finance Archives - Page 2 of 4 - Berwick Mortgage Broker

Oct 3

What you can borrow or what you should borrow?

The amount you can borrow and the amount you should borrow are sometimes two very different things. Before you apply for a home loan, it makes sense to realistically assess your financial situation. Here’s how to do it.

Understand your borrowing capacity
Generally speaking, your borrowing capacity – what you can borrow – depends on a number of factors, including:

your income
your monthly expenses
your existing debts
how much deposit you have saved
current interest rate
type of loan
whether it’s a principal, or principal and interest loan
the term of the loan
estimated repayments.

However, knowing the difference between what you can borrow and what you should borrow is very important. As a general rule, it’s not a good idea to allocate more than 30% of your monthly household income to repaying your home loan.

Build a budget
To fully understand what your realistic borrowing limit might be, first of all create a budget – and stick to it. Once you understand exactly what’s coming in and going out you can properly assess how much you can afford to repay – and therefore what you should borrow.

If you don’t feel comfortable drawing up the budget yourself, it’s wise to seek help. A financial planner can assist you in preparing a budget.

Expenses to include in your budget include, but are not limited to:

council rates
body corporate fees (if applicable)
insurance costs
maintenance costs
utility bills
estimated groceries
medical bills and health fund payments
school fees
phone and internet costs
petrol and transport payments
entertainment, travel and clothing
other loans or credit card debts.

Future-proof your figures
Remember to leave a bit of wiggle room in your budget in case circumstances change. People can lose their jobs or get sick, or interest rates can rise, which could impact your ability to honour your repayments.

It’s also important to think about some other things that may happen: Is your income likely to increase within the next few years? Are you likely to have children and lose an income? Do you plan to retire shortly? These are all questions that only you can answer, and they will all have an impact on how much you should borrow.

Remember, lenders tell you how much you can borrow, but you know your personal circumstances better than anyone else – it’s up to you to decide how much you should borrow. If you need support and advice, a mortgage broker may be helpful during the decision-making process.

Home Loans, Saving Money by Alan Sarkissian

Jul 19

Finance Broker or bank?

When you’re looking for a home loan, you could go to a finance broker or to a bank. While a bank will only offer you its own products, a credit adviser is an industry expert who will take the guesswork out of finding the mortgage product that suits you and your needs.

It’s understandable that finance brokers are now the number one choice for consumers who are seeking a home loan or to refinance an existing loan. Businesses are also engaging finance brokers to help them with their finance needs from car and equipment leasing to loans to help their businesses expand.

What can a credit adviser do for you?

The leg-work

Finance brokers already know the industry, the lenders, their products and their requirements, saving you a lot of time and energy on research. They will also put the time into finding out about your particular credit situation and have a wealth of experience to draw on to help you simplify it.

Translate industry jargon

Finance brokers are able to make sense of what loan documents and lenders are saying – put it into lay-person’s language, so to speak.

Get you what you want

Advisers will determine your borrowing needs and fiscal ability, and choose the only an appropriate product to suit your requirements.

Give you a broader choice

Being brokers, finance brokers have to offer a larger selection of loan products. While a bank can only offer you its own products, finance brokers can help you choose from a selection of loans provided by different lenders.

Help you compare apples, oranges and the whole fruit basket

Finance brokers have the knowledge and tools to compare often hundreds of products and you get a loan suitable for your circumstances and needs.

Find you a good deal

Loan providers are always spruiking a special deal or two, and these could make a big difference to your repayments or success rate. A finance broker will know which of the deals on the market at the moment will be appropriate for you.

Act as your advocate

A good finance broker wants the best for you, the client. They will be your cheer squad, middle-man, team player and coach throughout the process.

They’re in it for the long haul

A finance broker won’t just love you and leave you – they will oversee and manage the loan’s progression right through to the end on your behalf. By the way, ‘the end’ isn’t when you sign the documents and buy your property; you can expect your finance broker to keep track of you and your changing needs, helping you should you need to switch products or wish to purchase another property.

The key is to choose a finance broker who is MFAA-accredited. The Mortgage & Finance Association of Australia (MFAA) is the peak national body representing professional finance broker across Australia, and all members must adhere to professional development standards and a stringent code of conduct. Find an MFAA-accredited broker at:

http://www.buyerschoice.com.au/alansarkissian/

An MFAA Approved Finance Brokers is much more than your average mortgage broker.

Home Loans by Alan Sarkissian

Jul 5

Top financing apps and tools

Whatever your reasons, understanding your budget is key to living a comfortable life. Whether you’re saving for something in particular, getting out of debt or just trying to stop spending so much money on food, noting your daily spend can definitely help resolve any issues. Here are five apps that can help you you stay on top of your budget.

Money Health Check

Money Health Check assesses your finances and lets you know whether they’re in need of some tender loving care or whether you’re on the right track.

This free MoneySmart app asks some simple questions, and then gives you a breakdown of what areas need attention and where you’re doing well by looking at:

financial goals
income and expenses
debts
saving and investing
insurance
superannuation and retirement
estate planning.

The great thing about the app is that it’s personalised, and at the end it gives you the top five actions you need to take to improve your finances.

TrackMySPEND

Also created by MoneySmart, TrackMySPEND allows you to input all of your expenses so you can find out where you need to cut back and save.

Examples of expenses you can put in include medical, grocery, work or travel, gifts and coffees, lunches or dinners. You can also nominate a spending limit per week, fortnight, month or year, and the app will track your progress against this limit.

