Have You Considered Reviewing Your Current Loan?

Have You Considered Reviewing Your Current Loan?

There has never been a better time than now to capitalise on the low-interest rates. This is not just for first-time buyers racing in to get their initial loan to buy their first home or investment property. This is also the right time for existing mortgage holders to capitalise on lender competition and super low-interest rates.

Despite interest rates dropping to historic lows, less than 10% of Australia’s mortgage holders have refinanced. That means millions of mortgage holders are paying extra interest inadvertently. About half of surveyed home loan holders are unaware of their home loan rate.

Loan Market Lower North Shore works closely with PrimeAdvisory and has recently come out with the Mortgage Health Check. A 3-minute survey that can help you achieve considerable savings. It’s a new value-added repricing tool that allows us to reprice your current loan with your current lender.

“How did we help our client Alex save $10,560 in interest on his home loan? Alex, like most of us, hadn’t thought about reviewing his loan. He completed the mortgage health check, which allowed us to approach his bank on his behalf. Within 48 hours, we had negotiated a call from his bank to reduce his rate from 3.11% to 2.58%, saving him $4,240 pa in interest. But we didn’t stop there. We showed him an offer from another lender at 2.39%, which saved him a further $6,320 pa in interest. Alex was indeed very pleased, and we were delighted we could help him too”.

If you are interested in seeing how we can help you achieve considerable savings, click here https://mortgagehealthcheck.net/?utm_source=Prime&utm_medium=Newsletter&utm_campaign=March

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7 Ways To Turn The Tables On Your Mortgage! #Savings

7 Ways To Turn The Tables On Your Mortgage! #Savings

Why is now a great time to refinance your mortgage?

Because:

  • Australia has the third most expensive housing market in the world.
  • As many as 83% of people are paying too much on their mortgages.
  • Even though interest rates have fallen to record lows, a whopping 94% of mortgage holders have not refinanced their loan in the past 12 months – potentially missing out on saving thousands of dollars.
  • Research shows that 38.8% of all mortgage holders are experiencing mortgage stress.

Surely there’s some GOOD news?

The short answer is YES. There are some straightforward steps you can take to turn the tables, save thousands and take years off your loan…saving $33,222* in the process.

* Calculation based on $400,000 mortgage over 25 year term at 3.8% interest per annum on a variable rate, P&I. This calculation is not an offer of credit and does not take into account your personal circumstances. It is intended for use as a guide only. It is not intended to be relied on for the purpose of making a decision whether to apply for finance. It provides an estimate of the repayment amount based on the proposed borrowed amount. Other fees and charges may apply.

Negotiate a better interest rate

Studies show that 82% of Australian population don’t know their current interest rate. And yet, with your mortgage likely taking up at least one quarter of your monthly income, even the slightest change in your rate could make a huge difference to your monthly disposable income.

For example, for every $100,000 you borrow, even a 0.1% discount will save you roughly $100 per annum in interest. Maybe that doesn’t sound like much, but let’s take a look at the maths…

Let’s say you have a $400,000 loan with a repayment term of 25 years. And let’s say you can save 0.5% on your interest rate, going from 3.8% to 3.3%… that means you would save $32,273 over the life of your loan. What could you do with $32,273 back in your pocket over the course of your loan? That’s family holidays, a new car, helping the kids out, maybe installing that pool you’ve dreamt of. And it’s definitely enough to take the pressure down.

Shift from monthly to fortnightly payments

Many people pay their mortgage monthly – so that’s 12 payments a year. But if you can shift from 12 monthly payments to 26 fortnightly, you can make BIG savings over the life of your loan.

Here’s why… let’s say your monthly mortgage payment is $2,500. Over 12 months that’s $30,000. Now let’s look at what that looks like if you paid half your monthly payment every 2 weeks instead. That means you would pay $1,250 over 26 fortnights or $32,500. That’s finding a way to get $2,500 more off your loan each year and because you are spreading it out over the year, you don’t notice it as much (equates to an extra $48 a week).

BUT the cool thing this does to your mortgage is that every cent you pay above and beyond your set repayments goes directly to paying off your principal loan amount – and that’s the amount your interest is calculated on. So, the sooner you reduce your principal, the sooner your interest payments come down… and the sooner you get your mortgage paid off!

In fact, simply by shifting from monthly to fortnightly you could take 3 years and 1 month off your mortgage and put a whopping $30,160 back in your pocket in saved interest payments.*

*( Based on a $400,000 loan over 25 years at 3.8% p.a interest rate.)

Small sacrifices now = big wins later

When you first get your mortgage, those payments can look quite intimidating. But then, after a couple of years, maybe you’ve had a pay rise or two, or your business has grown. Perhaps you got that promotion you were after, or you landed your dream job with the nice bonus package you always wanted. While it’s great to enjoy those perks and the extra cash they put in your pocket, making even a small increase to your mortgage payments at those milestone moments can have a HUGE impact and really turn the tables on your mortgage.

As mentioned earlier, every cent you pay above and beyond your scheduled mortgage payment goes towards knocking down that principal amount. So, if you could find even another $100 a fortnight (that’s $50 a week) you could take another 3 years and 7 months off your mortgage AND save another $36,036*.

