Finance Broker or bank? What can a credit adviser do for you?

 

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.

 

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 credit situation and have a wealth of experience to draw on to help you simplify it.

 

Translate industry jargon

Finance brokers can 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 an appropriate product to suit your requirements.

 

Give you a broader choice

Being brokers, finance brokers must 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.

 

www.safefuturefinance.com.au

0433 630 716

martin@safefuture.com.au

 

Car finance for businesses

The preservation of working capital and taxation benefits are two big draw cards for businesses looking to finance staff vehicles.

Companies the world over are often faced with the costly requirement for staff cars. However, with the number of financing options on the rise, many business owners are turning to funding these purchases rather than paying cash.

Financing, rather than buying outright, enables businesses to take advantage of two key benefits: greater control of cash flow and working capital, as well as various tax benefits.

The preservation of working capital is a key benefit for business owners when comparing financing against paying cash for staff vehicles

A business owner needs to consider whether their working capital is better spent on other aspects of the business, such as paying debtors, advertising or even purchasing more inventory.

Some businesses may even be able to invest working capital and achieve a rate of return that exceeds the interest charges associated with financing.

The taxation benefits associated with financing staff vehicles is another key reason why businesses are turning to financing options. Of course, there are many different types of finance, each offering different tax benefits, as well as the luxury tax threshold to consider, so tax advice is strongly recommended.   

In certain circumstances, the financing of business assets provides a business owner with an opportunity to claim various tax deductions, such as rental payments, interest payments and depreciation, thus minimising the amount of tax payable

Going down the financing route can be cost-effective, and with expert advice it can also be pain-free when it comes to paperwork. Some businesses can arrange finance for a vehicle without the need for financial statements.

With a standard application taking no more than 20 minutes to complete motor vehicle finance as an integral component in providing a holistic, comprehensive service to customers

What’s more, with interest rates at all-time lows, the decision between paying cash and financing business assets should be an easy one.

www.safefuturefinance.com.au

0433 630 716

martin@safefuture.com.au

When should I find a finance broker?

Saving for a home? If you haven’t met with a finance broker yet, you’re doing it wrong. Here’s why:

 

  1. When saving a deposit to buy a home, many people have a goal amount in mind that they need to save before they meet with a finance broker who will help them secure the finance.
  2. If this is you, you’re doing it wrong. From day one, when you first think ‘I could maybe buy a house if I worked hard and saved a lot’, you’re ready to have a finance broker on your side.
  3. A finance broker’s knowledge of the loan and property market will help you work out how much you will be able to borrow, which determines the size of the deposit you will need to save.
  4. They will also be able to help you develop a realistic timeline to save your deposit and find ways to pay down debts faster, and provide creative solutions that will help reach your goals sooner.
  5. You may also be pleasantly surprised to find that you are closer to your goal than you thought. The tools in a finance broker’s belt that can help you realise your dreams more quickly and efficiently include lender’s mortgage insurance, specialist lending products, land loans and, for investors predicting significant rises in property prices, interest-only loans.

More importantly than just being allowed to provide these products, an MFAA Approved finance broker can help you work out whether they suit your situation and goals. For example, while buying land now to build on later lowers the cost of your initial investment and can be an opportunity to take advantage of a dip in land prices, there is no point in it if you will not be able to secure construction finance down the track.

Speak to Safe Future Finance, an MFAA Approved finance broker. We can help you take the first steps to owning your home.

 

www.safefuturefinance.com.au

0433 630 716

martin@safefuture.com.au

 

 

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.

  1. 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. Let’s say we give an extra $50 a fortnight on a $500,000 loan, that saves you $32,000 of interest over the life of the loan which in turn will save you just over two years. That’s only $25 a week.

  1. Switch your payment intervals

If you find that you don’t have the discipline to make extra repayments, then simply switching your payment structure can also help save years off your mortgage, as well as simplifying your finances if you are paid fortnightly. Because there are 12 months in a year but 13 four-week cycles, by switching your payment intervals from monthly to fortnightly, you are essentially paying off an extra month per year.

  1. 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.

  1. Set the mortgage on an investment as interest-only but make the principle and interest payment equivalent by putting surplus rental income into an offset account. Because interest is calculated daily but charged monthly, any money sitting in the account will help reduce the loan.
  2. Although you may have to pay extra fees for the offset or redraw account, these may well be lower amounts than the interest saved. Talking to a finance broker is the easiest way to work out whether this option is financially sound.

Paying off your home loan faster isn’t difficult; however it does require financial discipline and expertise in ensuring the right loan features are in place.

 

martin@safefuture.com.au

0433 630 716

www.safefuturefinance.com.au

 

How a health check can broaden your property horizons

A simple home loan health check led two borrowers to refinance for a saving of $7600 a year in interest.

 

When the applicants were looking for a home loan, they thought the choice was obvious. They secured finance through the same community-owned bank most of their colleagues used, bought a house and were happily paying it off.

A few years on, and knowing that their interest rate was a little higher than others they had seen advertised, they talked to an MFAA Approved Finance Broker for a home loan health check.

