Mike Woodrow Mortgage Broker

19/07/2022

Simple strategies to pay off your home loan sooner

Of course you want to pay off your home loan as efficiently as possible to build equity in your home and avoid excess interest payments. Yet you don’t want to sacrifice your quality of life for the sake of making crippling mortgage payments each month.

There are some simple strategies to help you pay off your home loan faster, without becoming too stressed about a tight budget.

Place any lump sum payments into your mortgage account
If you receive an annual bonus or a healthy tax return, place the extra money into your mortgage account. These lump sum payments can drastically reduce your loan term.

Pay the same amount when interest rates drop
Don’t let your bank reduce your regular mortgage payment when the interest rate drops – continue paying the same amount, and this will reduce the interest, eventually cutting down your loan term.

Offset your loans with a savings account – pay wages into offset
As your savings account earns interest, this amount is subtracted from the interest payable in your loan. When you reduce the amount of interest you need to pay, you can cut down on the length of your term.

Shop around for a better rate
Always stay alert for a better rate or a loan more suited to your requirements. You can delegate this task to a mortgage broker who will let you know if another lender can offer you a better rate or who can negotiate on your behalf with your current lender to improve the terms of your loan.

Increase your repayment frequency
Simply by making payments fortnightly instead of monthly, you will be making one extra payment a year. Again, this cuts down on the interest you need to pay, shortening the length of your loan term.

Avoid additional debt
While you are working hard to reduce the amount of interest you are paying on your home loan, you don’t need to accrue additional interest payments through credit cards and car loans. Minimize your debts so you can concentrate on paying off your home loan, as this is the asset which will appreciate in value.

Examine your budget
Have a close look at your weekly or fortnightly budget and see if you can cut down costs anywhere in order to make a small increase on your loan repayments. You could save $50 to $100 a week through simple strategies such as grocery shopping once instead of twice a week or cutting down on takeaway meals or having a “no spend” day once a week. That small amount of extra cash can be diverted into your mortgage payment, where it will add up to huge savings in the long term.

Contact us today if you need expert assistance in finding simple yet effective ways to reduce the length of your home loan.

17/07/2022

15/07/2022

Tip: Did you know you can split your home loan e.g. have one half as a variable rate home loan and the other half fixed... giving you the best of both worlds - flexibility and security!

(To ascertain if this strategy is appropriate for you, click the message button above for a professional take on your situation)

14/07/2022

It is imperative that we all look at our debt/mortgage position and ensure we are in the best possible position to ride out the coming storm. Costs nothing so you can’t lose! Contact me now!

14/07/2022

Did you know if a home loan interest rate varies by 0.5% (on a $350K loan), that's a saving of $41,875.00 over the life of the loan?

My free loan comparison service tells you how much you could save!

Message me for a free check up today! PM me...

13/07/2022

Questions to ask your mortgage broker

When you are going through the home loan and mortgage application process, your mortgage broker can help navigate you through all the paperwork and different loan options to find the right loan for you. While the process might seem overwhelming, you might not know which questions to ask.

When you ask your mortgage broker the following questions, you will have a better grasp of why your broker selected this loan as the best fit for your circumstances. You also need to be confident that you feel this is the best loan for your circumstances, and if you have any concerns you can discuss these with your broker before signing on the dotted line.

Do you have a license?
A mortgage broker is required to have a current license in order to practice in the finance market, and this license should be displayed on their web page or in the office. Without a valid license, your mortgage broker is not qualified to give you advice on your mortgage.

What can you offer me that the bank can’t offer?
Amazingly, not all brokers have an answer to this! A good broker will explain their services thoroughly and these services should include finding the right loan package for you, then setting up the loan on your behalf. Their services should save you the time and stress of comparing loan packages for yourself and then organizing the loan directly.

Which lenders are on your list?
A good broker will have access to a wide range of lenders, from the largest established banks to the smaller lenders. The broker should also be experienced in interacting with all these lenders, so they know how each one determines a loan application and how long they take to give loan approval.

