I’ve just saved one of my customers $1200 per month in financial outgoings and she is over the moon!
Loan consolidations are a good way to reduce outgoing financial commitments and breathe a little easier until you can recover, especially when you have been facing personal or relationship hardships. They are also a great tool for re-structuring how you control debt.
When you consider that a car loan of $50,000 can cost you over $1000 per month and a $10,000 credit card another $200-300 per month, it makes sense to consider ways you can reduce your payments.
One way you can get ahead is to consolidate car loans and credit cards into home loan debts and then re-structure your home loan to accommodate necessary future debt you will incur, without having to take out car or credit card finance in the future.
An easy way to think ahead is to split your home loan. Try to imagine a typical home loan of 450K split into two, one 350K and another $100K.
The 350K loan is the one you work hard at reducing long term, whereas the 100K split is used as an expense loan that replenishes funds for you through a redraw facility so that everything you pay over and above your minimum payments will sit as an available source of funds for future purchases.
As an example, instead of taking out your next car loan for instance, you may choose to consolidate your current loans into one and with the savings you make you can pay an extra $500 per month (which will go towards redraw) towards your smaller loan. Every year you will have $6K redraw which will be offsetting your home loan interest and for example after 4 years will give you enough redraw for your next car purchase at a home loan rate.
You can also choose to sweep your credit card each month so you do not pay any interest on purchases by using the funds you have accumulated in redraw.
This kind of disciplined approach makes home loan consolidations a great way to re calibrate and take control of your finances.
Book a Free Consultation
If you would like to book a free, no-obligation consultation with me to discuss your situation and compare your current loan with other options, please either call me direct on 0425 272 286 or fill out the contact form below and I will get back to you as soon as possible.
[contact-form-7 404 "Not Found"]
Regulatory pressures in the residential investment market over the past few years have resulted in some changes to the way lenders have applied investment rates.
Currently, ‘Interest Only’ Investment loans have incurred rate increases, whereas ‘Principal and Interest’ Investment loans have had some significant discounts.
These changes in most cases and with most lenders have resulted in customers being better placed shifting to ‘Principal and Interest’ products to gain more competitive rates, with the added incentive of also being able to pay down their balances.
This shift, combined with some very competitive new business ‘Principal and Interest’ rates, means it is a great time to re-assess your investment loan options.
The good news gets better though if your owner occupied home is unencumbered. You will be able to refinance your existing investment debt under your owner occupied security and enjoy the benefits of owner occupied rates, currently the lowest they have been for a long time.
When was the last time you re-assessed your investment rates? Talk to me about a free appraisal.
If there was ever a time to get into the housing market for first home buyers, it is now.
First home owners who purchase units ‘off the plan’ or units / that are newly constructed will be able to take advantage of a stamp duty exemption PLUS a first home owners grant of $10,000 up to $600,000.
First Home owners who want to purchase a home and land package can buy up to $750,000 with the same incentives and there are still some existing homes in the west of Sydney under the 650K threshold.
Security guarantees mean that as long as you have the borrowing capacity, you can also get into a new home with minimal or no savings.
See me today for a free assessment.
You can purchase an investment property without drawing cash out of your owner occupied home, simply by cross-securitising your owner occupied with the new investment property.
This means you combine the total value of both properties as one total security amount, reducing your overall LVR when you combine the total debt on both properties.
As an example, your owner occupied may be worth $800,000 and you have $200,000 owing. The new investment you want to purchase is valued at $600,000 but with stamp duty etc , will cost you $625,000.
Your total debt is now refinanced for $825,000 over the total security amount of $1,400,000 (value of both properties), resulting in a very good LVR of under 60% risk, all with one lender.
You will be able to split the loan into two components, one being the original owner occupied debt of $200,000 and the other being the total of $625,000 as an investment debt for maximum tax benefits.
In this process both securities are encumbered to the one lender, but you have been able to take out one loan, without a prior refinance to draw out any cash for a deposit.
In the loan process, this is an ideal approach when you already know the details of the investment property you’d like to purchase. Alternatively you can apply for a pre-approval to determine the maximum borrowing amount for your new investment.
Stamp Duty on a purchase of $650,000 would normally cost you an extra $25,012, which, when added to legal costs and lender fees , could end up costing the new home buyer up to $677,000.
Most lenders will lend up to 95% of the purchase price (including LMI) so you would need a minimum of around $80K to get into a house. With the abolition of stamp duty, new home buyers can get into a home with as little as $55,000.
This is great news and gets home owners into their first home sooner.
Fill in our online assessment form and find out your borrowing capacity within 24 hours.
RELOCATION LOANS – I don’t want to move to sell…
It can be a complicated process, working out the right steps to move out of your existing property (which needs to be sold first) and into a new place (which can take 3-6 months to build). There is also the problem of having to rent out a place if you need to sell your place first and then the cost of moving house twice, not to mention the stress of organising each step.
Relocation loans can be a very practical way to plan for the shift between your old home and your newly built home, without having to move out of your home at all.
Essentially the lender will work out the entire cost involved in buying your new home as well as factoring in your existing home loan debt during the build period (Peak debt). They will also work out estimated selling price for your existing home and what end debt you will be left with after your home is sold.
The difference is called the capitalising loan amount, which is the estimated amount which will be paid out after the sale of your house.
