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Do You Need a Financial Planner or a Finance Broker ?

Do You Need a Financial Planner or a Finance Broker ?

When taking the plunge into the world of home loans and property investment, the challenge often lies in knowing which expert to approach for help. Brokers and financial planners, although similar in their professional outlook, cater to different financial endeavours.

Brokers that deal in home loans must be qualified and licensed loan advisers with in-depth knowledge of home loans and options suitable for a range of different financial situations. They negotiate with lenders to arrange loans and help manage the process through to settlement.

 “When it comes to talking about a client’s debt structure or interest rates, or the best way to set up a loan, it’s really something that needs to be done by a mortgage broker who is qualified to give credit advice,” says the finance broker.

In contrast, financial planners assist with anticipating and managing longstanding financial outlook. They help sort through and select options for investment and insurance, with attention paid to retirement planning, estate planning and investment analysis.

“Financial planners take care of more of the long-term, wealth-creation strategy, as well as super and life insurance, and other sorts of wealth protection insurances,” the broker says.

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Case study: How to avoid settlement penalties

Case study: How to avoid settlement penalties

Connie Wilson was well on her way to becoming a first-home owner when issues cropped up prior to settlement that threatened to cost him her deposit.

Having found the house she wanted to buy and exchanged contracts for sale, Connie found herself considering a costly settlement extension due to unexpected problems with her deposit.

While she had thought that having a deposit sitting on her account would make the process simple, Connie had not realised that she needed to have the funds in her account for a minimum of three months before a lender would consider them genuine savings.

Her deposit, a gift from her parents, was due to reach the three-month milestone only nine days before settlement. Certain that she would need to apply for an extension, Connie spoke to an accredited finance broker to see how she should go about it.“She had wanted to request a two-week extension on settlement, but I told him not to get the extension,” broker says, “it would have involved substantial penalty interest”.

Rather than having Connie foot a $400 per day bill for an extension, the broker jumped into organising a loan, using the strong relationships and knowledge gained over a decade in the industry to hurry the processes along.“What I did was look at the different panels and the different policies, I called the BDMs and sent detailed scenarios to three lenders so that there were a few options in case one didn’t work out,” the broker explains.

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The perfect property at an affordable price - it’s not a myth

The perfect property at an affordable price - it’s not a myth

So you’ve found your dream home, but it’s in need of a little TLC. While others may see this as a deterrent, this is actually a great opportunity to nab the house of your dreams at a price tag that’s within your means. Here’s how to tactfully negotiate the price without ruining your chances of securing the property.

• Never enter a negotiation empty-handed Whether it’s hiring inspectors for a building and pest report, or obtaining quotes from tradespeople, obtaining facts and figures will give you ammunition when requesting a price reduction.

“Even if it costs you extra, it’s worth getting all the information before making your offer. People often underestimate how much repairs will cost,” says the real estate agent.

• Separate your emotionsThe most tactful way to negotiate is to eliminate all emotions, advises the real estate agent. “Try to separate yourself from the outcome and present your side logically. The owner is under no obligation to accept what you offer, no matter how well you present your points. So if things don’t go your way, being negative won’t do you any favours.”

• Remember this is someone else’s houseNegotiation is a two-way street, so in order to come to an agreement, concessions will have to be made on both sides. “Try to understand what is important to the owner,” advises the real estate agent. “What can you offer to counteract the price reduction you’re after? Perhaps a longer settlement period so they can find a new home? It’s little enticements like this that can often be much more valuable than a couple of extra dollars.”

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How to pay off your home loan faster and save big bucks

How to pay off your home loan faster and save big bucks

Reducing the life of your loan isn’t difficult; there are many simple things you can do to cut years off your mortgage. Here are some tips that will help you be mortgage-free sooner than planned.

Make sure you have the right type of loan

Ensuring your loan allows extra repayments without penalty will let you to make the most of bonuses or funnel small extra payments to reduce the loan principle more quickly, saving on interest immediately, while an offset account will use your savings or living expenses to reduce your principle, while still allowing you to access these funds from a transaction account.

Small extra repayments

One of the most obvious ways to pay off your home loan quicker is to make extra repayments. Depositing lump sums, such as a tax return or work bonus, will always be beneficial, however it doesn’t always take large amounts or windfalls to make a substantial difference – planning for regular, small cash injections can have a great impact over the life of a loan.

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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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Financing a Very Small Property

Financing a Very Small Property

Marie Owens, having purchased a 36 square metre apartment seven years ago, was recently ready to upgrade and visited her finance broker. To pay the deposit and related expenses on the new, larger property, she needed to release equity in her current apartment.

“She wanted to keep the one-bedroom unit as an investment property for tax purposes, to reduce the marginal tax she pays,” says her finance broker. “We needed to release some equity in the current unit, which will be used as a deposit to purchase her next home.”

When Marie initially bought the unit, she could borrow up to 80 per cent of the value of a 36 square metre property. But her lender changed its policy, and will now only finance up to 60 per cent of the value of any property that is under 40 square metres.

