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How to save a deposit: house-sitting

How to save a deposit: house-sitting

One of the toughest parts of realising the dream of owning a home is saving for a deposit. The options seem pretty dismal – subsisting on a diet of beans on toast, never socialising, moving back in with the parents – and are almost enough to prompt a commitment to a life of renting. Of course, you may not have all the comforts of home, but house-sitting can even mean seeing a bit of the world while saving a deposit.

To help the savings grow without resorting to these options, many people house-sit while squirrelling away funds.

David and Ellen, a couple in their mid-20s, have saved almost $25,000 they would have used on bills and rent by house-sitting. It was an especially good financial decision when they were living on a single wage, with David working at the local bike shop as Ellen finished her final year at university.

Before they started house-sitting, David and Ellen were renting a small apartment in Mosman, NSW, and they estimate they have saved $22,000 in rent and approximately $2000 in bills by house-sitting.

Of course, it is much easier if you have flexibility in where you live and for how long, but the real key is an ambition to save.

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Rules of investment

Rules of investment

When you’re trying to secure finance for an investment property, it’s important to keep a few simple rules in mind to make sure you get the best deal possible and will be able to afford the repayments, come what may.

If you’re thinking about purchasing an investment property, it’s important to manage the risks adequately. For example, you shouldn’t rely on rental returns as a guaranteed income to meet loan repayments, as there are times when a property may be vacant or hard to fill immediately and some months the rental return on a property may be diminished by maintenance costs.

“A finance broker will help a borrower find the right product, so that he or she can afford the repayments,” said one helpful adviser. “The adviser will add a two per cent rate hike onto the rate the borrower will be looking to take, to make sure they can still make repayments if, or when, mortgage rates go up.”

With access to property data and trend analysis, a finance broker can pull property reports for you, detailing how the area has performed in the past as an investment, the average median house price or rate of return and how much the property values have increased over the past five or six years. These are details that investors generally can’t access.

Even better, if you meet a local finance broker in the area where you want to invest, he or she will know that particular market and be able to provide a lot of detailed information from working there every day.

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How to Keep your Loan Application on Track?

How to Keep your Loan Application on Track?

Other than the obvious documentation that needs to accompany an application, satisfactory identification and evidence of income by way of pay slips, many lenders will expect to see a reference from your employer, group certificates or tax returns, and records of any investments or shares that you might have.

For the best possible chance of getting the loan that suits your circumstances, you need to tick all the boxes. If an application is not completed correctly, you risk delays in approval, or even being declined by potential lenders.

If you are self-employed, you will need to organise alternative documentation to prove income, such as financial statements relating to the profit and loss of your business going back two years.

Lenders will also want to see bank statements going back a few months in order to track your spending and savings history. Most importantly, you will need to provide the details of your debts.

You must include documents that outline debts, personal loans, credit card liabilities and any expenses relating to dependants. If you don’t disclose this information, your loan will very likely be declined.

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Who are the different parties involved in purchasing property?

Who are the different parties involved in purchasing property?

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.

Real estate agentUnless 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 companiesRisk 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. Finance brokerBrokers 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. LendersIf 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.

ConveyancerThe 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.

ValuerKnowing 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.

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Exit costs when refinancing

Exit costs when refinancing

Refinancing either a home or business can be a great way to save money if you believe you are paying too much for your loan, but there is more to it than just finding a loan with a lower interest rate and making the change. Before making the switch, ensure the savings you could make outweigh the fees involved.

Here are the different exit costs to consider:

Establishment feeAlso known as ‘application’, ‘up-front’ or ‘set-up’ fees, these cover the lender’s cost of preparing the necessary documents for your new home loan. They are payable on most new loans, and the alternative to not paying this particular fee is being charged higher ongoing fees for the life of the loan.

Mortgage discharge feeCovering your early legal release from all mortgage obligations, this fee is not to be confused with an exit fee. Also known as a ‘settlement’ or ‘termination’ fee, its purpose is to compensate your lender for the revenue it may lose due to the contract break.

Exit feeAlthough loans taken out after 1 July 2011 are not subject to deferred establishment, or exit, fees, those taken out prior may still be. Also known as ‘early termination’ or ‘early discharge’ fees, they can sometimes be paid by your new lender but are normally applied to an early contract exit.

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Explainer: fixed-rate loans

Explainer: fixed-rate loans

When purchasing a property, borrowers can decide between fixed-interest loans that maintain the same interest rate over a specific period of time, or variable-rate loans that charge interest according to market rate fluctuations.

