'Mortgage Brokers'

What a great start to the new year if you are looking to buy your first home or investment property!  Prices have progressively been rising along Australia’s eastern seaboard and lenders are favoring borrowers who can verify their income and have stable employment.

If you are looking to buy your first home, want to stop paying rent or want to reduce your taxable income and purchase an investment property, I invite you to call us for an obligation free chat to discuss:

• Any general finance questions
• The maximum loan you can comfortably borrow
• What the monthly repayments would be
• The financial difference between rental payments and mortgage payments
• Any cash variance from rental income and mortgage repayments

It’s the perfect time to assess your options and consider getting into the property market - as it has been quite a while since properties have dropped in value and there are some wonderful loans currently available.

Tip 1.

Don’t pay ‘professional package’ annual fees, ranging from $340 - $390 every year for a slightly lower interest rate. Many loans exist which offer the same interest rates, similar features but without the annual fees. e.g. ING, Bankwest, Citibank, etc.

Tip 2.

If you are with a large bank, call us to ensure you are structured to receive the maximum discounts you are entitled to from that bank. Most people do not receive all discounts they may be eligible for from their existing lender.

Tip 3.

If your existing lender is looking shaky OR wants to exit the Residential lending market (e.g. Macquarie bank) OR has removed loan features due to funding issues, then it’s a great time to renegotiate the terms of your agreement and possibly have waived exit fees.

Tip 4.

Don’t cross securitise your properties with ANY lender as it removes flexibility and has numerous other ‘downsides’.

Tip 5.

Investigate the opportunities which now exist for your self managed superannuation fund to borrow and buy property.

Harry Pontikis

Chocolate Money
P:1300 137 539
M:0411 258 058
harry@chocolatemoney.com.au

Speak to your mortgage broker to get an in-depth understanding of your mortgage, its features and the way to use them to your benefit.

1.    Know how mortgages work

The important thing to understand about home loans is that interest is calculated on the daily balance and charged to the loan account monthly in arrears. Reduce the daily balance by ‘parking’ as much of your funds as possible on your home loan, will save in the long run on both interest paid and the term of your loan.
- ensure your mortgage does not have redraw fees, penalties or minimum limits to withdraw.

2.    Make more frequent repayments.

If you have an offset facility – use it.  If you don’t have one or don’t want to try using it, make fortnightly or weekly loan payments.

3.    Pick the right home loan

Picking ‘the cheapest’ home loan may not be the best home loan for you.  Things are usually cheap for a reason.  Get advice and guidance as to which loan best suits your needs.

4.    Leave money on your loan as long as possible

You may have peace of mind paying off all your bills as soon as they are due, but consider leaving the money on your loan until the last day the bills are due.  Alternatively, organise direct debits to come from your loan to pay the reoccurring bills.

5.    Pay off your debts - consolidate only if you have to survive!

Consolidating all your debts onto your home loan often just means stretching short term debt over a longer term.  Even at a cheaper interest rate, it costs you more in the long run.  Your mantra should be ‘pay off all your non deductible debt asap.’

Call Chocolate Money for assistance on 1300 137 539 or info@chocolatemoney.com.au

The last 6 months has been uncertain due to the sub prime issues and the credit crunch. This has meant lending had started to become more difficult to acquire for Builders / Developers and the self employed in general.

Interest rates have been going up due to the inflationary pressures faced by our economy but the flip side to this is that our economy was still going strong.

Times have changed significantly now and the forecast for the next 6 months is very different; interest rates will start coming down from the Reserve Bank, but the self employed will probably not feel any easing in their personal or business borrowings.

There will be a further wave of credit rationing in Australia, with people in the building industry being adversely singled out even further by lenders. Lenders will be recalling business overdrafts which are not being used, or are not being used appropriately. Banks will continue to ‘call in development loans’ which are not adhering strictly to the terms of the contract, there will be a big increase in foreclosures. Finally, there will be a flood of semi completed development projects on the market due to the changed lending conditions.

Lenders and finance brokers will continue to go out of business or consolidate, meaning less choice and support will be available for people to obtain finance. This is the single most compelling reason to align yourself to a finance broker who specialises in the building and finance industry and is big enough to withstand the oncoming financial turmoil, and will be around to assist you with your lending requirements – an organisation like MBA Finance.

Harry Pontikis, Director MBA Finance. hpontikis@mbav.com.au 0411 258 058

Q. What is it meant to do?

A. It’s an attempt to provide a tax - effective way to help save a deposit for first home buyers.

Q. Who is eligible?

A. Australian Residents aged from 18 – 64 who haven’t previously purchased or built their first home.

Q. How does it work?

A. You’ll have to make an initial contribution of at least $1,000 and then be able to contribute up to $10,000 per year.

The Federal Government will then make an additional contribution , paid directly into the account, that will vary from 15 to 30% of contributions, depending on the account holder’s marginal tax rate.

Q. How will it be taxed?

A. There is no tax on contributions. Interest earned will be taxed at 15% and withdrawals will be tax free if the money is used to build or buy a first home to live in.

Q. What are the terms and conditions of this scheme?

A. You have to save at least $1,000 per year and leave your money in the account for at least 4 years.

When it’s time to purchase your home, you’ll be able to withdraw the full amount and close the account.

Q. What if your circumstances change and you don’t want to use the money to purchase or build your first home?

A. You can transfer it into your superannuation
you can access the money in case of hardship, terminal illness or on compassionate grounds. But you’ll have to transfer the balance into your super and use the early release provisions that apply for super funds.

An Example:
An average income couple that can save 10% of their income each year will be able to to save a deposit of $85,000 ‘after 5 years of discipled savings.”

The Treasurer Wayne Swan also estimates that people would save up to $14,000 more that they would have otherwise saved in the above example.

First Home Saver Accounts
Maximum Annual government contributions

*based on 2008 – 2009 tax scales