“Since the things have got a lot tighter,” explains her finance broker. After extensive research, he could find only one lender who would finance a property of that size at an 80 per cent loan to valuation ratio (LVR).

“I used an accredited mortgage finance broker group to ask my peers, and I found one lender who would work with 80 per cent LVR on the small property. I usually like to put forward three lenders and products, but there was only one this time,” says Marie’s finance broker. “The application’s been lodged and it’s all underway, so we’re going to release the equity from her unit now.”

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How to avoid paying too much for a home

How to avoid paying too much for a home

Knowing what a property is worth is central to avoiding paying too much for it.

Set a benchmark

Comparing nearby properties that have sold recently is the best way to assess an acceptable price for the property you are looking at and provides a valuable bargaining tool when you are negotiating with a seller or agent. Make sure the properties are comparable, with a similar land size and number of bedrooms, for example, so you aren’t measuring apples against oranges.

“Your mortgage broker can give you a list of sales in the area and then you can drive around and look online to do a quick comparison. If you can find one or two similar properties then you can be sure of what the property is worth,” advises the finance broker.

Keep in mind current market conditions

The property market is always changing, so doing this research once and sitting on it for a few months will offer little help. Going to open homes and auctions regularly will give you an insight into the current state of the market and how much certain properties are going for.

Expand your search

“My number one tip is to look at properties in the suburb next to the one that you want,” says the finance broker. “We find that first-home buyers in particular usually end up buying in the more affordable suburb next door to the one that they first wanted to buy in.”

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An expert solution to credit debt

An expert solution to credit debt

Diana and Paul put everything they had on the line to start a family, including their credit and home loan. With the expert advice of a finance broker they were able to start fresh for their baby girl.

Diana and Paul had professional careers and a new home, but needed help from a fertility clinic to make their family complete. The expensive treatments delivered a beautiful baby to the couple, but their credit was suffering as a result.

They were living off credit cards, nearly $70,000 in debt and spiralling as they took out new cards to bring others into the black. Paul had been to nearly all the local banks and none were able to offer a viable solution.

It was then Paul met with their expert Finance Broker, who rolled up his sleeves to see what he could do.

“We worked out that Diana and Paul were paying above and beyond what was necessary on their home loan, and so we decided to switch the repayments to interest-only while they focused on getting their credit card debt in line,” the finance broker explains.

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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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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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Tiny houses

Tiny houses

It’s easy to understand why we look for the largest, most prestigious properties we can afford – we are constantly urged to define our success by our possessions: bigger, better, newer, faster, shinier. A relatively recent counter-movement, however, urges lower impact, fewer goods and less consumption, and at its core nestles the tiny house.

With the price of property ownership creeping skyward across most parts of Australia and leaping into the stratosphere in others, a big home isn’t always affordable to buy. Add the cost of energy and living, and big isn’t always affordable to maintain, either.

With the boom of environmentally friendly housing and a return-to-basics design mentality, a trend for micro housing has cropped up, producing some positively diminutive living arrangements.

Whether it’s a one-room cabin with a loft for a bed space, a tree house or a converted shipping container, the trend in minimalist shelter has well and truly skyrocketed.

Despite how innovative those ideas are, there is no denying that they aren’t suited to everyone. What could apply broadly, however, are their lessons in downsizing. Not only can people save money, but they can save time and energy, too. It’s a good idea to consider the following benefits of smaller housing before buying the biggest home you can afford.

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What to look for at an open house

What to look for at an open house

There’s an old saying that you should never judge a book by its cover, and this is true for houses – after all, who would buy one having never seen more than the front door? Open inspections are opportunities to really flick through the pages, and here’s how to take full advantage.

Use your sensesSniff, peer, listen and feel as much as you can. Your nose might pick up a mouldy or musty smell that may mean damp. You might spy small or hidden cracks that could mean structural issues. That clattering sound when water is running? That can be a sign of serious plumbing problems.

Don’t be distracted by the beautiful blingAnyone can invest money in pretty cushions and lamps to set off the house. Or bake some cookies just as the open inspection starts so the house smells cosy and homey. But when buying property, you’re buying the sausage not the sizzle, so look past the perfectly presented and lit lounge room to the size, shape and placement in the floorplan of the actual room, and imagine how you will use it.

Look upThat means checking the roof on the way in and looking at the ceilings in the rooms. Damp and leakage issues are costly and notoriously hard to fix. And once the rot sets in, it’s there to stay.

That kitchen and bathroom advice It’s true what they say. If these two rooms aren’t how you would like them to be, are you prepared to live with it or spend the money required to transform them? Bathroom renovations will be upwards of $10,000, and probably a lot more.

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Buying a property with friends

Buying a property with friends

There are many considerations when buying property jointly, so speak to an expert early to make sure you’re doing it the right way.

If you’re looking for a creative way to overcome being locked out of the property market by rising prices, buying a house with a group of friends may be a solution. It can also be a minefield though, so here’s how to avoid a blast.While the excitement of banding together in such a life-changing moment can put everyone on a bit of a high, you need to plan for situations in which things might go wrong.