The key feature of this app is the ability to mark expenses as ‘need’ or ‘want’. That way, when you revisit your expenses you can see what you can cut back on and where there are opportunities to save.

Pocketbook

Pocketbook categorises all of your spending so you can see where your money is going. Categories include groceries, travel, clothing and fuel, among others. You can also set your budget so you can stick to it.

The great thing about this app is that you can link it to your bank account so you don’t have to manually input every expense – the smart technology does it for you. Another handy feature is the alerts. Notifications appear when money comes out of your account so you won’t miss any transactions or accidentally forget to input them. Finally, there are the encouraging words when you’re close to reaching a goal.

Splitwise

Ever had a friend or family member who constantly forgets to pay you back? There goes that money – and with it, the ability to save. Splitwise is a great way to remember who paid for what and how much people owe each other, whether it’s dinner, rent or a movie ticket.

This app lists what you’ve spent and what the other person has spent, then it does the maths for you. It also gives you the ability to send IOU emails.

Expensify

We’ve all been there – tax time comes around and you simply can’t find all the receipts you need to claim tax back on. Expensify lets you scan your receipts when you get them and stores them in a nice bundle so you can access them at a swipe or tap of your finger.

The great thing about the app as well is that it actually extracts the data, including the merchant, date, time and amount, and puts it all in a downloadable file for you.

Your broker will be able to give you advice to help you save money throughout the loan process. On top of this, sticking to your budget so you can be more financially fit is not difficult – sometimes you just need a bit of technological help.

Saving Money by Alan Sarkissian

Jun 28

Home loan pre-approval explained

For those getting ready to stride into the world of home ownership, the uncertainties of pre-approval can cast a shadow of doubt over an otherwise exciting time. When is it necessary? How long does it last? And what does it involve, exactly?

Pre-approval is a lender’s assessment of your likelihood of being approved for an otherwise suitable loan. The appraisal is made on the basis of your ability to service a loan by looking into your living expenses and liabilities, your credit history, your employment circumstances and how often you have moved home or employment in the recent past.

As it is performed prior to a property being found and chosen, it does not take into account the particulars of a specific property and valuation, which is why uncertainties can arise.

Pre-approval is helpful for those who want to know how much they can borrow before attending open homes, and can be reassuring for new borrowers.

“When someone gets pre-approval they can start looking at properties knowing how much they can borrow. They know what their price range is,” explains the finance broker. “People take comfort in knowing that a lender has looked at their application to make sure it meets policy.”

Pre-approvals are usually valid for up to 90 days but, depending on the lender, may be renewed to allow more time to find a property.

It is very important to note that a pre-approval is not a guaranteed loan. It is your potential lender’s way of signalling how much they expect to lend you. This may change on your official application.

“Policies are changing day-to-day, week-to-week at the moment,” the broker says. “For anybody with a conditional approval, it’s a good idea to speak to their broker to find out if any policies have changed.”

Another thing that may cause a lender to decline your loan application after pre-approval is a change to your pre-approval circumstances.

“We need to make sure the applicant has not gone and got another credit card or car lease, or any other debt that may affect their income and serviceability,” the broker says.

Your pre-approval will also usually be conditional on a property valuation. If your lender does not deem the property a marketable asset, they may not approve a loan.

“We want to check that it is a readily saleable property. That’s the biggest thing. To make sure the actual security itself is acceptable,” says the broker.

Potential lenders need to be wary of the changes that can affect their ability to take out a loan, regardless of pre-approval figures, to ensure they don’t overcommit without a guaranteed source of funding.

Pre-approval is not a guarantee, but is a very useful tool for anyone looking for a property. Speak to an MFAA Accredited Finance Broker about pre-approval before you lock in your Saturday open home schedule.

Home Loans by Alan Sarkissian

Jun 20

Explainer: Capital gains tax

If you buy and sell an investment property, you may be required to pay capital gains tax (CGT) on that sale. It’s important to understanding this tax when buying or selling a home.

What is CGT?

This is a tax that you are required to pay on any capital gain earned on the sale of an asset such as a property. CGT applies to any asset obtained after 19 August 1985.

What is a capital gain?

Put simply, a capital gain is made when a profit is made from the sale of an investment, so when the sale price exceeds the original purchase price. If you sell an investment property for less money than the purchase price, you will have made a capital loss. An industry expert can help you work out your net capital gain or loss.

Calculating CGT

It’s really quite simple. For the sale of a single investment, take the selling price of the property then subtract the amount you originally paid for it, along with any associated costs such as stamp duty and legal fees. The amount remaining will be your capital gain. If you make a loss rather than a gain, you will not be taxed.

You may be eligible for a 50 per cent reduction of the CGT payable if you purchased the property after 21 September 1999 and owned it for at least one year before selling, and the property was purchased by an individual, trust or complying superannuation entity.

Exemptions

While any investment properties sold will be subject to CGT, you do not have to pay this tax on every property you buy and sell. Your main place of residence is exempt, as long as you have never rented it out.

You also are not required to pay this tax at the highest marginal tax rate. Any capital gain obtained will be added to your taxable income and then taxed at the relative margin.

Find an MFAA Approved finance broker who can help you finance you investment property purchase.

This article is for information only; please seek advice from a tax adviser before making any decisions.

Owning Property by Alan Sarkissian