Being members of a mutual bank they thought they were being looked after and thought they were on quite a good deal, their finance broker recalls.

This wasn’t the case though. Although they had always received good service from the lender they had been with for nine years, they were on an unnecessarily high rate that was costing them both money and years on their loan.

They were able to reduce their rate significantly, and ended up saving $7600 a year in interest. And the loan was only $450,000 – it wasn’t a big loan

The couple had two options: they could either reduce their repayments and have an extra $7600 each year to play with or to save, or they could keep their repayments at the current level and pay down their loan more quickly.

They had a family as well, so the money could certainly be used elsewhere, but the aim for them was to pay their loan off as soon as possible, so they continued to make the same repayments, and have been able to reduce their loan faster.

Being able to reduce the debt significantly sooner than they originally planned means that the couple is now working towards purchasing an investment property.

The plan is to reduce their debt first, and then be able to put funds aside for an investment purchase. They are absolutely on track to achieve that

They are a fairly typical family, and thought they were on a reasonable deal. It wasn’t until they asked for a home loan health check that it was possible to show them that there were significant savings to be had by looking at an alternate lender.

Ask us for a free home loan health check and see if you can save

 

 

Why Would I Refinance My Mortgage?

 

5 Reasons why it makes financial sense to do so.

Heard about mortgage refinancing? In the past, most people who took out a mortgage doggedly continued with it until they had paid it off. These days, people refinance their mortgage much more frequently. The average duration of a home loan in Australia now is just 4-5 years. Here we look at some of the reasons people in Australia refinance their home loan.

  1. Mortgage refinancing reasons: lower rate

The most common reason for people to refinance their mortgage is to get a better deal. But be careful you don’t become interest rate-fixated. When you refinance your home loan, you need to consider fees and charges as well as the interest rate. You often have to pay charges for exiting your current home loan, plus charges for taking out the new mortgage. You need to be sure that in refinancing your home loan that you’ll be better off in the long run after taking into account all costs.

  1. Mortgage refinancing reasons: more flexibility

Many people only discover the full details about their mortgage when it’s too late. They try to do something and get told by their lender that either they can’t do it, or they will incur a hefty charge if they do. An example is a redraw facility – the ability to pay extra money into a mortgage and then redraw it later. This feature is not possible with a basic home loan, so many people refinance their mortgage to give themselves this sort of increased flexibility.

  1. Mortgage refinancing reasons: renovation

If you carry out renovations, it often makes sense to refinance your mortgage and take out a construction loan so you only pay interest as building progresses. Once construction is over, it might make sense to refinance your home loan again so that you consolidate the total amount you owe into a loan that minimises your interest bill, while giving you a degree of liquidity.

  1. Mortgage refinancing reasons: home equity

Over recent years in the property market houses have appreciated at a significant rate. e.g. a home you bought for $300,000 five years ago, might now be worth $500,000. Refinancing your mortgage with a home equity loan might let you tap into that extra $200,000 equity.

  1. Mortgage refinancing reasons: defaulting

Some people find they have borrowed more than they can comfortably repay, and they’re in danger of defaulting. There’s no shame in that. But don’t suffer in silence. If you’re having trouble making your mortgage repayments, talk to your MFAA member about refinancing your home loan to make it more manageable.

We can help you find out whether it would make sense for you to refinance and what the costs would be and what benefits you would get

 

 

 

Shocking survey reveals mass ignorance regarding interest rates, credit cards and personal loans

74% Of Aussies don’t know what a comparison rate is, a survey by ME bank has found. 

The statistic emerged in a study of the financial literacy of 1500 adults of all ages. 57% of participants did not understand that banks determined actual interest rates, rather than the RBA or other institutions, whilst 36% didn’t know that reducing the length of a loan reduces the amount of interest paid. 

35% of those surveyed admitted they’d done nothing to educate themselves on banking products. Some Aussies fail to educate themselves because they find banking dull and complex and think they know best, while others find working with numbers difficult and put their head in the sand.

Misunderstanding debt

Brokers working with first home buyers, highly geared investors or non-conforming clients will find ME’s results particularly disturbing. 

42% Of those surveyed did not understand compounding interest and thus the reason to be patient with savings. Almost three-quarters of respondents did not realise that repaying a credit card at its minimum level could mean the debt would take decades to pay off. 

In addition to the difficulty of understanding who sets interest rates, 41% of participants were wrong about what determines their interest when presented with options such as credit rating, secured or unsecured and length to repayment. 

There was also mass confusion over the role of lenders mortgage insurance. Just 20% of those surveyed realised that LMI does not cover the borrower if they were unable to keep up repayments. 

Finding information


28% Of those surveyed had spoken to a professional advisor, a category that includes brokers. 

Other methods used to learn about finance included reading information on websites, news and comparison sites (40%) and talking to family and friends (19%). Only 7% had attended workshops, seminars or completed online courses.

Even though a home loan will probably be the largest financial transaction they undertake mortgages were not a huge area of concern for those surveyed with an alarming amount even unsure of what rate they were actually paying for their home loan.