It’s essential you have all been completely upfront from the start about what you want to achieve by purchasing property together, as well as your personal expectations about timelines for purchasing the property, paying it off and selling it. And all of this must be documented in a co-ownership agreement.

Your mortgage finance broker can refer you to a solicitor of conveyancer with experience in working on co-ownership agreements, who can advise and create yours and make sure it is suitable, providing the necessary legal protection for everyone involved.The big question will be what structure your ownership takes. There are two options: joint tenants and tenants in common. Joint tenancy is the most common ownership structure in Australia, as it is how most family homes would be owned. However, because friends are less likely to share assets and long-term debts than a couple, and less likely to will their assets to each other, the ‘tenants in common’ model would usually be more suitable for this situation.

Under this model, each person owns a specified share of the property’s value. These shares may be equal, but need not be. So, if you are willing to contribute $500,000 to the price of a property, but your two friends are not quite at that stage and only comfortable contributing $250,000 each, you could own a 50% stake while they each own a 25% stake. Keep in mind, each stake is in the property’s value, not control of the property. Legally, under this model, each owner has the right to full access to the entire property.The co-ownership agreement created in collaboration with your conveyancer should set out how the costs of maintenance and insurances are divided, as well as how sale proceeds will be divided.

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5 things first-home buyers need to know

5 things first-home buyers need to know

Before you decide to purchase your first property there are a number of things to consider, including your current personal circumstances and financial status.

1. Think about why you want to buy a home.

Do you want to live in it or will it be an investment property? This can help determine the kind of loan you apply for and home you buy, depending on your short and long-term plans.

2. Research potential properties and loans.

Knowing the market is crucial, so do some research on the areas you are targeting, check out auction clearance rates and recent sales, as well as price trends in the area. Once you are aware of what you are looking for and the approximate price, the next step is saving a deposit.

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Purchasing property in Australia on a 457 visa

Purchasing property in Australia on a 457 visa

Most people on a 457 visa have a misconception that they are unable to purchase property in Australia while they are on a temporary visa but this is just not the case. A 457 visa holder or other temporary visa holders can easily purchase property although they do need to seek Foreign Investment Review Board (FIRB) approval. The FIRB policies have changed a few times over the past five years but at present people can apply for approval as long as the property is a residential property and they intend to live in the property. If the purchase is for investment then it needs to be a brand new property. The approval is on the property and not the applicant, so an approval is required for each property you are looking at purchasing.

457 Visa Mortgages and Bank policies

Prior to setting up CBM  Mortgages I worked for one of Australia's leading banks and created their home loan policies for temporary visa holders, specifically their 457 visa home loan policy which many brokers use today. My job was to make it easier for someone migrating to Australia purchase property. Previously the banks looked at potential mortgage applicants as citizens or non citizens and unfortunately temporary visa holders specifically on a 457 visa were unable to access the same policies as Australians and were treated the same as someone living overseas. After producing a report it was demonstrated that selected visa types are for highly skilled individuals that have moved to Australia to work and many to start a new life. It was shown that although these 457 visa holders do not hold citizenship, their occupations are on the Australian department of immigrations skilled occupation list (SOL) and they generally command a high salary and are quite a safe bet when purchasing property. If they were to lose their job then they it should not be too hard for them to find new employment due to their occupation. Also due to them not receiving any First home Owners benefits (FHOG) unless they purchase with an Australian permanent resident or citizen, the chances of them leaving and walking away from a property they have had to make a considerable contribution is slim. The policy for these applicants was introduced and 457 visa mortgage applicants could go as high as a 97% lending to value ratio (LVR) on selected properties if approved by the banks credit department. This was lowered to a 90% LVR at the start of the GFC when the bank pulled back many of it's credit policies. 

So presently applicants can purchase a property with a 10% deposit plus money for their costs (stamp duty and lenders mortgage insurance premium). This is still a great opportunity for temporary visa holders as nearly all banks require at least a 20% deposit plus costs. Applicants would still need to be approved by the banks credit department and they normally like to see a minimum of 6 months with their current employer and a minimum of 12 months left on their visa. Each application is assessed on a case by case basis though and looked at on it's merits.

Current 457 visa approval levels and forecasts

At present the Department of immigration are approving just over 30,000 new 457 visa applications per year with the department of immigration forecasting this to rise to 52,000 in 2016. After calculating the 457 visa holders returning home this leaves a net migration of  approximately 22,000 for 2012 with forecasts up to approximately 26,000 in 2016. The 457 visa is normally between 3 months and 4 years with the majority being 4 years. If the applicant still qualifies then these ncould be extended for a further 4 years. Unconfirmed sources estimate there to be as many as 100,000 457 visa holders currently in Australia. This means there are many people in Australia currently on a 457 visa and potentially looking to extend their stay in Australia and purchase property in Australia. 

                                                                                                                               

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Recent Comments
Steveoverseas
Great article, was full of information I was looking for and really informative with the data. Once I save up a bit more I will de... Read More
Friday, 11 January 2013 06:17
Neil
Thank you for this information Craig, it's info I have been searching for. I have been in Australia only for a few months on the 4... Read More
Sunday, 13 January 2013 03:55
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