Get the Most Out of Your Refinancing

In Refinancing your mortgage can be a game-changer in managing your finances, offering opportunities to lower interest rates, reduce monthly payments, and ultimately save money. However, to truly benefit from refinancing, it’s crucial to understand its intricacies and make informed decisions. Here’s your guide to getting the most out of refinancing.

Understanding Refinancing

Refinancing involves replacing your existing mortgage with a new loan, typically to secure better interest rates and terms. This financial strategy has gained popularity, especially in times of low-interest rates. But, it’s not just about getting a lower rate; it’s about optimizing your overall financial situation.

The Benefits of Refinancing

The primary allure of refinancing is the potential for significant savings. For instance, refinancing a $300,000 loan from a 7.5% interest rate to 4% could save you hundreds of thousands over the life of the loan. These savings can be further maximized by maintaining your original repayment amount, even after securing a lower rate, thereby paying off your loan faster and reducing the total interest paid.

Effective Strategies for Refinancing

Debt Consolidation:

Refinancing can be an excellent opportunity to consolidate high-interest debts, such as credit cards or personal loans, into your mortgage. This move can lower your overall interest payments, though it’s important to be mindful of extending short-term debts over a longer period.

Loan Splitting:

A savvy strategy is to split your loan, keeping a portion at a fixed rate and the rest at a variable rate. This approach provides the security of fixed repayments while still allowing you to benefit from potential rate decreases.

Offset Accounts:

An offset account linked to your mortgage can significantly reduce the amount of interest you pay over time, as the money in the account is offset against your loan balance.

Extra Repayments:

Making additional repayments on your refinanced home loan can dramatically reduce the total interest cost and shorten the loan term.

When to Consider Refinancing

Refinancing isn’t a one-size-fits-all solution. It’s best considered when your life circumstances change, such as a new job, changes in family dynamics, or when you find yourself with extra cash. However, be aware of potential costs like exit fees from your current loan and establishment fees for the new loan.

Navigating the Refinancing Process

Before jumping into refinancing, it’s crucial to understand your reasons and goals. Consult with a mortgage broker or financial expert to navigate the complexities of refinancing home loans. They can help you assess whether refinancing aligns with your financial objectives and guide you through the process.

Refinancing offers a pathway to better manage your mortgage and save money. However, it requires careful consideration of your financial situation, market conditions, and the costs involved. With the right approach and professional guidance, refinancing can be a powerful tool in your financial arsenal.

Remember, the key to successful home loan refinancing is not just securing a lower interest rate but making strategic decisions that align with your long-term financial goals.

What is refinancing?

Refinancing involves replacing your current mortgage with a new loan, usually to take advantage of better interest rates and terms.

How can refinancing save me money?

By securing a lower interest rate through refinancing, you can reduce your monthly payments and the total interest paid over the life of the loan.

Is refinancing suitable for consolidating debt?

Yes, refinancing can be used to consolidate high-interest debts like credit cards into your mortgage, potentially lowering your overall interest payments.

How does an offset account work with refinancing?

An offset account linked to your mortgage can reduce the interest you pay, as the money in the account is offset against your loan balance.

Should I consult a professional before refinancing?

Yes, consulting with a mortgage broker or financial expert is advisable to ensure that refinancing aligns with your financial goals.

How do I know if refinancing is the right decision for me?

Assess your financial goals, current loan terms, and potential savings from refinancing. Professional advice can also help in making this decision.

This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information.

Phone: 1300 855 022

Email: clientservices@zippyfinancial.com.au

Zippy Financial is an award-winning mortgage brokerage specialising in home loans, property investment, commercial lending, and vehicle & asset finance. Whether you are looking to buy your first home, refinance or build your property investment portfolio, the team at Zippy Financial can help find and secure the right loan for you and your business.

About the Author:

Louisa Sanghera is an award-winning mortgage broker and Director at Zippy Financial. Louisa founded Zippy Financial with the goal of helping clients grow their wealth through smart property and business financing. Louisa utilises her expert financial knowledge, vision for exceptional customer service and passion for property to help her clients achieve their lifestyle and financial goals. Louisa is an experienced speaker, financial commentator, mortgage broker industry representative and small business advocate.

Connect with Louisa on Linkedin.

Louisa Sanghera is a Credit Representative (437236) of Mortgage Specialists Pty Ltd (Australian Credit Licence No. 387025).

Disclaimer: This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information. This article is not to be used in place of professional advice, whether business, health or financial.

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Are You Considering Refinancing Your Mortgage?

Is your home loan not up to scratch? Are you looking for a better rate? Do you want to unlock equity? Then refinancing could be for you, but there are some important questions to ask first.

If you are considering refinancing your mortgage, you are not alone. With the rising cost of living and interest rates hitting the hip pockets of many Australians, it is a popular move. According to ABS data, November 2022 saw refinancing values reach a record high of $13.4 billion.