Fixed-rate loans usually come with a few provisos: borrowers may be restricted to maximum payments during the fixed term and can face hefty break fees for paying off the loan early.

 With interest rates at an all-time low, taking the option of locking in an interest rate on your home loan to guard against possible future fluctuation may be attractive. However, it pays to know the ins and outs of fixed-rate loans before committing to one.

However, locking in the interest rate on your home loan can offer stability.

“For those conscious of a budget and who want to take a medium-to-long term position on a fixed rate, they can protect themselves from the volatility of potential rate movement,” the finance broker says.

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Explainer: interest-only loans

Explainer: interest-only loans

Borrowing to buy a property and repaying only the interest for a set period can be a great choice for some, beause interest-only loans can offer the right candidate financial flexibility while they invest. There are, however, some very important risks to take into consideration.

With interest rates at historical lows, interest-only loans may sound more appealing than ever because they offer the opportunity to enter the property market with lower repayments. In saying that, care must be taken, because interest-only loan repayments do not pay down the actual purchase price of the property or reflect a realistic repayment on a standard mortgage.

 “If you’re only repaying the interest on a loan, you’re not building up the equity on your home during that period.”

For an interest-only loan to be part of an effective property investment plan, borrowers must be comfortable that a property’s value will increase substantially. If the value doesn’t increase by more than the interest paid, they may end up losing out on the equity front.

Eventually, interest rates will rise again as the market ebbs and flows and, once a loan reverts to principal-and-interest repayments, borrowers who are unprepared may find themselves in a financial struggle.

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How a guarantor can help you secure finance

How a guarantor can help you secure finance

When you’re desperately trying to save up a deposit for a home and just see the prices of property climbing and climbing, it’s difficult to remain patient. But there is another way: a guarantor can help.

If you don’t have a substantial deposit for a home loan, there are still a number of ways to obtain credit. These are known as family pledges and there are two types available to borrowers: service guarantees and security guarantees.

"Service guarantees are less common that security guarantees" explains finance broker. They involve a family member guaranteeing all of the repayments on a loan, as well as being named on the property title.

A drawback of this approach is that it usually means first home buyers are not entitled to any government grants. A more popular option is a security guarantee. Borrowers who have a limited deposit often use this approach. In this situation, a relative or friend (usually a borrower’s parent or parents) is prepared to use the equity in his or her own home to guarantee the deposit of the borrower.

For example, for a total loan amount of $600,000, in a security guarantor situation the borrower/s would take on the debt of 80 per cent of the value of their loan, which would be $480,000, in their own name/s.

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Small business finance without the bank

Small business finance without the bank

It can still be difficult to make a case to a bank when looking for finance to start a new business or invest in the growth of an existing one. The good news is that applying for commercial finance through a bank is far from the only option.

Personal loansA relatively young enterprise that doesn’t have a track record of success may not be looked upon favourably by banks, which make lending decisions based on risk. A lack of documented history doesn’t aid a business loan application, so for those who still want to go through the bank they use for transaction accounts, a personal loan could be the way to go.

The downside may be slightly higher interest rates and lower loan amounts, but a personal loan can provide a good buffer for start-ups and application is relatively easy.

Private funding Private funding is when individuals lend generally through a trust account. While it can be a little more costly than the average business loan, it carries the advantage of flexibility.

“If it’s a ridiculously difficult deal to put together, with no banks wanting to touch it due to not having the appropriate documentation or being outside LVRs” says the finance broker. “In saying that, however, I would strongly recommend speaking with a broker who has experience in private lending because, as a consumer, you’re kind of flying blind and you need to know that they’re going to be trustworthy.”

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How to refinance to renovate?

How to refinance to renovate?

Refinancing your assets to renovate a property is a significant decision that will hopefully improve your standard of living or add substantial value to your property. It isn’t as straightforward as you might expect. The type of renovation proposed goes a long way to dictating the loan required. If the wrong loan is chosen, you could be left with a pile of unexpected debt.

Know your budget

Before considering refinancing, you need to have a clear idea of your budget.

If you underestimate your budget, you run the risk of getting knocked back from your lender, according to finance broker.

“I know a lot of homeowners who have estimated a budget of say $100,000 to do renovations, only to discover it will cost a lot more,” the broker says

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How to choose the right business loan

How to choose the right business loan

From time to time, a business needs a cash injection. With so many lenders offering a dizzying array of products, it can be difficult to know what to choose.