  

 

Looking for a business loan? While SMEs account for 97 per cent of Australian businesses, it can still be difficult to make a case to a bank when looking for finance to start a new business or invest in the growth of an existing one. The good news is that applying for commercial finance through a bank is far from the only option. Securing finance is imperative for a business’s prosperity. MFAA accredited brokers can assist with business planning and finding the right type of finance to support growth and success.

  1. Gather your paperwork. Unlike residential loans, where much of the paperwork is straightforward, business loans are assessed on a case-by-case basis, which means the documentation that needs to be provided varies depending on the situation. In a nutshell you’re going to need proof of income and expenses, assets and liabilities, essentially anything that demonstrates that you’re asset rich and can afford to pay
  2. Do a self check. Loan to value ratios (LVR) on business loans are lower than those in residential. In comparison to the potential 95 per cent you could obtain with LMI on a home loan, you may only get between 50 to 70 per cent for its business counterpart, which means having extra money or equity to put into the deal deems you an ideal applicant. Having a good income and asset position is crucial as commercial loan terms are usually a lot less, which would make the monthly repayments a lot higher,” advises the finance broker.
  3. Further tips. Work with your broker to negotiate terms and product features that best suit your situation. This will help avoid extra onerous tasks that are sometimes expected with commercial lending. Ideally you would want a loan that doesn’t require ongoing reviews and one that has a long loan term. Some banks may offer a better rate with only a three year loan term for example, but that just means you’ll have to renegotiate your rate and fees once your term ends. This could potentially mean forking out more application and establishment fees, which could add up to an extra $1500 to $2500 expense.
  4. Talk to a broker. Skipping the banks entirely and talking to a commercial finance broker means gaining access to myriad finance products and loan types, as well as expertise in matching your needs to the right loan type. An experienced finance broker can take a broad view of a business’s finance, assist in business planning, and use their deep knowledge of a client’s needs to look beyond a simple ‘lowest interest rate’ formula in selecting a finance product, ensuring that business owners have access to the capital they need, when they need it.

 

Why your business loan was rejected

Due to the risks involved, strict guidelines are imposed on business finance, so securing approval can be difficult. Here are a few mistakes to avoid to increase your chances of approval.

Not knowing your credit score

Many consumers may not realise the importance of a credit score. Not only is it taken as a reflection of your ability to make repayments, it also highlights your financial history which is why understanding what it is and how it can be improved can be vital. Sometimes a business can be oblivious that they have a credit default until it was time to apply for the loan.

Lack of planning

Understanding the assessment criteria and having a well-prepared application increases your chances of approval. The key things to be aware of when it comes to your application are a healthy debt to income ratio, existing business assets and a justified cash flow position. This ensures that the lender has a full picture of what has happened and what the future forecasts are.

Aside from providing financial statements and forecasts, be prepared to discuss the purpose of the finance and how the business will service the loan. Business owners need to articulate how they are going to use the capital and demonstrate how repayments will be made.

Bad strategy

Longevity in a business is what lenders want to see and a good strategy supported by financial statements must be in place, and those statements should be geared towards demonstrating strong earnings. Many businesses are focused on minimising taxes and not maximising earnings. While there are tax advantages, not managing your business in order to demonstrate maximised earnings can have a negative impact when it comes to applying for a loan.

Not having the right advice
Surrounding yourself with industry experts can provide you with a solid understanding of what needs to be included in your application, and a good equipment and commercial finance broker can match you with the right loan product. A good broker understands that running a business can often leave you with little time, so ensuring you have someone qualified and trustworthy to do the legwork can be the difference between a success or decline.

5 Rules for your business plan

Preparing a detailed business plan will inform the lender about your business proposal so that it can assess your application as favourably as possible.

 

  1. Know your numbers. In order to inspire confidence in you as a borrower, it’s important you are familiar with your key financial figures, even if you don’t prepare your own financial statements. This includes current income, net profit and expenditure. Include a profit and loss budget, and, if your business is new or you are starting a new business, prepare your personal credit history.
  2. Estimate how much funding you need. Are you looking for funds to help with cash flow and operations on a regular basis, with a larger overdraft limit for occasional use? Or do you need one-off funds to open a new branch or purchase additional equipment?

Prepare an updated business plan to establish all of the factors in your application, including any partners and strategies.

  1. Project your cash flow. You can use this to prepare pro-forma statements, or projections of what your business will make going forward, making adjustments based on past trends.
  2. Provide proof of loan security. A lender will evaluate your risk factors to determine if you and your business are a good investment. Consider the maximum payment you can afford before meeting with your finance broker, who can advise you on whether you should offer collateral (assets such as property to secure your loan) or a third party willing to guarantee the loan on your behalf.
  3. Ask questions. Your finance broker will shop around on your behalf to find out what products are on offer. If you’re already a customer with one lender, discounts may be available. If one option is much cheaper, your finance broker will be able to tell you whether it carries higher fees or a likelihood of the interest rate changing.