Refinancing may offer you opportunities to unlock equity, land a better rate and avoid what is known as “loyalty tax.” Sticking to the same loan could see you missing out on favourable rates and features that lenders like to use to use to gain new customers. Or maybe you are about to come off a fixed loan period and are bracing for a potential rate hike.

Whatever the reasons for refinancing, we have some questions you help you through the process.

What Is Your Financial Picture?

Banks want to look at your financial profile before lending you money, so check that your credit score is healthy to avoid disappointment.

Look at your budget to see how much you can afford to pay towards a mortgage. Include interest, repayments, and service fees, and factor in possible additional refinancing costs such as application and valuation fees. You can also consider how the length of your loan impacts you budget.

A longer-term loan usually comes with lower repayments but more interest over the lifetime of your loan. A shorter-term loan on the other hand would usually mean you make higher repayments now, but you could save on total interest payments.

Whichever way are you are leaning, we can help you crunch the numbers.

Do You Have Equity?

Having 20% equity in your home is typically a lender requirement when refinancing. But what is equity?

It is the difference between the market value of your property and the balance of your mortgage. With the recent decline in property values, it is an important thing to check.

The 20% equity typically acts as a deposit. Not having 20% may mean you have to pay lenders’ mortgage insurance, which may make refinancing not worth it. And negative equity, when your mortgage balance exceeds your property’s value, would most likely put the brakes on any refinancing plans. But if you have additional equity, you may be able to unlock it when refinancing.

Here is an example. Say your house is now worth $1 million, but you bought it for $800,000 a few years back with a $600,000 loan that you have paid down to $500,000. Banks will typically allow a loan for 80% of a property’s market value (depending on your financial position and other factors). So, if you refinanced your $500,000 loan to an $800,000 loan, you could unlock $300,000 for things like renovation projects or investments.

What Are You Looking For?

Now it is time to think about what you want from a loan.

A better interest rate is usually at the top of the list, but what other features could benefit you? An offset account may be something you want to reduce interest, or the ability to make additional repayments without incurring penalties.

Depending on what you are after, you may not need to move to another lender. We can always talk to your current lender first to see if they will offer something better. If not, then we can explore other options.

Why is refinancing a popular option?

Refinancing has gained popularity due to the rising cost of living and fluctuating interest rates. According to ABS data, refinancing values reached a record high of $13.4 billion in November 2022.

What is “loyalty tax” and how can refinancing help avoid it?

Loyalty tax refers to the disadvantage you may face by sticking to the same loan for an extended period. By refinancing, you can take advantage of better rates and features that lenders offer to attract new customers.

What factors should I consider before refinancing?

Before refinancing, you should check your credit score and budget to see how much you can afford in mortgage repayments. Also, consider any additional costs like application and valuation fees.

How does equity play a role in refinancing?

Having at least 20% equity in your home is typically a lender requirement for refinancing. Equity is the difference between the market value of your property and the balance of your mortgage.

What loan features should I look for when refinancing?

Apart from a better interest rate, you may also want features like an offset account or the ability to make additional repayments without penalties.

Can I negotiate with my current lender before switching?

Yes, it’s always a good idea to talk to your current lender to see if they can offer a better deal before deciding to switch to another lender.

Get in touch

Do you want to refinance to unlock a better interest rate, features and benefits or equity in your home? Then give us a call. We can help assess your situation to see what is possible and locate loans and lenders that would be a great fit for you.

Phone: 1300 855 022

Email: clientservices@zippyfinancial.com.au

About the Author:

Connect with Louisa on Linkedin.

Louisa Sanghera is a Credit Representative (437236) of Mortgage Specialists Pty Ltd (Australian Credit Licence No. 387025).

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How Can Refinancing Help with a Fixed-Rate Cliff?

You have probably heard of the term “fixed-rate cliff” in finance news feeds, but what is it? And if you are about to head over it, how can you prepare for a soft landing?

880,000 fixed-rate loans are set to end this year, and when they do, many Australian households will be facing significantly higher mortgage repayments. That is because the variable interest rates now on offer as much higher than the fixed rates that were locked in years ago.

What does this so-called “cliff” mean for your budget and how can you reduce the impact by refinancing?

Why Is Fixed Rate Cliff Looming in 2023?

Before 2020, fixed rate mortgages equated to about 20% of total Australian home loans. But during the pandemic, the RBA dramatically slashed the cash rate to a record low of 0.10% and many savvy Australians pounced on the opportunity to lock in a low interest rate in early to mid-2021 for two to three years. This saw 2021 fixed-rate borrowing basically double to 40% of total Australian home loans. However, as with all good things, the low rate times have come to an end.

Since May 2022, the RBA has hiked the official cash rate back up to 3.60%. Those on fixed-rate loans have had a reprieve until now, with 880,000 mortgage holders set to start rolling off their fixed rate throughout 2023. And CoreLogic warns that “the pain will be felt most acutely from April” this year.