There are plenty of different types of business finance, but before diving in and applying, it’s important to understand your requirements first, so that a loan can be matched to your needs, and so that you can potentially avoid the problem in the future.

“Do your homework first, because if you don’t, you’re going to buy the wrong product,” says the finance broker. “There are hundreds of ways of getting the money, but you’ve got to match those with the purpose.”

The consequences of choosing the wrong finance product include paying too much for finance, or ending up with a loan that simply isn’t fit for the purpose – in this case it may make a problem worse, rather than solving it.

“It comes down to finding out what your real issue is,” says the finance broker. Work out how long it will take to repay the amount you need to borrow, whether the repayments will impact the business, what has caused the shortfall and whether you need to take any other action.

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When Would I Refinance My Mortgage?

When Would I Refinance My Mortgage?

Whenever it makes financial sense to do so.

Heard about mortgage refinancing? In the past, most people who took out a mortgage doggedly continued with it until they had paid it off. These days, people refinance their mortgage much more frequently. The average duration of a home loan in Australia now is just 4-5 years. Here we look at some of the reasons people in Australia refinance their home loan.

Mortgage refinancing reasons: lower rate

The most common reason for people to refinance their mortgage is to get a better deal. But be careful you don’t become interest rate-fixated. When you refinance your home loan, you need to consider fees and charges as well as the interest rate. You often have to pay charges for exiting your current home loan, plus charges for taking out the new mortgage. You need to be sure that in refinancing your home loan that you’ll be better off in the long run after taking into account all costs.

Mortgage refinancing reasons: more flexibility

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How to avoid extra home loan fees

How to avoid extra home loan fees

Exit and early termination fees can put the brakes on plans to sell, to refinance, and to renovate or purchase an investment property. Here’s how to avoid them from the start.

Fees charged for the early repayment of variable-rate loans were phased out by government reforms in 2015. However, fixed-rate loans may still carry these fees, and both fixed-rate and variable-rate home loans taken before the reforms may still impose penalties for early repayments. Those pre-reform loans may now still be running.

“In most instances, for most lenders, fixed-term loans had a term of five years,” the finance broker explains. “That will be the case for most borrower’s pre-2015.”

If you took out a loan before 2015 and have decided to sell, it can be difficult avoiding early termination fees for fixed-rate loans, as they protect your lender against the loss of the interest they reasonably expected to earn on your finance.

You are able to receive a waiver or fee reduction, although you rely on the discretion of your lender to receive one. Having a good repayment history and being a long-term customer helps.

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Why your broker asks so many questions

Why your broker asks so many questions

Ever wondered why mortgage brokers have to ask you so many questions about your financial circumstances? It’s to ensure that fraudulent applications don’t slip through the cracks and that your loan suits your needs now and your plans for the future.

Brokers can face claims against them if they submit inaccurate documentation, regardless of whether falsities are the brokers’ intention, a mistake or the result of a client’s dishonesty.

It is your broker’s job to find out everything they can about your financial situation and your goals for the future. Not only does the process help to identify fraudulent application activity, it also ensures that they are serving your best interests.

You will definitely be asked to provide proof of identification as well as details about your income and spending habits. Your broker will want to discern how much you can afford to borrow. You will need to prove this by way of payslips or proof of income.

You will be asked to provide information regarding your dependants, any lawsuits you may be involved in and whether you have filed bankruptcy, and you might be asked twice, by your broker and by the lender.

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How can I secure cash fast?

How can I secure cash fast?

Small business owners know all too well that the unpredictable nature of the industry can sometimes mean that quick access to cash flow is needed.

Solution #1: equipment finance

For many small businesses, especially those in the hospitality industry, income and cash flow are heavily reliant on functioning equipment. So for restaurant owners who find their delivery truck has suddenly decided to call it quits, turning to equipment finance could be the best solution.

“Supported by most major and subsidiary lenders, rates are offered competitively at around five to eight per cent. Where a chattel mortgage, a mortgage on a commercial vehicle, is elected, borrowers own the asset from day one and can claim payments upfront, which enables greater cash flow within the business as well as interest and depreciation add backs,” says the finance broker. “Ultimately, I would recommend this solution as they are safe, structured and can have tax benefits associated with ownerships.”

Solution #2: unsecured business cash loan

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Selling your home? Here are the first steps to take

Selling your home? Here are the first steps to take

There is more to selling your home than putting up a ‘For Sale’ sign on your front lawn. Here are the first things you should check off your list to help you get the largest return from your investment and to ensure the process runs as smoothly as possible.

