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Improve your finances one month at a time with this 2019 to-do list

Improve your finances one month at a time with this 2019 to-do list

31 Dec 2018 | Personal Finance

Improve your finances one month at a time with this 2019 to-do list

Improve your finances one month at a time with this 2019 to-do list

It’s easy to get overwhelmed with a long list of tasks, so we’ve simplified things for you. Just tackle one job on this list each month and you’ll make a huge difference to your finances in 2019.

January: Create a monthly family budget in four steps

1: Calculate your household’s monthly income

2: Work out all your monthly expenses

3: Set up your budget using our handy budget planner.

4: Stick to it throughout 2019 using ASIC’s TrackMySPEND app.

February: Get a home loan health check

A startling eight out of ten Australians don’t know the interest rate they’re paying on their home loan. Now’s a great time to consider:

– fixing the rate of your home loan

– switching to a principal and interest home loan

– setting up an offset account.

March: Cut back on take-away coffees and other items

Buying a $4 take-away coffee each day costs you a whopping $1460 per year. Making it yourself using a French Press or Moka Pot costs just $260 – a saving of $1200.

Consider other luxuries you can cut back on too, such as wine, beer and takeaway food.

April: Cut up the credit card?

The average card holder is paying around $700 in interest per year if their interest rate is between 15 to 20%.

By now the family budget you set-up in January should be running smoothly. The next question to ask yourself is: do I really still need a credit card if a debit card will suffice?

May: Ask your employer about salary sacrificing

Generally, salary sacrificing is tax-effective for people who earn more than $37,000 a year.

It helps you save on tax by allowing you to forego your salary in return for non-cash benefits, including, car leases, childcare, student loans or superannuation contributions, to name but a few examples.

June: Prepare for the 2019/20 tax year

If you run your own small business, consider the following four tax tips ahead of the 2019/20 tax year.

  1. Separate your business and personal accounts to avoid using your business bank account like a personal ATM machine.
  2. Establish a second business account to pay tax and GST and assist with cash flow.
  3. Stop using cash for business transactions – it’s easy to misplace receipts and miss out on deductions.
  4. Learn in advance what you can and cannot claim.

July: Review your insurance costs

Whether it’s your home and contents insurance, your car insurance, or a life insurance policy, by calling three or four insurance companies, getting quotes, and then comparing, you can save hundreds of dollars each year.

August: Ask for a pay rise

If you want to earn more money to put towards your financial goals, consider asking your boss for a pay rise. Here are six tips for broaching the topic:

  1. Schedule a time with your boss and inform them of the meeting’s purpose.
  2. Know what your industry peers are getting paid.
  3. Clearly outline the value you bring to the company.
  4. Have reasons ready for why you want the pay rise (children’s education, etc.).
  5. Don’t take your employer hostage by threatening to move to a rival company.
  6. If you receive a ‘no’, ask for specific KPIs to work towards and ask for a reviewal date.

September: Look into your banking fees

How much are fees eating into your savings and spendings accounts? If you don’t know, find out, then shop around for a better deal.

October: Consolidate your superannuation

If you have more than one superannuation fund, consolidate it by following these steps to avoid doubling up on fees.

November: Start saving about 20% of your pay

Now that you’ve got most of your finances in order for 2018, aim to save and/or invest around 20% of your pay.

The exact amount you aim to put away – and whether you’ll save it, invest it or put it towards your mortgage – will depend on your financial goals. ASIC’s TrackMyGOALS app can help.

December: Set a New Year’s resolution goal for 2020

The December holidays are a great time to sit back and take stock of what’s really important to you and your family.

So use this time to carefully consider what financial goals you want to achieve in 2020.

It could be saving up for a long overdue holiday, putting away more money towards your kids’ education, or buying an investment property.

If you’re stuck for ideas, come in and have a chat to us. We’d be more than happy to help you identify goals, and can also help with other suggestions listed above.

