When was the last time you looked closely at your loan, the progress you are making on paying it off and how it compares to others in the market?  Your mortgage could mean savings for you, as well as the opportunity to pay it off more quickly, invest in other assets or reach financial freedom sooner.

Make smaller payments, more often

To cut the size of your payments, make more of them. This could even see you pay off your loan faster, and therefore pay less interest overall.

If you pay your mortgage monthly, consider changing to fortnightly repayments. For example, if your mortgage equates to $2400 a month, cut this in half and pay $1200 each fortnight. As well as having more manageable payments to make, by the end of the year you will have paid off $31,200 rather than $28,800.

Pay just a little bit extra

A minimum repayment is just that – for most loans there is no reason you can’t pay more, whether here and there or regularly.

By rounding up to a full number or contributing an extra $100 or even $10, you’ll significantly reduce your mortgage. It may also be worth considering putting all bonuses, tax returns and gifts into your mortgage.

 Don’t decrease repayments when interest rates fall

Even if your repayments are lowered when fees and interest rates decrease, it doesn’t mean that’s all you have to pay and, by keeping your repayments at the same level when interest rates are lower, you will pay down more of the principle with each payment and make speedy progress on your loan.

Offset it

If you can, use an offset account. A mortgage offset account is linked to your loan and the interest payable on the loan from month to month is calculated by deducting what is in your offset account from your current loan. For example, if your mortgage is $500,000 and your offset account has $10,000 in it, you will only pay interest on the remaining $490,000.

An offset account will save interest while still giving you access to your savings. It also means investors can preserve the tax deductibility of the mortgage.

Consider if it’s time to refinance

Ultimately, your mortgage needs to suit you and your circumstances, or you will wind up paying too much. If you are not sure if your current loan matches your situation, or want to check what other options are available to you, have a chat to Philippa who can help you find the right product for you, as well as negotiating appropriate rates on it.

Of course, it is important to make sure that your lender doesn’t charge fees for extra repayments, refinancing, or any other steps you take in an attempt to save on your loan. Philippa will be able to provide details and make sure you have a loan that lets you pay down your balance sooner.

Rentvesting – enter the property market without sacrificing your current lifestyle

Purchasing in a centrally-located or sought-after area can be out of reach for the average working millennial. Instead, many are opting to rent rather than buy as it means not having to compromise their inner city or beachside lifestyle. But for those who are still eager to enter the market, there is a way to get the best of both worlds.

‘Rentvesting’ is the term coined for when you purchase a property for investment purposes in an affordable location and continue to live and rent in the area of your choice. An example of how the market is evolving, it is a wealth creation strategy that is popular among the younger generation due to the flexibility it offers in comparison to being an owner-occupier.

“Millennials aren’t interested in purchasing a property in the outer suburbs and then having to commute into the CBD, Rentvesting allows your rental income to cover the mortgage expenses, so you can keep living the lifestyle you want without it costing you any money.”

For this strategy to work, you’ve got to be a good saver and there needs to be a focus on delayed gratification, advises the broker. “It’s all about living within your means. Don’t spend big at the start while you’re building it up. Step away from the mentality of negative gearing and tax minimisation and buy neutrally, or ideally, a positively geared property as this provides higher rental yields.”

A recent survey highlighted an increase in ‘rentvesting’ from 21 per cent of investors to 37 per cent over the past twelve months alone. But while this strategy may appear ideal to many, it’s not suited to everybody.

“It’s still a foreign way of thinking, In the past, the great Australian dream was to buy a home on a quarter acre block and then do everything you can to pay that down as fast as possible in the hope of living debt-free. ‘Rentvesting’ is quite the opposite. It says we’re okay with good debt as long as we stick to our budget and keep using the money to invest further. You’ve got to have an open mind and be comfortable with debt.”

To ensure you have the means to make ‘rentvesting’ work for you, have a chat to Philippa.

Following the lodgement of a home loan application, hopeful borrowers are often keen to know what will happen next and how long it will take for them to receive the verdict. The bad news is that there is no one-size-fits-all answer. The good news, however, is that a solid application is the key to keeping the approval time short.