What Effects Can a Fixed Rate Cliff Have?

According to CoreLogic data, a mortgage holder who took out an average-sized loan of $538,936 with a fixed rate of 1.98% could see their repayments increase by over $1,000 per month when rolling over to a standard variable rate.

Those who locked in 2020/2021 interest rates that hovered around the 1.75% to 2.25% range will be transitioning to interest rates as high as 5% to 6%. That is an increase greater than the 3 percentage point minimum interest buffer that lenders use to assess the serviceability of home loan applications.

How Do You Refinance Properly?

When a fixed-rate loan period ends, lenders often don’t roll existing clients over to the best rates they have on offer. The most attractive interest rates are usually reserved for new customers as an incentive. But by refinancing with another lender, you can access lower introductory rates, which can potentially save thousands of dollars in repayments over time.

Working with a broker like us can take the stress of your shoulders when navigating the end of a fixed rate period. We use our vast network of lenders to zone in on suitable loans and lenders that are right for you. And importantly, we will bound by a best interest duty.

While banks and digital lenders might try to tempt you with cashback offers for loan products that may not really be in your best interests due to fees, high interest rates and other undesirable loan terms, we will only ever try and match you with lenders and loans that are in your best interests.

What is a Fixed-Rate Cliff?

A fixed-rate cliff refers to a situation where a significant number of homeowners transition from low fixed-rate mortgages to higher variable rates, often leading to increased financial strain.

Why is the Fixed-Rate Cliff relevant in 2023?

The RBA has increased the official cash rate, affecting those who had locked in low interest rates in the past. Many of these fixed-rate loans are set to expire in 2023, leading to higher repayments for homeowners.

How can refinancing help me if I’m facing a Fixed-Rate Cliff?

Refinancing can allow you to switch to a lender offering lower interest rates, potentially saving you thousands of dollars over time. Working with a broker can help you find the most suitable loans and lenders.

What are some other options if refinancing isn’t viable for me?

You can consider extending the length of your loan to reduce monthly repayments, consolidating debt, or building up a cash buffer to manage the transition more smoothly.

How can Zippy Financial assist me in this situation?

Zippy Financial can help you explore refinancing options, identify suitable loans and lenders, and even help you with debt consolidation or other strategies to manage the transition effectively.

Are there any risks involved in refinancing?

While refinancing can offer lower interest rates, it’s essential to consider any fees, terms, and conditions that may apply. Always consult a financial advisor or mortgage broker to understand the implications fully.

Get in Touch with Us

If your fixed-rate cliff is looming, get in touch today and we will work on finding you great refinancing options to soften the landing.

And if the landing is still looking a little bumpy, we can help you explore some additional options, such as increasing the length of your loan and therefore decreasing monthly repayments, debt consolidation or helping you identify ways to build up a bit of a cash buffer in the meantime.

Whatever your situation, the earlier we sit with you and help you plan, the better we can help you manage the transition.

Phone: 1300 855 022

Email: clientservices@zippyfinancial.com.au

About the Author:

Connect with Louisa on Linkedin.

Louisa Sanghera is a Credit Representative (437236) of Mortgage Specialists Pty Ltd (Australian Credit Licence No. 387025).

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Is it worth refinancing? | Zippy Financial

With the interest rates increasing rapidly, many borrowers are now paying close attention to the rate they are paying for the mortgage.

Some people are keen to refinance to a better deal, but they are worried they will not qualify for loan approval. Others figure that the potential savings on offer won’t be significant enough to compensate for the time, hassle and fees involved with getting a new home loan.

So, how can you work out what your options are and whether you will be approved for finance? And when is it worthwhile refinancing your current mortgage?

There is nothing to lose by review your current loan, but there is potentially a lot to gain.

Where Do I Start When Refinancing?

First, call your bank and ask what your current interest rate is, then ask if this is the very best rate that they can offer you. You will be surprised at how much flexibility and discretion they have to offer you a rate discount if you threaten to refinance and take your loan elsewhere.

Once you have spoken to your bank, whether they give you a discount or not, it is time to review the other options out there.

After you have gone straight to your bank to get the best possible deal that they can offer, it is time to shop around and see what other loans you could be eligible for.

There is a big difference in interest rates between various banks, which is why refinancing can be a powerful way to save money.

If you have a $750,000 loan and you find a mortgage you can refinance to, and the rate is just 0.5% less than what you are paying, you could save around $220 per month or $2,640 per year. The more properties you own and loans you have, the more you stand to save.

Are there any hidden finance costs to watch out for?

Yes, there can be a few fees to look out for. These include:

Application fees. Lenders often run promotions to wave application fees for new borrowers.
Rate lock fees. If you want to take out a fixed rate loan, some banks charge an optional ‘rate lock’ fee to secure the advertised rate at the time of applying (as it can change by the time your loan settles).
Monthly or annual account keeping fees.
Government fees and charges to register the mortgage. These vary between states and territories, but often they amount to a few hundred dollars.
An annual ‘package’ fee of up to $400. Keep in mind this package comes with an interest rate discount, credit card fee waiver and other benefits, which can more than offset the cost of this fee.
Loan settlement fees.
Break fees, which may be applicable if you end a fixed rate loan to take out a new loan (even if the new loan is with the same bank). In the current environment, these break fees are likely to be low.