Improve your finances one month at a time with this 2019 to-do list

Choosing the right investment ownership model

28 Dec 2018 | Investor Loans

We all know that choosing the perfect investment and getting the timing right are both critical. What people often overlook, however, is selecting the right investment ownership model.

How you own your investment – and with whom – is a decision you’ll want to nail from the outset.

That’s because the asset ownership structure you select can dictate the tax you pay, access to finance, estate planning, control of your investment, costs associated with maintaining it, and the risks you face.

Today we’re going to take a quick look at your options when it comes to asset and investment ownership.

Personal ownership – sole or joint

Sole ownership is the complete ownership of an asset by one individual. This is perhaps the simplest and least costly form of asset ownership.

You’re entirely responsible for the asset, which means you carry full liability for all debts, finances and taxes.

Joint ownership involves two or more individuals owning a share of the asset.

Depending on your situation there may be tax benefits or tax discounts associated with joint ownership. For example, joint ownership of a property by a husband and wife may qualify for a tax benefit. You may also receive a 50% discount on Capital Gains Tax (CGT).

One of the main disadvantages of personal asset ownership is that it offers little protection for your investment if you become bankrupt or are sued.

Trust ownership

A trust is an investment structure that obliges a person, or group of people (trustees) to hold assets for the benefit of others.

Trust ownership can offer additional asset protection, allow for profit sharing and tax benefits, including a 50% discount on CGT. It can also help with estate planning and reduce the costs associated with transferring asset ownership.

Trusts, however, can be costly and complicated to establish and are also associated with more reporting and administrative responsibilities than personal ownership. Depending on the trust structure you select, it can also be more complicated to secure an investment loan.

Company ownership

A company can own a stake, or the entirety, of an asset.

Again, company ownership can help protect assets from personal losses and liabilities. It can also deliver tax benefits because any income and capital gains is taxed at the company tax rate of 30% (which may be significantly less than your personal marginal tax rate).

On the other hand, companies miss out on the 50% discount on CGT that is possible through personal or trust ownership.

Your control over the asset – including when you buy and sell – may also be diluted via a company structure.

Superannuation ownership

Investing through a superannuation structure can deliver significant tax benefits as any income earned via super can be taxed at as little as 15%. CGT from investments via super may be discounted by a third.

Investing through your super is also an estate planning strategy that many people consider.

That said, there are complex rules around super contribution caps, tax treatment and borrowing arrangements when investing via super. The location, type and liquidity of your investment may also be restricted.

Get in touch

Understanding which ownership option is the best fit for you and your asset can be complex. As you can see, it’s not straightforward – there’s a lot of considerations and no two situations will be the same.

So if you want to get it right from day dot, get in touch.

We can take into account all relevant information to help you decide what option to choose so your asset is owned in the most beneficial way.

Improve your finances one month at a time with this 2019 to-do list

5 common reasons home loan applications are rejected

21 Dec 2018 | First Home Buyers, Home Loans, Investor Loans, Refinancing

Whether it’s unrequited love, or an unsuccessful home loan application, getting your heart broken is never easy. Here are five common reasons home loan applications are rejected.

 

Due to the banking royal commission, lenders are cracking down on home loan applications.

Applications that would have been approved in a just few days last year are now being put under the microscope for much longer periods.

To help you in your quest to secure an approval, here are five common reasons a lender may reject your loan application.

1. No proof of genuine savings

Lenders use the term ‘genuine savings’ to describe funds you’ve saved over a period of time.

Basically, if you can’t prove to them that you can knuckle down and save for a home loan, they’re going to baulk when it comes to believing that you can pay one off.

Here are seven ways to prove ‘genuine savings’.

– Regular deposits into a savings account over 6 months.

– Term deposit savings accounts held for at least 3 months.

– Shares or managed funds held for at least 3 months.

– Rental history for the past 6 months.

– Salary sacrificing through the First Home Super Saver scheme.

– Additional repayments into a car loan or personal loan.