With this experience and background, the broker will be able to give you accurate updates about the progress of your loan application.

How do you determine that this loan is the most suitable for my needs?
Your mortgage broker is legally obligated to find a home loan that is suited to your circumstances. Ask your broker to explain the thought process so you understand how they felt the features, rates and fees were right for your circumstances. For example, if you want the freedom to make overpayments on your loan, you need to ensure that your mortgage broker has chosen a loan that allows this without a penalty admin fee.

How long will it take to process the loan?
As mentioned above, different lenders have different procedures for processing loans, and some will take longer than others. Your mortgage broker should know how long it will take to process your loan application so you can work with a realistic timeframe while house-hunting. You don’t want the right house to slip through your fingers because your loan wasn’t approved on time!

Contact us today if you are looking for expert guidance or advice on how to find the right home loan for you, whether it is for your existing property or your next purchase.

12/07/2022

Pros and cons of debt consolidation with your mortgage

If you are struggling to keep up with multiple credit repayments – credit card, car loan and mortgage – one option for simplifying the issue is to consolidate all the debts into your mortgage. However, there are also potential negative consequences for consolidating all your other debts with your home loan, so you should consider this strategy carefully and ask for independent advice before making a decision.

So what are the pros and cons of debt consolidation with your mortgage?

Pros

Shifting from multiple payments to one payment
When you consolidate your debt, you only need to make one regular payment, so your finances are more organized and you don’t have the stress of doling out minimum payments to multiple lenders. Once you have streamlined your repayment plan, you may even be able to increase the amount of that one repayment.

Lower interest rate
Multiple debts is equivalent to multiple interest rates, yet when you consolidate all these debts, you are only paying interest on one loan, which is generally at a lower rate than before. This is an automatic saving. With one interest rate and one regular payment, your monthly payment will probably be much lower than usual, giving you the option of increasing the amount of your regular repayment to get on top of the loan faster.

Cons

Reduces the equity in your home
Unlike your car and the items you purchase with your credit card, your home is an investment which will appreciate in value. Your goal is to increase the equity in this asset for your own financial security. Yet when you combine your home loan with your other debts, you are reducing your equity without any increased value of assets to balance it out.

Risking your secured loan
Another difference between a mortgage and your other debts is that a mortgage is a secured debt – if you can’t pay it, the lender can take something from you in lieu of the debt. In contrast, if you cannot make your credit card payments, it will affect your credit rating and your ability to get another credit card but it won’t have a significant impact on your overall security.

Consolidation loans are also secured loans. When you consolidate all your debts into your home loan and then cannot manage to make the repayments, your home is at risk.

More costly in the long term
While your minimum monthly repayments may be reduced in the short term, your long term debt may be increased. For example, if your car loan was taken over a five year term and then consolidated into your 30 year home loan term, then the interest on the original car loan will actually be increased so you are ultimately paying more for your car.

Debt consolidation can be a valuable tool for some borrowers, but can be difficult for others. Contact us today if you would like expert advice on whether debt consolidation is the right strategy for you.

10/07/2022

Fill in the blank: If I had a $1,000 to give away, I would donate my money to _______

08/07/2022

Working with a mortgage broker

A mortgage or finance broker acts as your go-between, communicating with banks and lenders on your behalf, in order to secure the best deal for your circumstances. With approximately 40% of home loan applications being turned down, you can benefit from a broker to ensure that your application is sent to the right lender.

However, while the broker can save you a great deal of running around, you should still double check everything to make sure you are getting the best deal available.

Is the broker licensed?

Before you start doing business with a mortgage broker, check that they are fully licensed. In Australia, it is illegal for a credit provider or broker to operate without a license. You can check through ASIC Connect’sProfessional Registers or call ASIC’s Infoline on 1300 300 630.