We know what you are thinking… this seems like a lot of fees, and it is! But if you work with a mortgage broker, we can help you find a bank or lender that offers value for money when it comes to both the interest rate and the fees and charges that apply.

We may also be able to find you a suitable loan with a cashback offer of up to $5,000. A home loan cashback promotion is exactly what it sounds like – it means that once the loan settles, you will get a lump sum payment in your nominated bank account. It can be a great way to offset some of the interest rate rises we have seen.

With mortgages climbing and putting plenty of pressure on household budgets, we are likely to see more mortgage stress in the year ahead. Refinancing can be a relatively low-effort way of reducing your costs and saving potentially thousands of dollars per year, especially if you engage a mortgage broker to do all the work on your behalf.

If you are keen to learn more about your refinancing options, contact us.

Phone: 1300 855 022
Email: clientservices@zippyfinancial.com.au

About the Author:

Connect with Louisa on Linkedin.

Louisa Sanghera is a Credit Representative (437236) of Mortgage Specialists Pty Ltd (Australian Credit Licence No. 387025).

Why Refinancing Numbers are Surging Across the Country?

Has rising interest rates got you feeling a bit vulnerable? It may be time to take some control back by refinancing or asking for a rate review. Why are we seeing refinancing numbers surge across the country?

In just a couple of months we have seen the Reserve Bank of Australia (RBA) increase the cash rate from a record low of 0.10% to 0.85% and it has not taken long for most lenders to pass those rate increases onto customers. Unfortunately, the RBA has warned us that more rate hikes are on the way.

There are ways you can make yourself feel more in control, including by doing what tens of thousands of mortgage holders around the country have done – refinancing or asking their current lender for a better rate.

Homeowners are Refinancing in Droves

According to PEXA’s largest refinancing insights, refinancing increased by more than 20% in May (from April) across each of Australia’s most populous states.

Here is a breakdown:

NSW: 10,823 refinances – May up 20.8% on April, and up 15.6% year on year.

VIC: 11,500 refinances – May up 26.7% on April, and up 23.3% year on year.

QLD: 6,699 refinances – May up 21.8% on April, and up 49.6% year on year.

WA: 3,244 refinances – May up 25% on April, and up 46.1% year on year.

Why the Big Increase in Refinancing?

Lenders now, more than ever, need to attract and retain borrowers.

Just because rates are going up, does not mean you can’t scope out a better deal, especially if you have a decent amount of equity and strong track record of meeting your mortgage repayments. If that sounds like you, then you are a good customer, and lenders want good customers.

The other big reason for the recent surge in refinancing is that smaller lenders are stealing more and more borrowers away from the major banks with super-competitive rates.

In fact, according to PEXA, in NSW, VIC, QLD and WA combined, the major banks and their subsidiaries had a net loss of more than 5,000 borrowers to non-major lenders in May.

Competition is fierce!

Why Work with a Broker Now?

The amount of loans being written by brokers continue to grow. Brokers are currently writing 70% of all new home loans in the country – which is the biggest market share ever. And as you know, brokers are loyal to you, not to any lender.

This means, that if we think you can get a better deal elsewhere, we will encourage and help you to do so, not hope that you will stay put on your current rate.

Why are refinancing numbers surging across Australia?

The Reserve Bank of Australia (RBA) has recently increased the cash rate, leading most lenders to pass on the rate hikes to customers. This has prompted many homeowners to seek better rates through refinancing.

What are the statistics on refinancing in different states?

According to PEXA’s largest refinancing insights, refinancing increased by more than 20% in May across Australia’s most populous states, including NSW, VIC, QLD, and WA.

Can I still get a better deal even if rates are rising?

Yes, especially if you have a good amount of equity and a strong track record of meeting your mortgage repayments. Lenders are keen to attract and retain good customers.

Are smaller lenders offering better rates?

Smaller lenders are increasingly attracting borrowers away from major banks with super-competitive rates. In May, major banks and their subsidiaries had a net loss of more than 5,000 borrowers to non-major lenders.

Why should I consider working with a broker?

Brokers are currently writing 70% of all new home loans in the country. They are loyal to you, not any lender, and can help you find a better deal or negotiate with your current lender.

What should I do if I don’t want to refinance with another lender?

You can ask your current bank to review your rate and indicate that you are prepared to refinance if they don’t offer a better deal.

And even if you do not want to refinance with another lender, there is always the option of asking your current bank to review your rate (and indicating that you have prepared to refinance if they don’t come to the table). If you would like to find out more about what options are available to you, get in touch with us today. We would love to help you feel like you have some agency in the period ahead.