The amount of time it takes for you to receive a response to your home loan application can vary. An answer is usually received between two days to two weeks, depending on a range of factors.

Before offering conditional approval, your potential lender will need to assess your application and conduct a valuation of the property. Of course, having a valuation that is acceptable to the lender done in advance will expedite the process.

With valuations, the intention is to support an application rather than to make or break it. There are a few things that can result in an application not being approved based on valuation, like zoning, property size, or if the condition of the property is poor enough that major repairs would be required before it could realise its market value.

The lender will also assess your capacity to repay the loan amount you have requested. This is where all of the information about your salary and liabilities come into consideration, and where accurate and complete information is essential.

The credit review by the lender can include a bit of to-and-fro between the customer, the broker and the lender due to the lender’s request for further information as that credit review takes place.

Your potential lender makes an overall judgement of you as a borrower and the complexity of your financial history will affect how long this takes.

It’s best to be full and frank in disclosure from a borrower’s perspective. The biggest red flag is non-disclosure of liabilities or adverse information on a credit history, whether it is included in documentation or not.

The complexity of the application process is a great reason why you would sit down and discuss your options and what could be required to make your application as smooth as possible.

Following the submission of an application, you can expect your broker to be in touch with you to update you on progress, and to notify you of the outcome. If your application is approved, your broker will also advise you of when to expect a formal letter of approval from your lender.

Purchasing a property is a thrilling yet nerve-wracking experience, which is why it can be handy to surround yourself with a network of support and expertise. Here are the different parties who may be involved in your home-buying process and how you can use this valuable knowledge base to answer your questions.

Finance broker

Brokers act as a liaison between you and the lender. They will find out about your finances and your property goals, and search for and negotiate a loan product that matches your needs. Not only will they do the legwork and ensure your loan is processed as smoothly as possible, but they are there to guide you throughout the entire process.

Lenders

If you need money to make your purchase, you will need a lender, whether it’s a major bank, a second-tier or non-major, or a specialist lender for more difficult funding proposals.

Real estate agent

Unless you’re working with a private vendor, meeting a real estate agent is inevitable when it comes to purchasing a property. Hired by the vendor, or seller, their role is to market and communicate about the property, advise on preparing it for sale and negotiate with potential buyers.

Insurance companies

Risk management is vital in such a high-value purchase and long-term financial commitment. Insurance, including mortgage protection and property insurance, will help you avoid being hit with a major financial burden should anything not go according to plan. Many finance brokers can deal with insurance as well or will recommend an insurance broker who can.

Conveyancer

The legal aspect of a property purchase is taken care by a licensed and qualified conveyancer. If they are a solicitor, they can also provide legal advice. Their role is to prepare the documents to ensure that transfer of ownership of the property has met the legal requirements in your state or territory.

Valuer

Knowing the value of a property is a vital factor in a loan application, so a valuer can play a huge role in the home-buying process. A lender will often engage an impartial valuer to ensure that the buyer and the lender will know what loan amount may be warranted. The value is based on the property and location, as well as the current market.

Pest and building inspectors

Without the services of pest and building inspectors, a home buyer’s worst nightmare – finding out the property they have bought requires costly renovations or pest treatment – may come true. Organising a pre-purchase inspection is essential. If the property requires structural, wiring or repair work, these inspections can stop you from making a costly mistake or, if the property is still your dream home but just needs a little work, can provide a valuable bargaining chip.

It’s easy to get carried away with the fun part of buying a property – looking at houses – but delaying the less compelling task of arranging finance will weaken your negotiating position on both the property and the loan.

Looking for a property to purchase is an exciting time. Choices regarding location, size, number of rooms and local amenities often see house hunters carried away in a deluge of daydreams and anticipation.

But, before you get carried away, it’s important to check off the essentials first. Although organising your finances may seem drab in comparison to perusing sales listings, gaining pre-approval with a lender will give you confidence about how much you can afford to borrow.

First and foremost, you need to determine if you’re eligible to borrow money from a lender, your ability to repay the loan will need to be assessed – you don’t what to find out after you’ve made an offer that your credit history or deposit is not up to scratch.