The end debt and the capitalising debt will be set up as two loan amounts. The end debt you will pay off as any normal loan. The capitalising debt will just sit there gaining interest until your first home is sold.
The proceeds from sale will go towards the capitalising debt, leaving you the end debt.
5 Steps to owning your own home
This is a generalised process for purchasing an established home and not advice. House and Land purchases vary slightly regarding the timing and loan structure. Refinances have a different process.
- Pre-approval – aka Approval in principle (AIP) or Conditional Approval – Essentially this generally means the lender has assessed your income, liabilities and credit history and is confident to lend you a sum of money. This is conditional to the valuation of property you find being equal to or more than the contract of sale price. This is also conditional to your financial situation not changing adversely since assessment. You will have between three and six months to look for a property.
- Finding a house – Finding a house in this current market can be very frustrating so the key is building relationships with your local real estate agent so you remain in their view when homes come up for sale. Also, it would be prudent to know your maximum limit. You will need a buffer to accommodate a seller’s market so set your pre-approval amount to your maximum (You can always reduce the borrowing amount if purchase price is less, but it’s a lengthier process to ask lender for more money if you’re short). When you find the place you want, it can come down to that 20-30k buffer that will get you over the line. For a 30 year investment you will need to weigh up the pros and cons.
- Holding Deposit and Cooling -off period – When you find your house you will need to make your intentions known by placing a small holding deposit with the vendor (seller). You will then be given a 5, 7 or 10 day cooling off period. Ask your solicitor for 10 days so you have necessary time to complete the following:
- You will have to place a 10% deposit when cooling off expires. If you need to rely on the bank’s lending amount for some of the deposit on your home, your mortgage broker has this period of time to organise a deposit guarantee to be given in place of a cash deposit (see Deposit Power website for full details).
- Your solicitor/ conveyancer has this period of time to do necessary checks on the house, pest, structure etc
- The lender brings your pre-approval to a formal approval.
- A Contract of Sale is presented to you with the purchase price when you place the holding deposit and you sign the contract of sale (exchange of contracts). This is given to your broker, who sends to your lender and organises a valuation on your property.
- A valuation is returned and if it is in line with the contract price, the formal approval is given, which in turn gives you confidence to place the 10% deposit on your new home.
- Loan contracts are sent to you for signing. There are generally 45 days from placing the 10% deposit to the settlement of your loan. Within the first week of receiving formal approval your loan documents will be sent to you for signing. Once they are signed and returned they are certified by the lender and documents prepared for settlement and dispersement of funds.
- Settlement. Transfer of deeds into your name, dispersement of funds etc. Generally it means you can move in!
Family Pledges are a very good, but sometimes complicated way of helping young couples into their new home, particularly if they have limited savings.
This strategy is best explained by way of illustration: (hope it makes the point, see below ).
Essentially, where there is sufficient equity in the parents’ home, they are able to pledge a portion of their home’s security to their childrens’ purchase.
In this example the applicant wants to purchase a home for $600K, they have $25K saved which they need to use to reburbish the house they wish to buy. The parents pledge $150K of their security towards the purchase, making the overall security now 750K (600 + 150). The 600K loan they wish to borrow now becomes 80% (LVR 80%) of the overall security held for this purchase.
Please note: The family pledge is not an exchange of cash or a refundable gift… it is a second mortgage on part of the parent’s home.
Why Consolidate? Won’t this mean I pay more in the long run?
This is probably the biggest misconception about consolidating debt and if you are disciplined enough you can save tens of thousands over the life of the loan.
Monthly financial debts:
Home Loan amount $300,000 @4.6% = $1540
Car loan $30,000 Monthly payment = $700
Credit cards Limit total $20,000 = $600
Total debt – $350,000
Total monthly outgoings – $2840
New home loan of $360,000 (includes an extra $10,000 in an offset facility)
@ 3.7% = $1657 per month.
This is a saving of: $2840-$1657 = $1183
Throw half of it back on the loan = $592 per month extra
This saves you almost 12 years on a 30 year term and $100,000.
There are many reasons why customers fall behind with finances. Changing between employment, illness and marriage separations can place so much stress on individuals that in desperation they will use whatever means possible to stay afloat financially.
Did you know that there are temporary refinancing and consolidation options that can help you stay in your home, even with adverse credit like credit card arrears or defaults, home loan or personal loan arrears.
Below is a real example of customers that I have helped during the last 12 months:
ADVERSE CREDIT AND CREDIT CARDS MAXED OUT.
Applicant 1 is 50 years old and had been made redundant six months earlier. He was working in a casual job 35 hours a week when he came to me, on approximately 45K. Applicant two had steady income for the last 7 years on approximately 60K.
When they came to me they had maxed out three credit cards and all were in arrears, although their home loan was being paid on time. Without the capacity to catch up the arrears, as well as private school fees in arrears, they feared they might have to sell their home.
Short term solution… I was able to refinance them with a specialist lender for 6 months and consolidate existing credit card debt although all three cards were behind in payments. The home loan rate was 2% higher than current introductory offers, but I was still able to save them $300 per month and place them in a better financial position.
Long term solution… After 6 months of good conduct, they will be eligible to apply for a new refinance at a prime rate, placing them in an even far better financial position.