Michael McKenzie Finance Broker

25/09/2024

I would like to say a big overwhelming thanks, to all of you that took the time out to say happy birthday today!

It means a lot.

Some of you are family, friends, neighbours, school buddies across many suburbs, clients and some of you have been with me all the way from primary school and beyond.

But all of you have made life more fun and complete for playing your parts in it, and I thank you all for that!

30/08/2024

Term deposit vs Offset

I get this question a lot, so lets say we have a person making $100,000 per annum, and they have a spare $40,000 they weren't sure what to do with, we will assume they also have a $300,000 mortgage.

Option 1, they invest in a 6.25% term deposit.

Option 2, they put against their 6.25% mortgage.

With option one they will make $2,500 off their $40,000, which is great, but the down side of this is is their taxable income has now gone from $100,000 to $102,500, so the $22,967 tax they would have paid on their $100,000, has increased to $23,618, an increase of $651 per annum. Reducing their $2,500 to a net $1,894, giving them an actual return of 4.62% instead of 6.25% on their interest.

Option two, holding funds in offset, they have saved $2,500 off their annual estimated interest charge of $18,750, which would have resulted in a reduction of debt of greater than $2,500 over the course of the year, with those savings compounding and accelerating into the future.

The power of offset cannot be understated here, with the above example, on a 25 year mortgage, just making the minimum repayment, it would save you just under 5 years on the loan term, paying it down in 20 years and 1 month. Pair this with paying just and extra $50 per week, that term drops down to under 17 years!

Same as compounding works on savings and investments, you can also put this to work in destroying your debts. Reach out if you would like any more specific circumstances addressed thanks.

29/05/2024

Great response from the MFAA CEO to the article by Big Yellow in the AFR earlier in the week. Who have been taking care of shareholders and doing their best to erode competition in the lending market for as long as I can remember;

This story was published in the Australian Financial Review on 29 May 2024.

There has been a rush of headlines over recent weeks about banks being 'at war' with mortgage brokers. These headlines are misguided.

They also ignore the most important player in this 'war': Australian borrowers.

However, if some of the larger lenders are seeking to disrupt mortgage brokers and steer borrowers back into their branches, then they’re actually declaring war on home loan borrowers, for the benefit of their shareholders.

The mortgage broking industry is not in competition with banks. Banks are in competition with each other.

The major lenders have been losing share to agile, nimble, low-cost, customer-focused lenders for a decade now. Why would anyone think increased competition driven by a broker network – leading to lower prices for consumers – is a bad thing?

To be clear, I believe that our robust financial system that consistently rides the waves of recessions – and once-in-a-generation events – needs stable, well run major lending institutions.

But now, in my role representing Australia’s mortgage brokers, I’m seeing these attempts to shift blame during quarterly earnings announcements onto the broking industry in a completely different light: a thinly-veiled push to drive higher margins at the expense of Australian borrowers.

Suggestions that mortgage brokers are “eating the banks’ lunch” and that “banks need to wage war on mortgage brokers", are way off the mark.

The major lenders’ market share is not being 'taken' by the mortgage broking industry. It is being taken by more than 100 other lenders in the market, many of whom are accessed only via brokers, not branches. It’s a good thing too, because if you live in a regional area, your choice of bank branches to borrow from is likely one, or none.

Positioning banks as competing with brokers is like saying Hilton hotels is competing with travel agents, instead of Hyatt and Sofitel. It completely misrepresents how the mortgage broking industry works.

Brokers are not at war with banks. We act as distributors of their products.

And when a bank acquires a new customer via a broker without having to do anything, they pay a commission. That bank doesn’t pay rent, overheads, bank lenders’ salaries, super – the list goes on. Are they suggesting that borrowers should pay banks to become their customers by paying the broker commission?

The recent reporting is right in linking brokers to competition. But rather than being in competition, we drive competition. Mortgage brokers have helped create a more competitive market where it is cheaper for all Australians to access credit.

We have a responsibility and a legal duty to find the most appropriate deal for borrowers under the Best Interest Duty, which has been in place for some years now. We provide choice, value and guidance to millions of Australian borrowers, and access to more than 100 lenders, who all have to compete in a market – not a monopoly – for borrower’s business.

So, what happens in practice is that brokers represent borrowers by driving competition and helping them access finance, and the major lenders represent their shareholders in seeking strong margins. Combined net profits of more than $30 billion last year for the Big Four suggests they’re doing just fine.

Competition is here to stay, it’s being driven by mortgage brokers, and that is a good thing for Australian borrowers who are paying less interest on every loan because of the rise of the broking channel. While 72 per cent of loans are originated by a broker, the other 28 per cent benefit from the competition driven by brokers as the industry drives lower prices on all mortgages.

The big end of town’s market share might be shrinking, but that’s not our problem. Brokers are focused on the interests of their customers, and it is up to lenders to put their best foot forward to outstrip their actual competition – other banks.

And that might just mean focusing on their customers: Australian borrowers.

Anja Pannek, MFAA CEO

11/03/2024

How to succeed in buying a property in this market… From a Finance Brokers perspective.

With hot property markets come crazy times, we are seeing dwindling listing numbers now, as we are in that unique situation that we saw in WA in the early 2000’s. Properties are going up more than what they are costing the owner to keep, so there isn’t a great motivation to sell at present.

So when a property lists, there is only what can be described as a frenzy to get in before every one else. So having seen the successes of most of our clients, we have coached them on the following points, hopefully they can be of some help to you;

• Research - most properties are being listed under their value. This means if the home makes it to open, there are more people there than realistically are in the hunt for it, but it will still add to the perceived pressure to outbid. So you really need to know what properties are worth in the areas you are targeting. We are providing our clients with recent sales and settlement data, as the more you know, the more you know.

• Time – the days of low ball offers are gone, but as most of you are aware, most properties list with ‘set date sale’ or ‘all offers presented by’ and these dates are normally 2 to 3 weeks into the future from listing. Rather than having your offer become a bargaining chip for others to beat, go in strong and force the vendor into a quick decision. Put a 24 hour clause on your offer, or a short term expiry period. This does 2 things, it allows you to stay in the market for other properties, if your offer is not successful, and you will get instant feedback as to the vendors and agents pricing expectation, to know if you are near the mark.

• Inspire confidence - this could be by having a pre-approval, but we always prefer to have a discussion with the real estate agent. This helps to inspire confidence in your offer. It is a big commitment to have a vendor wait 2 to 4 weeks for a deal that may not go anywhere, so it is important that the sellers and agent have confidence in you, and your offer.

• Conditions – Cash is king always, but in the absence of a cash offer, it never hurts to ask, “what conditions would suit the vendor?” This could be settlement length, a discounted rent back period or not having to deal with items at the property. We have seen all sorts of weird and wonderful conditions, that have put our clients offer to the top of the pile. But keep in mind this cuts both ways, don’t make your offer difficult, by having excessive conditions for the seller to comply with.

Hoping this helps you in your search and we with you the best of luck! If there is anything we can help you with, or if you want us in your corner, we would be happy to advocate for you.

All the best,

Michael Alchemy Finance

Call now to connect with business.

29/03/2021

http://www.loansmyway.com.au/investing-and-ownership-structures-what-do-you-need-to-know/

Many Australians go for property ownership as their investment method of choice. While investing in the real estate market is common, many first-time investors will be surprised to learn that the ownership structure they choose for their new property can have a notable impact on the returns they see...