Phone: 1300 855 022

Email: clientservices@zippyfinancial.com.au

About the Author:

Connect with Louisa on Linkedin.

Louisa Sanghera is a Credit Representative (437236) of Mortgage Specialists Pty Ltd (Australian Credit Licence No. 387025).

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Car Prices Gone Up Since the Pandemic Started?

Most of us have noticed that car prices have gone up significantly over the past two years, how much have they gone up exactly?

Both new and used vehicle prices have spoked over the last two years. The reasons for car price hikes include supply issues stemming from a semiconductor shortage, increases in cost for raw materials, complications around shipping and parts procurement, factory shutdowns and other pandemic-related issues.

But how much have these disruptions sent car prices up? And what options are available if you need help financing your next car purchase?

New Car Price Increases

According to an ABC article quoting website pricemycar.com.au, the price of new cars has gone up as much as 25% since before the pandemic.

The detailed analysis of 1,100 models by goauto.com.au calculates that as of March 2022, the average price of a new car is up 7.6% since pre-pandemic times.

The price increase varies a lot from manufacturer to manufacturer, and even model to model. For example, some models such as the Toyota Yaris have gone up by as much as 37% ($7,290 extra).

Here is how much some of the more prestigious manufacturing brands have increased prices:

Land Rover – 9.01%
Audi – 9.59%
BMW – 8.42%
Jaguar – 5.33%
Lexus – 3.36%

And here is how much some of the more mainstream manufacturers have increased prices:

Volkswagen – 9.83%
Hyundai – 9.06%
Jeep – 8.91%
Nissan – 8.59%
Toyota – 7.70%
Fiat – 7.31%
Mitsubishi – 6.80%
Renault – 6.60%
Subaru – 6.00%
Citroen – 5.93%
Mazda – 5.30%
Ford – 2.73%

Used Cars

It appears that because of the wait times for new cards (due to supply constraints), used car prices have gone up even more. Used cars have risen 50%, based on Datium Insight’s price index in this ABC article. Meanwhile, car valuation expert Redbook.com.au estimates a 25 to 35% increase in recent years.

How to Finance Your Next Car Purchase

Have you been wondering about how your neighbour bought that fancy new car?

There is a better than even chance they took our finance to purchase it, with Mozo research showing that 52% of car buyers taking out a loan to buy a vehicle in the past decade, with the average loan size being $25,000. Most car loan providers offer a maximum term of up to 7 years, the average loan usually is repaid in the 2-3 year range.

It is also worth mentioning that if you are purchasing the vehicle for your business, the Federal Government’s temporary full expensing scheme can help your business’s cash flow.

If you would like to find out more about financing your next car purchase, whether it is for your household or business, get in touch with us today.

How Much Have New Car Prices Increased Since the Pandemic?

According to an ABC article quoting pricemycar.com.au, the price of new cars has gone up as much as 25% since before the pandemic. The average price of a new car is up 7.6% since pre-pandemic times.

Which Car Brands Have Seen the Most Significant Price Increases?

The price increase varies a lot from manufacturer to manufacturer. For example, Land Rover has seen a 9.01% increase, Audi 9.59%, and BMW 8.42%.

How Have Used Car Prices Been Affected?

Used car prices have risen even more than new cars, with an increase of 50% based on Datium Insight’s price index. Another estimate suggests a 25 to 35% increase in recent years.

What Are the Financing Options for Buying a Car?

Research shows that 52% of car buyers have taken out a loan to buy a vehicle in the past decade, with the average loan size being $25,000. Most car loan providers offer a maximum term of up to 7 years.

Are There Any Incentives for Business Car Purchases?

If you are purchasing the vehicle for your business, the Federal Government’s temporary full expensing scheme can help improve your business’s cash flow.

Phone: 1300 855 022

Email: clientservices@zippyfinancial.com.au

About the Author:

Connect with Louisa on Linkedin.

Louisa Sanghera is a Credit Representative (437236) of Mortgage Specialists Pty Ltd (Australian Credit Licence No. 387025).

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Do You Want a First Home Buyer Scheme Spot?

In Navigating the journey to homeownership can be a complex process, especially for those entering the market for the first time. The first home buyer scheme offers a valuable opportunity for new buyers to make this journey smoother and more attainable. Understanding how to secure a spot in this competitive scheme is crucial for prospective homeowners.

Updates to the First Home Buyer Scheme

Recent changes to the first home buyer scheme have made it more accessible yet competitive. The scheme, designed to assist first-time homebuyers, now includes updated eligibility criteria and borrowing caps. These changes aim to accommodate a broader range of applicants, reflecting the diverse needs of modern homebuyers.

Preparing for the Scheme Application

Preparation is key to securing a spot in the first home buyer scheme. This includes gathering necessary financial documents, understanding your credit score, and ensuring your latest tax return accurately reflects your financial situation. A thorough preparation can significantly enhance your chances of being accepted into the scheme.