Arranging finance before finding the perfect property will put you in a good position when it comes time to make an offer. When you do find the house you have always wanted, you can present to the seller and estate agent as a prepared applicant who is serious and reliable.

It shows you mean business and gives them peace of mind that your financing will not fall through. Don’t be afraid to let the selling agent know you have conditional loan approval in place.

Sellers are most interested in completing their sale fuss-free and with steadfast funding, and showing that you are capable of both will help put you at the top of a potentially competitive list of applicants.

In the instance that you find and secure purchase of a home without having your loan pre-approved by a lender, there are a few pitfalls that you risk running into.

If you don’t have financing to pay for your property, you run the risk of forfeiting your initial 10 per cent non-refundable deposit you need to put down to secure the property. This may differ depending on what state you live in, but the point is it always pays to be organised and have pre-approval in place.

Saving home loan applications to the last minute also leaves less time to find the most suitable loan and have it approved ahead of settlement.

Arranging financing as an afterthought also adds immense pressure to the process of shopping around for the right loan and gathering the paperwork to prove you can service the loan, you don’t want to rush this process.

Contact us today to start your finance journey with Pulp Finance

🏡 Review how much you spend in a month and where your money is going, make a budget and try to stick to it
🏡 Set challenging but realistic goals, make cut backs on non-essential items for example dining out every week, take-away coffee
🏡 If you receive any work bonuses or other windfalls, pay them straight into your savings account to boost it!

Your full financial situation would need to be reviewed prior to acceptance of any offer or product.

Credit Representative 508672 is authorised under Australian Credit Licence 389328

Refinancing also means you could pay off your mortgage in less time, by reducing the number of years.

Although there are high benefits to refinancing, there would be costs involved so we would need to work out if it would be worth it in your own circumstance.

If you’re trying to decide whether or not to refinance, contact Pulp Finance to help with running the numbers.

Your full financial situation would need to be reviewed prior to acceptance of any offer or product.

Credit Representative 508672 is authorised under Australian Credit Licence 389328

Lenders work out your LVR to determine risk.

For example, if a property is valued at $500,000, and you pay a deposit of $100,000, you’ll need to borrow $400,000 for your mortgage, resulting in an LVR of 80%.
Generally, the lower the LVR, then the higher the loans security, which means lower risk and the loan is more likely to be approved.

If you are finding some financial terms regarding home loans a bit tricky to understand, have a chat to the specialists at Pulp Finance.

Contact Pulp Finance on 1300 506 998 or admin@pulpfinance.com.au

What is LVR?

Your full financial situation would need to be reviewed prior to acceptance of any offer or product.

Credit Representative 508672 is authorised under Australian Credit Licence 389328

It all comes down to the risk of income certainty, and a few bad months may mean you can’t make your repayments.

Lenders ask for your previous tax returns and try to figure out how much the business may grow and whether your income will be stable for a long period of time. Techniques vary by lender.

If you are self-employed and would like to know more about suitable lenders for you, contact Pulp Finance on 1300 506 998 or admin@pulpfinance.com.au

Your full financial situation would need to be reviewed prior to acceptance of any offer or product.

Credit Representative 508672 is authorised under Australian Credit Licence 389328

LMI is paid by the borrower, so that if you default (miss a payment due date), the insurance covers the lender (not you as the borrower), for any difference if the property is sold for less than the outstanding amount on the loan. After the property is sold, you’ll be required to pay the same amount to the mortgage insurer, despite the fact that the lender has been covered for their loss.

Borrowers can pay for Lenders Mortgage Insurance upfront, or it can be capitalised into your home loan.

Lenders Mortgage Insurance should not be mistaken for ‘Mortgage Protection Insurance’, which covers your mortgage repayments in the event of death, illness, unemployment or disability.

If you have any questions about obtaining a home loan, contact Pulp Finance on 1300 506 998 or admin@pulpfinance.com.au

Your full financial situation would need to be reviewed prior to acceptance of any offer or product.

Credit Representative 508672 is authorised under Australian Credit Licence 389328