*(Based on a $400,000 loan over 25 years at 3.8% p.a interest rate.)

Get a mortgage offset account

When you get a standard variable loan (meaning the interest rate isn’t fixed), you usually have the option of putting your income and savings into what’s known as an offset account. That’s simply a separate savings account attached to your loan account.

As the name suggests, your offset account works in tandem with your home loan, with its balance being subtracted from the outstanding home loan principal when your daily interest charges are calculated. By adding your savings into that account and getting any income paid into that account as well, you can take a healthy bite out of the principal, simply by getting the money you already had working smarter for you.

For example, if you have a $400,000 mortgage and $20,000 in your offset savings account, you will only be charged interest on $380,000, even though your loan balance is $400,000.

Be Smart with your equity

Check if your loan offers a redraw facility that enables you to access and withdraw additional repayments you have made. If you were worried about putting extra money into your mortgage, you don’t need to be, if you have a redraw facility.

This means you can put as much money as possible into your mortgage, keeping your interest down and paying your mortgage off faster, however still redraw the money if you need it.

It’s also possible to use those funds to consolidate debts with higher interest rates such as credit cards and personal loans. Often your home loan interest rate is a fraction of other interest rates and consolidating your loans can lower your interest, freeing up income. Having this kind of flexibility can give you peace of mind and help you out when you really need to access those additional funds.

Watch out for hidden fees & negotiate

It’s always nice to be aware of all the fees included in your loan (some hidden fees can end up being costly!) and you may also want to negotiate on those fees – hard. Many lenders will reduce or remove fees such as:

  • Loan application fees
  • Loan establishment fees
  • Service fees
  • Valuation fees
  • Legal fees related to your mortgage
  • Account transaction fees
  • Exit fees

And this can equate to thousands of dollars in savings, in some cases.

Getting the data you need , when you need it

Information is power. And that means you need to be able to access clear, accurate information on your home loan wherever and whenever you want (and in a format that you want). That includes your current interest rate (if variable) and your current loan balance. Plus, you want the flexibility to be able to make changes online at any time via a mobile app or your home or office computer.

For most people, the ideal way to get this information is online. But not all online banking experiences are created equal. You need to be able to access your home loan information easily, via a simple online interface that is available for both mobile and desktop use.

And, if you are one of the 5.7 million Australians who don’t use internet banking, you need to make sure you are getting the information you need in a way that is timely and transparent.

If you have any questions, let one of our senior advisors put you in direct contact with our Lending Partner, Loan Market Lower North Shore, experts in turning the tables on your mortgage. This could be the best time you have invested all year!

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Mortgage advice from our new referral partner.

Mortgage advice from our new referral partner.

Over the years at PrimeAdvisory we have tried different structures to deliver a mortgage solution to all clients.  We have employed mortgage brokers, we have referred directly to banks and referred to third-party mortgage businesses.  After a successful trial period we are now introducing Loan Market Lower North Shore (LMLNS) as our preferred referral partner for all your mortgage needs.   

Loan Market is part of the White Family Group (who also own Ray White) and has been family owned for the past 23 years.  LMLNS is headed by Matt Clayton and his team.  Matt has been involved in the industry since 1999 and he and has team have the expertise to guide you through these interesting times and beyond.  Here is an article from them highlighting a few of the options available in the current climate.   If you do require help please don’t hesitate to call Matt on 0414 877 333. 

  

We are here to help answer all your mortgage needs.  

What’s a payment deferral?
This is also known as a mortgage holiday but don’t let the name fool you, this is no holiday. If you’ve been stood down, lost your job and cannot afford to pay mortgage repayments, you have the ability to enact a payment deferral. This is when a lender defers your repayments for a period of time. 

Every lender has their own rules and requirements on these payment deferrals. It’s important to know that at some point you will be required to pay the interest that accrued while the loan was deferred. For example, some lenders will add the amount you owe to the end of your loan and some will charge immediately after the payment deferral is off hold.  

Also, after the deferral, your balance and your repayments could be higher to make up for the interest accrued deferred repayments. 

What happens to the principal if repayments are frozen?
When a payment deferral on an existing mortgage is activated, it means that a lender will defer your required mortgage repayments for a specific period of time. Although your repayments are deferred, the interest on your loan is still calculated and added to the balance. In effect you’re paying interest on interest. 

So, when you recommence repayments your lender will recalculate your repayments so you repay the loan in the original term. This ultimately means your repayments will rise. However, there are options available to refinance after the payment deferral period, which could help to reduce repayments and increase the term of your loan, giving you a bit more flexibility.  

How do I get hardship assistance? 
First things first, while it’s important to understand what your options are in these difficult times, I urge you not to panic and spend hours on hold to your lender. Let’s look into your options first, I can help you navigate and understand what your options are during this time of financial hardship that many Australians are facing.  