Navigating the Current Market

The real estate market is constantly evolving, and these changes can impact first-time homebuyers. It’s essential to stay informed about current market trends, how they affect property prices, and what this means for your borrowing capacity. This knowledge will help you make informed decisions when applying for the first home buyer scheme.

Financial Planning for First-Time Buyers

Effective financial planning is crucial for first-time buyers. This involves setting a realistic budget, considering potential future changes in interest rates, and understanding the long-term financial commitment of owning a home. Proper budgeting ensures you are well-prepared for the financial responsibilities that come with homeownership.

The Role of Mortgage Brokers

Mortgage brokers play a pivotal role in guiding applicants through the first home buyer scheme process. From assessing your borrowing capacity to navigating complex application procedures, their expertise can be invaluable. Brokers like Zippy Financial can provide personalized advice tailored to your financial situation, enhancing your chances of securing a spot in the scheme.

Exploring Alternative Home Buying Assistance Programs

In addition to the first home buyer scheme, there are various first home buyer schemes and first time home buyer scheme options available at both federal and state levels. These programs offer different benefits and can be explored as alternatives or supplements to the main scheme, providing additional support to first-time buyers.

Long-Term Considerations and Property Investment

For first-time homebuyers, it’s important to think long-term. This includes considering the potential for property investment and planning for future financial stability. Understanding the broader implications of homeownership will help ensure that your first home is a stepping stone to long-term financial success.

Securing a spot in the first home buyer scheme can be a game-changer for first-time buyers. With the right preparation, knowledge, and professional guidance, you can navigate this process successfully and make your dream of homeownership a reality.

What is the First Home Buyer Scheme?

The First Home Buyer Scheme is a government initiative designed to help first-time homebuyers purchase a property with a smaller deposit and without the need for lenders’ mortgage insurance (LMI).

How does the First Home Buyer Scheme benefit first-time buyers?

The scheme allows first-time buyers to purchase their first home with just a 5% deposit, significantly reducing the initial amount they need to save and accelerating their path to homeownership.

Are there any eligibility criteria for the First Home Buyer Scheme?

Yes, there are specific eligibility criteria, including income caps and property value thresholds, which vary based on location and are updated periodically.

What steps should I take to improve my chances of securing a spot in the scheme?

To improve your chances, ensure your financial documents, including your most recent tax return, are in order. It’s also important to understand your borrowing capacity and to apply as early as possible due to the competitive nature of the scheme.

Are there borrowing caps in the First Home Buyer Scheme?

Yes, the scheme includes borrowing caps that vary depending on the location of the property you wish to purchase.

How can a mortgage broker assist me with the First Home Buyer Scheme?

A mortgage broker can help you understand your borrowing capacity, guide you through the application process, and provide advice on meeting the scheme’s criteria.

Is the First Home Buyer Scheme available for all types of properties?

The scheme is generally available for a range of property types, but it’s important to check the specific criteria for the type of property you are interested in.

Get the Ball Rolling Today

Places in the Home Guarantee Scheme are generally allocated on a first-come, first-served basis, and don’t let this year’s expansion to 35,000 spots lull you into a sense of complacency as they will be snapped up quickly.

So, if you are a first home buyer looking to crack into the property market sooner rather than later, get in touch today and we can explain the scheme to you in more detail, help check if you are eligible and take steps to get the ball rolling. We are ready to help you apply through a participating lender!

Phone: 1300 855 022

Email: clientservices@zippyfinancial.com.au

About the Author:

Connect with Louisa on Linkedin.

Louisa Sanghera is a Credit Representative (437236) of Mortgage Specialists Pty Ltd (Australian Credit Licence No. 387025).

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Financial Hardship Arrangement Report Has Changed

With interest rates on the way back up, there is no doubt that some households are starting to do it a big tough. Coincidentally, some big changes have kicked in from 1^st of July when it comes to recording financial hardship arrangements.

In the past, if you were unable to meet your loan repayments, you could enter a financial hardship arrangement with your lender, and it couldn’t be reported in official credit reporting systems. In many cases, the repayment history in your credit report would show a blank month or possibility a missed payment during the hardship arrangement period.

Neither of these two approaches told the full story about the credit history and that a financial arrangement had been agreed upon with the lender.

What Has Changed from 1st of July 2022?

From 1^st of July, the credit reporting system has introduced financial hardship information into credit reports. This means that if you enter a financial hardship arrangement that reduces monthly loan repayments, then for the next 12 months the credit report will show:

That you were current and up to date with repayments for that hardship month, provided you made the reduced payments on time

A flag alongside the repayment history information for the hardship month, indicating a special payment arrangement was in place.

The flag in the credit report will be referred to as ‘financial hardship information’ and can take two forms (A or V) depending on the type of arrangement:

A – indicates there was an arrangement for the month that temporarily deferred the repayments (which will need to be repaid later or be subject to a further arrangement).

