In recent times, many Australian lenders have introduced a mandatory genuine savings policy for everyone that applies for a home loan.
This was implemented in response to the increased number of first home buyers that were applying for mortgages with no deposit and no savings.
So how does this affect your ability to borrow?
Lenders have different genuine savings requirements depending on the amount that you borrow.
- 80% of the property value: Genuine savings isn’t required.
- 85% of the property value: Genuine savings isn’t required by most lenders.
- 90% of the property value: Most lenders require genuine savings.
- 95% of the property value: Almost all lenders require genuine savings.
- 100% of the property value: A couple of our lenders offer guarantor loans for 100% or more of the purchase without genuine savings. Read the rest of this entry »
Understanding how interest affects your home loan is an important step in the loan process. Even if the interest rate remains relatively low it will still add up to a large portion of your total repayments over the duration of a 25-30 year home loan term.
Many people misunderstand how interest is calculated. For example, when investigating a $100,000 loan at 10% interest, a novice borrower might think the total amount of interest to be paid will be $10,000.
The above calculation would be accurate if the $100,000 (plus $10,000 interest) is paid off in one year, as the interest rate is a yearly cost. However, home loans are a long term commitment where repayments chip away at the amount owing over time.
Putting it in perspective: a typical repayment rate on the $100,000 loan at 10% interest could be $1,000 per month, which would add up to $12,000 paid over one year. In other words, you will have paid $10,000 interest plus $2,000 off the principal amount. This means that in the second year of your repayment schedule you will be paying 10% interest on the remaining $98,000 of your loan.
It’s slow going at first, but with each passing year your $1,000 monthly repayments will more rapidly pay off the lowering interest, plus a greater percentage of the principal amount. In other words, you need to be patient to see results, and the last ten years of your loan repayments will be an exciting time as you watch the amount owing quickly disappear. Read the rest of this entry »
There are many reasons you may want to purchase a used car instead of a new one. Some of them are listed below:
- Much better price- There is a $20,000.00 difference between a new and a used car according to Cars.com. The interest rates are not much different between the two types of cars. Even though used car interest rates may be slightly higher, this may be offset by cheaper insurance rates.
- If you buy a used car from a private party, you will not encounter the additional fees associated with new cars.
- Deciding to buy a used car opens up a huge inventory of cars to choose from. You won’t only be able to choose from this year’s models. All of a sudden, a whole world of cars has opened up to you to buy.
- Used cars depreciate much more slowly and you paid less to begin with.
- New cars are much more expensive to insure because of their replacement value. You will have to pay more for GAP insurance to cover this difference. Insurance for new cars may be an added expense you haven’t thought about.
- The internet opens up a whole new way of finding information out about used cars. There are websites specifically created to let you know if a particular vehicle you are interested in has been in a major accident. There are also sites that can give you the value of the car you are considering. They also have websites like thecarbuyers.com.au that offer a centralised online destination where individuals can buy and sell their cars. The options are endless.
If you are considering the option to buy a used car, you may want to think fast because cars that are in great shape are snatched up quickly. People favour cars that have had only one owner because service history tends to be more consistent. You may be able to take advantage of parts that are still under warranty, if the owner has kept all the receipts.
The process of buying a used car from a private party can be a great move for the seller as well as the buyer. Using online platforms such as thecarbuyers.com.au allows for a hassle free experience.
Are there disadvantages to buying used? A few. If you prefer to lease, a used car probably isn’t a viable option. By buying a used car, you may be missing out on some of the latest-and-greatest safety and technical gadgets. And, of course, there’s that new car smell. Let’s face it: Having a new car is a great feeling.
In the end, all of these things have a price, often several thousand dollars. Is it worth it? That’s up to you – but if you’re looking to stretch your car-buying dollar as far as possible, it’s hard to argue against buying used.
The top 5 tips on getting the lifestyle you’ve always planned
The main question people ask is “Can I meet my goal of X?” or “how do I get to Y?” When you’re looking at the lifestyle you want now, over the medium term and ultimately during retirement, there’s some planning that needs to be done. What do you want out of life? How much risk are you willing to take on? What happens if I get sick or ill and I can’t work?
My experience is that it’s all well and good to have a plan, but what will really build your wealth is discipline and implementation. It’s like saying “I’m going to lose weight”. If you don’t do anything about it or put together a strategy to make it happen – it probably won’t. Furthermore, if you don’t put the plan into action, and then continually review, tweak, and assess the plan, it definitely won’t happen.
So, in saying that, here are my top 5 tips on getting the lifestyle you’ve always planned: Read the rest of this entry »
It’s often touted as the antidote to rising house prices, but a Reserve Bank of Australia official claims that increasing housing supply won’t automatically bring prices down.