– Deposit paid to a real estate agent, builder or developer that was originally in your savings account prior to being paid (ie. not borrowed from somewhere else).

2. You spend like a drunken sailor

Lenders not only want to see you save money. They also want you to demonstrate that you can exercise discipline when it comes to your spending habits.

Therefore lenders will trawl through your spending accounts hunting for any big-ticket items that are out of the ordinary.

This might include a $400 ATM withdrawal at a casino, or a $100 purchase at a baby store if your application says you don’t have children.

3. Your credit history ain’t so hot

Since Comprehensive Credit Reporting was introduced in July, lenders have been sharing a lot more of your credit history.

You can get a free credit report once a year from one of three national credit reporting bodies, which are listed on this government website.

If you find errors in your report, you can get them corrected. You can also take steps to improve a ‘poor’ rating by clocking up a period of consistency and reliability.

4. You don’t have a big enough deposit

Lenders like to see that you’ve saved a deposit of at least 10% to 20% before applying for a home loan.

But all too often people forget to factor in additional funds for other expenses such as stamp duty, lender’s mortgage insurance and removalist costs.

That means, for example, if you have saved $70,000 for a $700,000 loan, you might want to keep saving for a little while longer before you apply for a loan to factor in those other expenses.

5. Your employment situation

Even if you tick all of the boxes above, lenders may also reject your loan application if you haven’t been in your job long enough. And if you’re unemployed, they can’t approve it full stop.

Those who are self-employed are also running into headwinds. Lenders are becoming increasingly hesitant to approve loans unless a steady and reliable income stream can be proven. That said, there are lenders who are more flexible when it comes to self-employed workers, and we can help guide you towards them.

How we can help

We help people who are seeking a home loan overcome all of the above hurdles on a daily basis.

So if you or someone you know has recently had a home loan rejected, or you simply want to nail it the first time, get in touch.

We’d love to help you navigate the tighter lending standards to make your dream of home ownership a reality.

Improve your finances one month at a time with this 2019 to-do list

Bank wanted mortgage broking fees transferred to customers

19 Dec 2018 | Home Loans, Investor Loans

Bank wanted mortgage broking fees transferred to customers

Bank wanted mortgage broking fees transferred to customers

A big four bank almost overhauled its broker remuneration model so that the cost of mortgage broking services would be transferred to customers.

The Royal Commission (RC) revealed that back in 2017 the Commonwealth Bank planned to replace commissions paid to mortgage brokers with a flat fee.  Instead of the bank paying brokers a commission.  Customers would pay a flat fee to brokers.

CBA’s CEO Matt Comyn told the RC that CBA believed the most attractive model was one where “customers would pay a broker”.

The move would have saved CBA $197 million over five years if everyone in the market moved with them.

They wanted regulator intervention to drive an industry wide move to this model.  CBA feared they’d be left hung out to dry by the other big three banks if they went alone.

“We came to a view that nobody will follow and we will suffer material degradation in volume,” Comyn said.

Not only would this model be a major disadvantage to consumers going forward. It reduce a new broker’s revenue on an average loan to about a third of what it currently is.

Basically, the only real winner would have been the big banks.

Not the customers. Not the mortgage brokers.

The banks.

Some interesting stats

A Deloitte Access Economics report may explain why CBA was looking to limit the growth in the mortgage broking market:

– Over the past three decades brokers have contributed to the fall in net interest margin for banks of over 3% points. This saves you $300,000 on a $500,000 30-year home loan (based on an interest rate fall from 7% to 4% pa).

– 27.9% of residential loans are arranged through lenders other than the big four banks and their affiliates. Providing competition and more choice for consumers.

– On average, mortgage brokers have 34 lenders on their panel and use 10. It’s this additional choice that adds competition in the market. The only winners from less competition are the big banks.

– 56% of residential loans were settled by mortgage brokers in the September quarter in 2017. This is up from 44% since 2012.