V – means the loan was varied that month to reduce the repayments.

The good news is that the financial hardship information flag will only stay on the credit report for 12 months, whereas regular repayment history information stays for 24 months.

Is All This Good or Bad News?

It comes with pros and cons:

The changes are intended to give the ability to ‘protect’ your credit report if you experience financial hardship. In no way are they designed to exclude you from applying for credit. However, a financial hardship arrangement flag may prompt prospective lenders to make further inquiries to better understand the situation.

If the hardship arose because of a temporary reduction in work hours, but you are now back in stable employment, in most cases it should not cause any major issues for a loan application, especially if proof can be provided to the lender.

Hardship arrangements can stem from a natural disaster that’s completely outside of your control, such as flood or bushfire, which can be explained to a lender.

The financial hardship information cannot be used by a credit reporting body to calculate the credit score, whereas regular repayments that are missed outside a hardship arrangement will impact your credit score.

Are You Having Trouble Meeting Your Repayments? Get in Touch!

The Reserve Bank of Australia has been aggressively raising the official cash rate in recent months, which means monthly repayments would most certainly have gone up if you are on a variable loan rate.

If you are on a fixed loan rate, you also need to think ahead to where your monthly repayments might be when the fixed-rate period ends and reverts to a variable rate.

If you think more rate rises may soon strain your monthly budget, now is a good time to start putting extra money away into an offset or savings account to build up a buffer.

Other options that can help include refinancing and debt consolidation, both of which can help reduce monthly repayments.

Whatever the circumstances, we are here to support you however we can.

Phone: 1300 855 022

Email: clientservices@zippyfinancial.com.au

About the Author:

Connect with Louisa on Linkedin.

Louisa Sanghera is a Credit Representative (437236) of Mortgage Specialists Pty Ltd (Australian Credit Licence No. 387025).

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How Do You Budget for Interest Rate Rises?

It is impossible to know how much interest rates will rise, but one thing we know for certain is that they are rising…

It is important to look at your budget and financial situation, so you can plan for the increase in your budget.

If you are worried about the extent of interest rate rises, keep in mind that all increases are introduced gradually. The most important thing to do is get prepared. How can borrowers prepare themselves for the increases in mortgage rates?

Tips to Manage Higher Mortgage Repayments

Tip 1: Review your mortgage pronto

If you have a home loan bit haven’t checked out the details in the last 12 months, now is the time to do so. You could be paying more than you need to. Did you know, for instance, that many banks will offer new customers a lower interest rate than existing customers? Check out your current rate and see what you are paying. Then…

This is what helped car salesman Rihan Nasser purchase his villa unit last August. Rihan had been crunching the numbers on what he’d need to do to save a 20% deposit. The scheme fast-tracked the process by maybe two, three or four years and made it easier to come up with the deposit to buy.

Tip 2: Contact your bank

Make sure that you are not paying too much by checking the interest rate that you are paying with the interest rate that the bank offers new customers. Then call them and ask for a discount.

Tell them that you are thinking of refinancing, and you would like to know if they are willing to offer you a discount to stay with them. They could say no, or they may shave off some of your repayment, gibing you an instant saving.

Bonus tip: If you do secure an interest rate discount and your repayments go down, set up a direct transfer of the difference into a separate bank account that you do not touch. If you let that money build up over time, you can use it towards your repayments when they increase. Or simply leave the direct debt instalments as it is and leave the extra money in your mortgage.

Tip 3: Review the market

Whether your bank agrees to a discount or not, have a quick look around at other deals that are available. This is where a mortgage broker may be able to help. We look at your situation and review the market for you, then come back to you with the best offers and deals to suit your needs. Shopping around could see you save hundreds or even thousands of dollars a year on your home loan.

Tip 4: Look for cash-back deals

Many lenders offer cash-back deals when they approve you for a loan. There are a few fees and charged involved when you refinance, but if you find a loan that suits your needs and it offers cash-back, you could bank $2,000 to $2,500 from your refinance.

Set this money aside in a bank account you don’t touch or consider making an extra repayment in your variable-rate home loan now and you will instantly make a saving on interest.

Tip 5: Start saving

Interest rates are going up and your mortgage repayments will go up with them. Look at your budget to find ways to set aside the extra money for the expected increases now. This way you will be able to afford the repayments when interest rates rise, and you will build up a small nest egg to help you deal with the increase in rates.

If you calculate your future repayments and realise you might have trouble making repayments at the higher amount, it is a good idea to reach out to an experienced mortgage broker. They can look at your overall situation and potentially restructure your debt, so that you don’t get into financial stress down the track.

Phone: 1300 855 022

Email: clientservices@zippyfinancial.com.au

About the Author:

Connect with Louisa on Linkedin.

Louisa Sanghera is a Credit Representative (437236) of Mortgage Specialists Pty Ltd (Australian Credit Licence No. 387025).