Choose a quality agentAsking family and friends who have purchased or sold a property about their experience is a great way to ensure the agent you’ve enlisted will provide quality service, explains the accredited finance broker. “A website and promotional material will always highlight the agent in the best possible way, but word of mouth and past client reviews will show their true colours,” she says.

Make sure the agent specialises in your area and is someone you feel comfortable around as they don’t just negotiate prices on your behalf, they also act as a mediator and represent you as a vendor.

Prepare the paperworkGetting together all the documents required is a tedious yet necessary part of the process. Before a property can be marketed for sale, your agent requires a copy of the Contract from your legal representative, explains the broker. From a disclosure document to a home loan pre-approval, ensure all the paperwork is prepared in time to ensure it all runs smoothly.

Don’t take things personallyRemember this is a business transaction; don’t feel insulted if you receive feedback on the property that doesn’t match how you feel about your home. To ensure you come out with the best deal, remove all emotion and think of your house as a commodity.

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Where there’s a will, a Credit Adviser can find a way

Where there’s a will, a Credit Adviser can find a way

There are many paths to successfully financing a property purchase. Recently, an expert finance broker helped a young couple, who had nearly given up hope, realize their dream.

If at first you don’t succeed, ask more questions. That’s the motto of finance broker, who doesn’t let a history of refusals stand in the way of securing the right loan.

Recently, Jim and Jenny Stewart, who were keen to buy their first home but had had their loan application rejected twice already, were referred to him.

“They didn’t think they had a chance of getting the amount they wanted, and I wasn’t sure I could get them approval either, but I started asking questions,” says the finance broker.

“It’s not enough to gather only the information required to submit an application; it’s important finance brokers know what borrowers’ plans for the future are, whether they plan to renovate or rebuild, for example, and what their background is.”

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How to invest on a low income

How to invest on a low income

While you may not need a six-figure salary to invest in property, those who earn a relatively low income will require a little more creative thinking to start a portfolio. Here are some tips to help you get started.

Find an investor-friendly loan

The challenge for low-income earners, explains the finance broker, is the time taken to save for a sufficient deposit. Some lenders require a higher deposit for an investor than is required for an owner-occupier, so seek out a lender and loan that is investor friendly, or consider living in the property for a period after the purchase before converting it into an investment property as your portfolio grows.

In any case, having at least 10 per cent of the property’s purchase price as a deposit will not only increase the likelihood of loan approval, it will also increase your borrowing capacity and lower the risk that you will have to pay lenders’ mortgage insurance (LMI).

Prove your financial discipline

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Save your legs and call a loan expert

Save your legs and call a loan expert

How do you match a loan and lender to your needs? Rather than running around finding out the details of each and every lender and loan, draw on the expertise of a Finance Broker.

One of the benefits of working with a finance broker is the extensive menu of loan options they have at their fingertips. But given such a wide choice, how does your adviser narrow down the options to find the right loan for you?

Mortgage finance broker sometimes have access to more than 30 different lenders. These include the big four banks, which offer loan options for people who may not meet the lending criteria of the top banks.

When it comes to making loan recommendations, a credit adviser looks at a number of different factors.

First they’ll talk to the client about their goals. This might be to pay off the loan as quickly as possible, or to find a loan with the lowest interest rate possible. They may want a loan with a fixed term, or they may want a facility with a low fee structure. Each client is different.

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Three things you need to ask your partner before you apply for a home loan together

Three things you need to ask your partner before you apply for a home loan together

Before you apply for a home loan with your partner, there are a few discussions that you need to have that go a little beyond what you may know already.

You’ve found someone you want to spend your life with (or a significant chunk of it, at least) – the hard part is over, right? Wrong. You know each other well enough to know whether or not you each blow the budget every month, but you probably don’t know each other’s complete credit history. So, before you buy a property together, there are plenty of discussions you need to have. Here are three of them.

Have they defaulted on any payments?

He or she might be relatively debt free now, but has this always been the case? One bad mark on a credit file, such as a late car payment or a default on a credit card, will change the approach you need to take when applying for finance.It doesn’t mean you can’t secure finance, but it may mean you need to apply to a specialist lender for an alt-doc loan. Your Mortgage Finance Broker can help you find the right lender and craft an application to avoid the heartbreak of continual rejection.

That savings balance, where has it come from?

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