Before you start doing business with your licensed broker, ask what loans they offer and how they are paid. The broker’s fee is generally covered by commission paid by the credit providers, although some brokers may charge you a fee instead of commission or on top of their commission. If you are expected to pay a fee, you need to know this before you start doing business. Shop around before choosing a broker, so you are confident you have the best and most cost-effective person for the job.

The broker’s role

Your mortgage broker is responsible for negotiating with credit providers such as banks, to find the best possible loan for your circumstances. They can offer you a range of loan options and help you manage the process of buying your property. Make a list of all your loan requirements, so the broker knows exactly what you need and want. If the broker is making recommendations that do not fit your requirements, do not settle for “not good enough” – ask the broker to keep looking.

While the broker will save you a great deal of time and money by searching for loan options, you can still do your own window shopping.

As your broker is paid by commission, it is possible they will favour a certain lender over one that has the deal you desire. Alternately, they might not have connections with a lender who has the home loan deal you want. It doesn’t hurt to look around!

Written loan agreement

Once the broker has secured a loan that satisfies your requirements, you must get a written agreement, specifying the type of loan, the amount of the loan, the term and the current interest rate. It should also cover any fees you are required to pay, such as commissions, broker’s fees or fees to the credit provider. You may also incur fees if you wish to terminate the agreement before the end of the term.

How to make a complaint

If you have a dispute with your broker or any concerns about their professionalism, you can make a complaint by contacting ASIC’s Infoline on 1300 300 630.

07/07/2022

🧐 Top tips for young property investors

It is possible for people to launch into the property investment market in their early twenties – in fact, this is a great time to start, when you are first launching into your career and don’t yet have any other financial responsibilities such as a family to support.

However, buying an investment property can never be an impulse decision – it takes self-discipline and applied knowledge to start building a profitable investment property portfolio.

Set a budget and save
The first step of course is to start saving for your first deposit, which is usually at least 20% of the purchase price (can be lower, check with your broker). You will need to be focused and realistic, and quite single minded in order to save a sufficient amount. Your best option is to set a budget and create a clear financial plan that will help you remain focused and prepared once you do buy your first property.

Think long term
While some of your peers will be looking into short term gratification – visiting pubs and night clubs, booking overseas holidays or buying a new car - you need to establish a mind-set that focuses on the long term rewards of building your investment portfolio.

Learn from the experts
While you are saving your deposit, take this time to educate yourself about the property investment market and the best type of property for your first investment. Read articles about property investment and monitor the real estate section of your local newspaper, so you can build a vision of an affordable and profitable investment property. Consult local agents and mortgage brokers as soon as possible so they can offer their insight into the market. Seek advice from a professional accountant, who can oversee your savings plan and advise you on your first home loan.

Consider a family guarantee
If you have the option, you could ask a family member to act as guarantor of your bank loan. The guarantor allows the equity in their property to act as additional security for your home loan. This strategy could potentially reduce the amount of deposit you need to save. You can split the loan into two portions, so your guarantor is only guaranteeing one portion of the loan. That way, you can pay off that portion first, so you can release your guarantor from the agreement as soon as possible.

Invest, don’t gamble
Gambling is a game of chance where you can hope to win big but you are perhaps more likely to lose it all. Investment is based on knowledge and experience, so you make decisions that will be profitable in the long term. Learn everything you can about the property and the market, so you can make objective, beneficial decisions.

06/07/2022

Pros and cons of a reverse mortgage

A reverse mortgage allows a home owner aged over 62 to borrow against their home’s equity while still maintaining ownership of the home. You can receive a lump sum or regular payments, and the loan is due to be repaid when you die, sell the residence or move permanently from the residence. The amount of the loan will depend on the value of your home, current interest rates and your age – the older you are, the more you will be entitled to borrow.

So what are the pros and cons of a reverse mortgage? And what factors do you need to take into account if you are considering this option?