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5 Ways You Can Absorb Interest Rate Rises

We have seen interest rates bounce back up over the past three months and it is predicted that more increases are to come. If you are starting to worry about your finances, there are a few things you can do.

Check out this Reserve Bank of Australia (RBA) graph. It shows interest rates are currently lower, as of July 2022, than they were prior to May 2019. The current cash rate is nothing extraordinary, although it might come as a shock to newer borrowers, as we previously had not had a cash rate hike since November 2010.

There is no denying that some households are starting to feel the squeeze, and if you put yourself in that category

Consider Implementing Some of These Measures

Start Building a Buffer

Interest rates will go up over the next few months. Economists from the big four banks are predicting it could increase to anywhere between 2.60% (Commbank) and 3.35% (ANZ) by November.

Therefore, it is important to start planning ahead now, if you can, by building up a buffer. This usually includes putting extra money into an offset account, redraw facility or savings account, that’s attached to your mortgage or easy to access.

Reduce Expenses

Stan, Netflix, Spotify, Amazon, Audible, Apple TV, Disney, Paramount+, Kayo, Binge… the list goes on. How much do you spend on subscriptions each month?

These subscription services could be costing you a lot more than you realise. The average Australian household spends $55 per month on entertainment subscriptions.

Next on the list is takeaway coffees. Six takeaway coffees a week cost about $27, which is about $120 per month or $240 per month for a couple. Instead, you can brew your own barista quality coffee at home for $30-$70 per month.

There is Uber Eats, Menulog, DoorDash, Deliveroo… if you are making a habit of it then it will really start adding up. And the best part about home-cooked meals is the leftovers for lunch the next day – making it two meals for the price of one.

Shop Around

A recent study from Choice found that Aldi is the cheapest supermarket. So that is a start when it comes to your weekly food bill, which is going up each month thanks to inflation.

Furthermore, an ING survey found that the average Australian family saves $114 a month by doing their shopping online.

But… it is not just the groceries that you can shop around for a lower price. Car insurance, home insurance, utilities, phone, and internet are all other monthly expenses that you can usually find a better deal on.

Refinance

If you have not refinanced for a while, there is a decent chance you could get a better rate on your home loan.

But why refinance now if interest rates will just keep rising? Let’s say you refinance your variable rate home loan this month from 3.50% to 3%. Then if the RBA raises the cash rate by 0.50% next month, and your bank follows, your interest rate will then be 3.50%. But if you choose not to refinance and your bank follows the RBA, it will be 4%. This 0.5% gap would remain for all subsequent upcoming interest rate rises, so long as the banks increase their interest rates in line with the RBA.

Another option is to consolidate multiple loans such as car or personal loan into your mortgage to reduce your monthly expenses. It is important to note that if you do this you will pay more in interest on the car and/or personal loan over the lifetime of those loans, but if you need cash flow now, this could be a possible solution.

You can also consider refinancing to extend the term of your home loan, which could help reduce monthly repayments. Again, you will end up paying more interest over the life of the loan, but it can give you more breathing space if you need it.

What is the current trend in interest rates?

The article discusses how interest rates have been rising over the past three months and are expected to continue increasing. The Reserve Bank of Australia (RBA) has indicated that rates are currently lower than they were before May 2019, but they are expected to rise.

How can I prepare for upcoming interest rate hikes?

The article suggests building a financial buffer by putting extra money into an offset account, redraw facility, or savings account that’s easy to access or attached to your mortgage.

What are some ways to reduce my monthly expenses?

The article recommends cutting down on subscription services like Netflix, Spotify, and takeaway coffees. It also suggests cooking at home to save on food delivery services like Uber Eats and DoorDash.

How can shopping smartly help me manage rising interest rates?

According to a study from Choice, shopping at Aldi can save you money on your weekly food bill. An ING survey also found that online shopping can save the average Australian family $114 a month.

Is refinancing a good option to manage rising interest rates?

Yes, refinancing can help you get a better rate on your home loan, which can be beneficial even if interest rates are rising. The article explains that if you refinance now, you could potentially save on interest payments in the long run.

What should I do if I’m concerned about meeting my home loan repayments?

The article suggests reaching out for professional advice if you’re worried about how interest rate rises will affect your ability to meet your home loan repayments. It’s important to consult with experts to tailor a plan that suits your financial situation.

Come and Speak to Us

If you are concerned about what is going on with interest rates, inflation and/or how you will meet your home loan repayments, please don’t hesitate to get in touch.

Everyone’s situation is different, and we understand many of the ideas we have listed might not suit your financial or personal situation.

If you are worried about how you will meet your repayments in the months ahead, give us a call. We would love to speak to you and help you work out a plan moving forward.

Phone: 1300 855 022

Email: clientservices@zippyfinancial.com.au

About the Author:

Connect with Louisa on Linkedin.

Louisa Sanghera is a Credit Representative (437236) of Mortgage Specialists Pty Ltd (Australian Credit Licence No. 387025).

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