Another Rate Cut – What Does It Mean For You?
The RBA announced yet another rate cut last week and now the banks are slowly passing this onto consumers. These rates are the lowest Australia has seen in nearly twenty years.
Typically, rates move up or down by 0.25 percent although they are at a record low. But what does this actually mean for you personally? Well, firstly, let’s explore the reasons around it and what factors affect those changes. The government uses interest rate cuts to regulate what money is available in the economy. In Australia, it is determined by the RBA. They regulate the interest rate changes according to the economic conditions and future forecasts. Based on these conditions, they then decide if they will increase or decrease the interest rate.
The variables around interest rate cuts include things such as inflation, government borrowing and global conditions.
Most people really just want to know how these cuts actually affect them personally.
The biggest weekly or monthly spending for many people is their mortgage. So the interest rate cut or increase affects how much your mortgage will cost you. You know the saying “money makes the world go round”? Well, in this instance, it kind of does as it’s all connected.
Depending on where the interest rate is sitting will control how much money you have in your household budget. This, in turn, affects how much money you have to spend elsewhere.
As a current homeowner, the interest rate cut means your mortgage payments are decreased and you have more money in your back pocket. Be aware that, at times, if the RBA does announce a cut, it doesn’t always mean the banks will pass it onto you. Most often they do and sometimes they pass only part of the cut.
If you are in the market to purchase a home, low interest rates may seem like the ideal time to buy. Mostly true, for the short term. In Australia, rates can be fixed for a maximum of 5 years, so when that time has expired, chances are, the interest rates may have risen over that period. This will have you facing a significant rise in your mortgage repayments. So always be mindful when purchasing a property that you factor in rate increases.
If you are looking for the right advice and assistance getting the right mortgage for you, give Excellence Finance a call. We will help you out and guide you through the process.
Get CRAA Checked!
Credit can seem like such an ugly word, but it doesn’t have to be. We want to give you some great reasons why you should check your credit report before you go out and apply for that credit card, mortgage, or any other finance so you aren’t in for any nasty surprises during the process.
An apple a day……
Do you visit your doctor regularly just as a preventative measure, just to make sure nothing is wrong or that there aren’t some underlying lurgies hanging around? It’s worth doing a health check on your credit! At the end of the day, you can’t fix a problem if you don’t know it exists.
There are three credit-reporting bodies within Australia that you can apply to obtain a credit report. Most people don’t realise the reports are free, although you must only apply for it once a year. Should there be any discrepancies on the report that are stopping you from receiving that mortgage the credit provider needs to make the amendments. The free reports can take up to 10 days, so if you are in a hurry, fees do apply.
If you are ready to make that credit health check, the national bodies are:
- Veda MyCreditFile.com.au Phone: 1300 762 207
- D&B: CheckYourCredit.com.au Phone: 1300 734 806
- Experian: Experian Credit Services Phone: 1300 783 684
It’s Not Perfect
Banks and finance-related companies are not the only ones that can put a red cross against your name.
Phone companies and utility providers have this capacity too and, unfortunately, they can make mistakes. Sometimes an overdue bill you eventually did pay off years ago can remain on your report.
These mistakes can be fixed and an application needs to be filed so the amendment can be made. If, however, the company refuses to do so, they do need to provide you with a written note with their reasons.
Privacy Law Change
On 12th March 2014, there were changes made to the Privacy Act 1988. Previously, the credit report would only show if you didn’t pay or defaulted on your debts. The new system has been created to show whether you have or have not paid your bills on time from any licensed credit provider i.e. phones bills, mortgages, credit cards, electricity, etc.
Life just gets in the way at times and unless you pay your bills on a direct debit scheme, it is easy to forget a bill. Unfortunately, with these new laws, you need to change your habits and stay on top of it.
Have You Insured Your Greatest Asset?
Could you support your family if you were ill or injured and needed to take several months off work?
We all insure our cars and homes, but what about you and your family? Have you protected your greatest asset – your ability to earn an income?
If you plan to take out a mortgage or investment loan for a property, you might want to consider having income protection insurance to help you meet your monthly repayments in the event that you’re unable to work due to a serious injury or illness. Having a monthly income stream can help ease the financial burden of paying off loans or any ongoing bills and expenses whilst you’re on the road to recovery.
