months of statements for the loan you are refinancing AND debit you are consolidating (if applicable)
- Three months of transaction statements so that your expenses can be reviewed and confirmed to ensure you are living within your means. If you don’t think you are, cut back on the uber eats and come back and see me in three months.
You will also need to be ID’ed and provide some information about yourself, your situation and what your aims are now and in the future. I will then complete the applications and any other paperwork required.
The whole process takes around 4-6 weeks depending on the lender. Some lenders have a process where the refinance can occur faster through paying out the lender you are leaving first before they transfer the Mortgage as some lenders can stretch this process out causing delays and frustration.
So it really isn't as complicated or expensive as you may think. If you have any specific questions don’t hesitate to give me a call. Always happy to have a coffee and a chat and see if I can save you money which is way better in your pocket than the banks!
Catherine Thompson is a credit representative 508141 of BLSSA Pty Ltd ACN 117 651 760 (Australian Credit Licence 391237). The information contained in this blog is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice
Message from CAtherine
Occasionally I come across an interesting article to do with Home Loans. I thought I'd share some of these with you here.