Why refinance?* Is it complicated?  
There are many factors that you need to consider when looking to refinance. A few reasons you might want to refinance are:  

  • Take advantage of the recent RBA cut
    Now might be the right time to see if we can find a more competitive rate that is suited to your current needs. A lower interest rate could result in lower interest costs and might just save you a heap of savings over the life of your loan. 
  • After some new loan features?
    There could be a bundle of features that could give you more power over your finances when you refinance your mortgage. It might be the new rates that could save you money or the option to repay your loan faster without having to pay penalty charges. Some loans won’t charge you a monthly account fee or a fee for withdrawing money when you need it. 
  • Keen to tap into your home equity?*
    If you need some extra funds but don’t want to dip into your emergency funds or savings account you could tap into your home equity instead. Now, the line of credit your equity can get you depends on two things – The amount you’ve repaid on your mortgage and the value of your home. The benefits? You might be able to save on costs compared to other types of loans, start your home renovation or use the extra funds to help with your current circumstances. 

Is now a good time to fix my rate?*
There is no easy answer to this question, as it depends on your situation and your financial goals. Let’s take a look at the pros and cons of fixing your rate:  

  • Pros: Fixed rates prevent the risk of your repayments increasing due to a rise in interest rates and your repayments will stay the same for a set period. 
  • Cons: Fixed rates are usually higher than variable rates, but now as rates are continuing to decrease, there could be associated fees and costs for breaking your fixed rate if you chose to refinance.  

Refinance vs payment deferral?
A common question I get asked is whether to refinance or if a payment deferral is the way to go. There are a few different options which all depend on your current situation and financial needs. I can help answer any questions you may have around this to see what the right option is for you.  

What are the options as a landlord?
Your tenants may be going through some financial hardship at the moment and may not be able to afford paying their rent, I can help:  

  • Negotiate payment deferral options for your mortgage  
  • Discuss hardship options  
  • Refinance or reprice to get a more competitive rate 
  • Outline the costs of switching and not switching  

What are the options if I’m a small business owner?  

The JobKeeper Payment, has been set up by the Australian Government to provide a temporary wage subsidy available to eligible employers. This subsidy relates to current employees who were employed by the employer on 1 March 2020.  

It will allow businesses impacted by COVID-19 to access a fortnightly wage subsidy of $1,500 for a maximum of 6 months. Generally, to qualify businesses will need to demonstrate a drop in revenue by at least 30 percent. 

Want to chat about your options? Let’s talk and I’ll see how I can help.   

Please contact Matt Clayton on +61 414 877 333 or visit their website here. 

*Disclaimer: Any refinancing/access to home equity is subject to lender imposed terms and conditions including but not limited to loan serviceability, valuations and confirmed capacity to service both any existing and revised lending arrangements. **This document has been created by Loan Market Pty Ltd (ABN 89 105 230 019, Australian Credit Licence no. 390222). It provides an overview or summary only and it should not be considered a comprehensive statement on any matter.You should before acting in reliance upon this information seek independent professional lending or taxation advice as appropriate specific to your objectives, financial circumstances or needs. Information included has been sourced from third parties and has not been independently verified. Accordingly, Loan Market Pty Ltd is not in any way responsible for nor provides any warranty express or implied as to its accuracy or relevance. 

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The effects of the Coronavirus

The effects of the Coronavirus

Since the outbreak of Coronavirus (COVID-19) on the 24th January 2020 there have been 4,027 deaths as of 10th March 2020 with 114,422 confirmed cases in 115 countries and territories. This has caused mixed results globally from a nationwide toilet paper shortage to extreme market volatility.

As the spread of the virus widens, we are seeing the effects globally, causing a lack of clarity and doubt for global investors. This is also impacting domestic businesses with supply deficiencies caused by China’s slowdown in production.  As the world’s manufacturing superpower accounting for 29% of production globally this was bound to have an impact.

We have seen the stock markets fall 14.98% year-to-date (at the market close on 9 March 2020) with GDP expected to slow by billions of dollars. This also encouraged the Reserve Bank of Australia (RBA) to announce its decision on the official cash rate for March slashing an already historically low interest rate by 25 basis points to 0.5%. AMP’s Capital chief economist Shane Oliver says, “Rate cuts won’t kill the virus or solve supply side constraints but they will help ease the pain for borrowers through this uncertain period and will help boost growth once the virus is under control.”

So, what should you do? Until more is known about the virus, we won’t fully understand the real economic and medical impacts of COVID-19 however we expect the volatility will continue. Please remember that our advice at times like these is to focus on the portfolio’s timeframe, generally years and decades, rather than weeks.

Should you have any concerns or questions you wish to discuss regarding COVID-19 and its impact on your finances please get in touch with your advisor on 02 9415 1511 or email reception@primeadvisory.com.au

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Two ways to help your children get a foothold in the property market

Two ways to help your children get a foothold in the property market

Like all parents, you want your children to have the best possible start in life by helping them grow their own financial nest egg. And owning property is a great way to do it. So how can you help your children get a foothold in the property market?

Ideally, you’d be able to give them enough money to cover the 5% cash deposit and associated stamp duty and legal costs. But what happens if you don’t have the money? Can you still help your children get a foothold?

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