– 70% of a broker’s business comes directly or indirectly from existing customers, demonstrating high levels of customer satisfaction.

– 9 out of 10 customers are satisfied with the services provided by mortgage brokers.

It’s still a live issue

Basically, the reason CBA didn’t pull the trigger on the move was because it was worried that if it did, the other lenders wouldn’t join them. Instead, they’d swoop in and steal their business.

However, if the regulator enforced a flat fee model, then all the lenders would have to get onboard.

How can you help?

The best way is to contact your local MP to let them know you’re happy with the mortgage broking service we’re currently providing.

By letting your local Federal Member of Parliament know this you can help prevent the cost of our future services being transferred from the bank over to you – and you’ll also be showing your support for us.

If you’d like any more information on this issue don’t hesitate to get in touch. We’d love to speak to you more about it.

 

Improve your finances one month at a time with this 2019 to-do list

Don’t get outfoxed: a quick guide to property valuation

14 Dec 2018 | First Home Buyers, Home Loans, Investor Loans, Refinancing

Information is power. Knowing the property valuation can help you secure a great price during negotiations.

Whether you’re a buyer or a seller, having an accurate property valuation conducted can give you the confidence you need to close the deal in your favour.

And it doesn’t matter if you’ve had one conducted recently. The housing market is constantly shifting.

A house worth $600,000 a year ago could be worth much more – or even less – today.

So it’s vital to always obtain reliable, up-to-date advice on the value of a home when buying or selling.

Who conducts a property valuation?

Property sellers can approach either real estate agents or private valuers for a valuation.

While private valuers are not used by banks when lending decisions are made, they are useful for a guide to the estimated market value.

In fact, “bank valuations” are altogether another thing. They’re conducted by a lender to determine their risks when you apply for a home loan. And they’ll usually be more conservative than the market valuation.

What exactly is meant by “market value”?

The market value of a property reflects the price that a willing buyer and willing seller negotiate before a transaction takes place.

It is not the current listing price of the property or the amount of money that was last offered for the property.

How property is valued

A property valuer takes a number of different things into account before coming up with a figure.

Typically, they look at the number and type of rooms, the size of the property, location, and areas for improvement.

They may also look into whether the building has a sound structure, the quality of the property’s interior design and fittings, ease of access, and planning restrictions.

Outside the property, they will look into any local council issues and compare recent sales figures in the area to understand how in-demand the property may be.

Factors that influence value

Many of the factors that decrease a property’s value are beyond the control of homeowners.

The popularity of a property’s location and surrounds will have a huge impact on its price. For example, a new whizz bang unit block may go up next door making yours look outdated, or a new high rise could block your ocean view.

Government legislation – such as changes to foreign ownership or Labor’s proposed changes to negative gearing and capital gains tax – can also impact the market.

There are, however, ways that sellers can increase the value of their home outside fluctuations in the market. We’ll take a look at a few below.

Kitchen and bathroom: These areas attract the most interest from potential home buyers. Consider allocating a chunk of your budget towards new sinks, countertops and cabinets.

Fresh paint job: Painting can make a property feel new. Neutral creams and whites suit most people’s preferences. Lighter shades also give the impression of spacious rooms.

Get trimming: If your property looks gloomy, try trimming overgrown bushes, mowing the yard, and growing flowers.

Improve energy efficiency: Buyers may dig deeper into their pockets for a home that helps them save on energy costs. Install appliances with positive energy conservation ratings. Also, replace old windows with ones that have a durable sealing.

And a quick warning to the buyers out there. Make sure you don’t allow yourself to get “wowed” by cosmetic upgrades. Remember that there are other important factors you’ll want to consider when you evaluate a property too.

Want to conduct a property valuation?

If you’d like help finding out exactly how much a property is worth, then give us a call.

We’d be more than happy to put you in touch with a reliable, independent valuer who will help give you an insight into the market value of the property you’re looking to buy or sell.