Speaking on Tuesday to a real estate conference in Sydney, RBA head of financial stability Dr Luci Ellis said the desire of people to live in certain areas will result in price increases regardless of how much land is released for housing.
Dr Ellis people’s desire to live in areas with established amenities in place should not be underestimated.
“Yes, some people like a bigger garden, for privacy or to enjoy in other ways,” Dr Ellis told those in attendance.
“But being in the ‘right’ kind of neighbourhood with the best amenities, close to commercial centres and other services, is more important to most people, if their willingness to pay for it is any guide,” she said.
The fact that those desirable areas present limited opportunities for buyers is the main reason prices rise and won’t reversed by releasing land in other areas Dr Ellis said.
“The physical reality is that the supply of good locations is more or less fixed in the short term,” she said.
“So any sizeable boost to demand cannot be fully absorbed by more supply.”
Dr Ellis said this phenomenon was the reason why suburbs surrounding the desirable areas see their prices rise as gentrification takes place.
“To give a few examples, in the space of a few decades, suburbs like Paddington, Newtown and Balmain in Sydney or Fitzroy and Northcote in Melbourne went from ’scary, to edgy, to trendy, to pricey’.
“The housing stock was also renovated in this process, but most of the price action can probably be explained by the rising relative price of those locations.”
This entry was posted in Australian Mortgage News
With the new financial year upon us, now is a good time to spring clean, de-clutter and renew your finances for a fresh start to 2015/2016. Here are a few simple steps to help de-clutter and organise your finances.
Clean out your wallet
The first step to de-cluttering your finances is to clean out and re-organise your wallet or purse. Most of us carry our ID, credit cards, money, store cards, bus passes, and other important things in our wallets on a day-to-day basis. Having a clean and organised wallet can create a positive flow on effect to all other areas of your finances. So take 2 minutes each week to clean out and process those crumpled up receipts, organise your notes and loose change, and ensure you carry only the cards you need.
Check your spending leaks
This can be an eye-opening experience and also help identify areas where you can easily save money. To recognize the leaks, try tracking all your earnings and spending over a set period – usually a month. If you pay for everything using your credit or debit card, review your latest bank statement and use it to look at your expenses.
Next, highlight any unnecessary purchases, frivolous spending patterns, and interest or late fees that can be avoided. Once identified, calculate how much this is costing you on a yearly basis and direct this money towards more important areas of your budget such as savings or paying personal debts. Read the rest of this entry »
Saving money is something we all hope to do, and there are many reasons why setting up a savings account is a good idea. Anyone who has been short of ready cash will realise the difficulties that can result, such as a credit card debt spiral, inability to pay fees or fines on time, penalty payments and ongoing money worries. Of course, getting started with a savings plan is the hardest part, but even a little saved weekly or even monthly will shield you from life’s unwanted surprises.
Setting a comfortable savings target is the first step. Not only will there be money aside in case of emergency, you will also feel increased satisfaction and confidence due to your disciplined savings efforts. Whether you are single or part of a family, a better and more consistent future is guaranteed when savings are available for emergency use.
Having money in the bank will provide peace of mind and the ability to ride out any down times during your career or between jobs.
Your savings account can be further divided into additional priorities and future plans such as a vacation or even a home deposit.
The first and most important consideration of a savings account is to have ready cash available for emergency use.
If possible, have around 10 percent of your salary directly deposited into your account. It will be much easier to resist temptation this way, and you will become habituated to understanding that the 10 percent is not for immediate use.
Keep on track with your plan and you will ultimately find yourself being encouraged by the savings. Try to see your savings account as a long-distance race rather than a sprint. You will eventually see a sizable balance in your savings account, and even have the opportunity to dedicate a little toward luxuries for yourself and your family.
For the sake of minor frugal living adjustments, such as fewer shop-bought coffees or meals per week, your growing savings will ensure you have a financial cushion, peace of mind, and the added confidence that, for better or worse, only money can buy. Happy saving.
Would you be better off paying cash or taking out a loan? What are your options when it comes to car finance?
Should You Pay Cash For a Car?
Paying cash is a great option when you have lots of it to spare. There are no borrowing costs, no repayments and you don’t need to go through the process of applying for a loan.
If you don’t yet have the cash on hand you’ll need to budget and save. Realistically, how long will that take?
If you choose to pay cash, how sound will your finances be once you’ve made your purchase? Would running and servicing costs lead to cash flow problems further down the road? And would you be able to cope with any unforeseen expenses?
If you’re in a position to pay with cash, it ultimately comes down to personal circumstances as to whether it’s the best option or not. Just be sure to consider your other options. Read the rest of this entry »