PRO – A great source of retirement income
Your home is your largest personal asset, and you can channel this asset through regular payments. If you are on a small fixed income through your pension, it can make sense to release some additional income through this asset.

CON – Value of your property is reduced
As these payments are being made from the equity in your home, so you gradually lose equity in the property. This means that your heirs will inherit a property of reduced value when you die. Alternately, if you need to sell the home to move elsewhere (such as into an aged care facility) you will need to repay the loan while still having enough equity to fund your next home.

PRO – No monthly mortgage repayments
While you are living in the home you are only required to pay the costs of taxes and property maintenance.

CON – High fees
Fees are usually higher than a traditional mortgage, further reducing the equity in your home.

PRO – You can continue living in the property and leave it to your heirs
One of the myths about the reverse mortgage is that you can be evicted from the property if the loan exceeds the property value. This is not correct. You can live in the home for as long as you wish and still leave the home to your heirs but they become responsible for repaying the loan balance, either by refinancing through a traditional mortgage or selling the home.

CON – The loan is due when a “maturity event” occurs
Maturity events include the death of the last surviving borrower, or when the home is no longer your principal residence or you vacate the property for more than 12 months. It will also become due if you fail to maintain the property or fail to pay the relevant taxes or insurance. This means that the loan could become due during a crisis time for your family when you actually need financial resources rather than having to confront a huge loan repayment.

While a reverse mortgage can be a fantastic option for some retirees, it is not for everybody and you should never embark on this type of financial commitment without independent advice. Contact us today if you wish to discuss whether a reverse mortgage is the right option for you.

05/07/2022

Myths about mortgage brokers

Wary about engaging a mortgage broker to see you through the loan application process? There are numerous myths about mortgage brokers that have put people off using their services. Here we debunk some of the more common myths so you can see how a mortgage broker can help you secure the best possible loan for your next property purchase.

1. Mortgage brokers are aligned with one particular lender
Many people believe that mortgage brokers are simply a “front” for a specific lender, so their job is to lure you to that lender. In fact, a mortgage broker is fully licensed, and relies on their knowledge of the whole mortgage market to provide you with the best mortgage for your individual needs.

2. Mortgage brokers will charge you for their time
As the client, you do not pay the mortgage broker – once you are approved for a loan, the lender pays a commission to the mortgage broker. The commission is calculated according to the size of your mortgage.

3. Getting a home loan through a mortgage broker costs more because of commission
The mortgage broker’s commission is a percentage of your home loan, so it is not an additional cost for you nor is it paid by you in any way. It has no effect on the fees or interest rates you pay on your mortgage.

4. Mortgage brokers deal with shady lenders
While mortgage brokers have connections with smaller lenders whose names might not be familiar to you, they generally also deal mainly with the major lenders with high-profile reputations. Many of the smaller lenders are affiliated with the larger banks, or they could simply be low profiles businesses with a long-standing reputation. A mortgage broker relies on the professionalism of the lender to maintain their own business reputation and income, so even the smaller lenders will have a strong reputation within the industry.

5. Mortgage brokers are only for people with bad credit
Another pervasive myth is that only people with bad credit need assistance from a mortgage broker. While mortgage brokers can certainly assist someone with bad credit find a suitable loan for their circumstances, they can also help anyone who wishes to save time and money by sourcing the best loan possible for their requirements.

6. All mortgage brokers are fully licensed
Unfortunately, anyone can call themselves a mortgage broker, but only a licensed mortgage broker is qualified to give you advice and assistance in securing a loan. A licensed mortgage broker should have the license on display in their office or on their website – if they do not, you are entitled to ask them to confirm their qualifications.

7. A mortgage broker will force you to refinance with a new lender
If you are happy with your current lender, there is no reason for you to refinance your loan with someone else. However, your mortgage broker could renegotiate the terms of your current loan on your behalf and perhaps get you a better deal.

Contact us today if you need independent assistance in finding the right home loan for your needs, whether it is for an existing property or an upcoming purchase.