Most insurance companies are able to insure up to 75% of what you earn, inclusive of employer superannuation payments. This benefit is paid as a monthly income stream which can continue until age 65, provided that you’re unable to return to work due to your condition.
Having an income protection policy can provide you and your family with financial security and peace of mind, especially if have a significant amount of debt, for only a few dollars a day. The premiums are also tax deductible or you can also choose to have the policy paid from your existing super fund.
If you would like more information on how income protection can protect you and your family, please contact our business partner, Altura Financial Planning at (02) 8776 0104.
Congratulations! You are about to embark on a life-changing experience. It’s an exciting and stressful time because you want to make sure you pick the right home. Just relax there are a few options to consider in order to afford your first home.
One of the top options is to make a Deposit. This is a valued resource because the more funds you contribute, the mortgage cost will be lower and enable you to get a better loan. It shows the lender you are a lower risk. There are many ways to accumulate a deposit: Save money, use gifted money, equity from another property, pledges from relatives, and First-Home Buyers Grant.
As a First-Home Buyer, you are now in a good position with low interest rate offerings, and the First-Home Buyers Grant. The Federal Government has a grant available to first-home buyers of a certain amount to go towards the purchase of their first property. Some of the qualifications include: application must be filled out within 12 months of completion of construction or settlement of the home and you must be a citizen or permanent resident. For more information, you can contact the Office of State Revenue.
Just as a reminder, the interest rate is only part of the overall pricing. This is something you need to consider when taking out a home loan. Make sure to investigate the features of the loan and ongoing fees.
As a First-Home Buyer, you do have access to similar loans offered to other types of home buyers. Consulting a mortgage broker is wise as a broker has connections with a selective variety of banks/lenders. The broker’s job is to find you a suitable loan with the right features and lower costs. It should be a deal based off your financial situation that will result in you getting an affordable home loan.
Utilise First-Home Buyers information websites to get answers to common questions like home buying eligibility, what are qualifying homes, and residency requirements.
Get started on the right home buying path today and call someone in the know! Excellence Finance – 9609 4655.
Getting Rid of Your Mortgage
Getting rid of your mortgage is like getting rid of clutter in your home. You stare it down everyday wanting it to just disappear with a snap of your fingers but it’s not that easy. It may take you a while but when you get a clutter-free home, it’s like releasing a sigh of relief. Well, reducing your home loan can be a tedious effort but once you begin the process, your financial situation will improve – likened to a sigh of relief.
Let’s examine 4 main ways to reduce the cost of your home loan:
- Get a lower interest rate and only pay for necessary features
- Consistently make extra payments
- Pay weekly rather than monthly
- Make payments above the required amount as often as possible
Lower and cheaper interest rates with the flexibility to make extra payments that accommodate your lifestyle is the greatest ONLY opportunity to getting rid of your mortgage. Lower and cheaper interest rate loans might have slightly higher price. However, only get features you need because they do cost more money.
Also, if you pay more frequently, you get interest savings where interest is calculated daily because you are reducing the loan balance on a regular basis. Debt consolidation is a good way to obtain a lower and cheaper rate. Refinancing is another course of action that could allow you to access cheaper and lower interest rates and better products. In order to refinance, there must be enough equity available in your property. You should have good credit history. Calculate the sums to determine if it’s worth refinancing.
Tip: Some lenders will allow you to pay extra within a fixed limit and at least one lender will allow you to pay extra.
With every dollar put against your loan early will reduce the principal which will eventually result in less interest payments.
Tip: A Line of Credit is not necessarily the best way to pay your mortgage faster. In fact, Lines of Credit are like a very big credit card; the worst case scenario is that they can run at their maximum limit.
Communicating periodically with your mortgage broker keeps you up-to-date with changes in the home loan market. Notify your mortgage broker with any changes in your personal finances. If a new product is offered, it may benefit your financial status in helping reduce your home loan.
If you’re ready to speak to someone in the know, call Excellence Finance today at 9609 4655.
General Advice Warning: The information/advice provided in this web site is general advice only. It has been prepared without taking into account any person's individual objectives, financial situation or needs.
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