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Minimising your mortgage

Bid Home LoansFor most of us, paying off a home loan as quickly as possible is the smartest strategy to get ahead financially.

Structuring your home loan more efficiently can help you reduce your loan balance substantially and pay off your loan faster. Mortgage minimisation is based on good planning and tight budgeting.

Increase your loan repayments

It might seem obvious, but the best way to reduce your mortgage is to simply increase your repayments. The simplest and most effective way to do this is to increase your regular repayment amount.

Some other strategies to consider are:

• Paying fortnightly instead of monthly. There are 26 fortnights in a year but only 12 months, so by dividing your set monthly repayment in two and paying it fortnightly, you will be making one additional month’s mortgage repayment each year.

• Making extra repayments whenever you can.

• Keeping your repayments the same if interest rates drop at any time.

• Next time you get a pay rise, put 50% of it towards upping your loan repayments.

Get the right home loan

Making sure that you have the right loan to suit your individual situation is important, and your Australian Mortgage Centre Broker will help you choose a loan that you are likely to be able to pay off faster.

There are many loan products that offer flexibility – for example professional packs, line of credit loans, or standard variable loans with a redraw facility, or an offset account.

Make every cent work

100 per cent offset accounts enable you to have every cent of your money working to reduce your mortgage rather than sitting idly in your cheque or savings account. Line of credit loans can achieve the same result but can be more difficult to manage as they are like giant credit cards and require great budgetary discipline from you for them to work effectively.

Consolidate your debts

You can make significant savings in interest by consolidating all your loans – personal, car and credit cards – under your home loan, where the interest is usually at a much lower rate.

Remember, however, that putting short-term consumables under long-term finance can prove expensive in the long run.

Houses or units: which is more profitable?

House or UnitShould you invest your hard-earned cash in house on a quarter acre block, or a low-maintenance apartment in the city?

It’s the age-old question that plagues property investors across the nation, and as is often the case when it comes to real estate, there is no clear-cut answer.

When buyers look at a property for themselves the majority tend to go for houses, mainly due to the development potential. A decent block in a growth area then there is the possibility of developing the site –even if only to the point of a dual occupancy – and increasing the yield.

However, this is not necessarily a blanket strategy that applies to all investors. The long-held argument for houses over units has been largely drawn from the belief that “the value is in the land”, as land appreciates and buildings deprecate, and therefore houses are always the premium option.

When trying to decide between houses or units, you should evaluate your options based on “the quality factor”. This means investing in the best quality property you can afford within your budget – regardless of whether its strata titled or standalone.

In regards to units, you need to pick quality developments in quality areas with a good agent, as this provides a desirable property to tenants. This translates to maximised rental returns and minimal vacancy rates, which maximises your income.

Top three tips for a profitable property investment:

  • Structure in routine maintenance. If you keep your property, whether it’s a house or unit, in good repair, you increase the property’s overall profitability.

 

  • Engage an A-list property manager. If you have an agent who is diligent and takes care of the property, and who doesn’t keep changing the method of rental payment, you will have happy tenants and therefore a lower vacancy rate.

 

  • Review rents regularly. A good agent will help you make sure you are charging the market rent, instead of too much or too little.

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What Makes People Buy? 20 Reasons Why

Buying Decisions ImageThe forces that influence whether people buy include: basic need, convenience, replacement, scarcity, prestige or apparitional purchase, emotional vacuum, lower prices, great value, brand and name recognition, fad or innovation, compulsory purchase, ego stroking, niche identity, peer pressure, the “girl scout cookie effect”, reciprocity or guilt, empathy, addiction, fear, and indulgence…

Read more

Fixed or Variable Loans – Which One to Choose?

Fixed or Variable Home LoansDo you apply for a variable rate or a fixed rate loan – perhaps both…?

The toughest loan decision of all: whether to lock in an interest rate. A fixed rate gives you security, but a variable rate can add to your flexibility and cut your costs.

As you begin looking for a home loan, you’ll come across two main types of loans: fixed and variable. Which one you choose depends on your finances, the features you need in a loan, how long you plan to own the property and whether you believe interest rates will rise or fall. The good news is that as competition has intensified, the gap between fixed and variable rates has all but disappeared.

A fixed rate home loan is taken out for a set period with a set interest rate; when this period ends you can fix the rate again, or switch to a variable interest rate which fluctuates with the market.

Variable and fixed rate loans are more or less appropriate in different financial environments, and for different types of lender.


Fixed or Variable Loans – Which One to Choose?


Fixed Home Loan Products

With fixed interest loans, the rate is set for a specific period – usually 1 to 5 years. At the end of that time, the loan reverts to a variable rate or you can renegotiate a further fixed term. By locking in your home loan, you are protected against rising interest rates. And your monthly repayments remain the same throughout the fixed-interest period.

On the down side, fixed loans have fewer features than variable loans, are expensive to break and can attract a slightly higher interest rate.

Ask yourself:

  • Do you need predictable repayments?
  • Do you anticipate any major changes to your family arrangements, job or business?
  • Do you believe rates will rise in the near future?
  • Are you buying an investment or owner-occupier property?
  • If you answered yes to most or all of these questions, a fixed rate loan may suit.

Fact: Fixed rate loans offer security and predictable repayments. But beware: breaking the loan early can cost thousands in what lenders describe as economic breakout cost fee.

Standard Variable Home Loan Product

Most standard variable loans feature accelerated repayment options, offset, redraw, split loan capacity, variable repayment schedules and portability. If you don’t plan to use most of these features, you are paying for window dressing and may be better off with a basic or fixed loan.

Disadvantages:

  • Rates can rise or fall at any stage
  • Very sensitive to economic conditions
  • Picking the next move in interest rates is very difficult


Advantages:

  • Very flexible
  • The most popular form of loan
  • Competition between banks is intense so the spread of rates is small
  • Big savings when rates low


Decide what’s important to you:

  • Redraw facility
  • Extra repayments
  • Portability
  • Flexible payments
  • All-in-one facility
  • Split loan option
  • Offset account
  • Loyalty discount
  • Top-up

Let the Australian Mortgage Centre find you the right Loan to suit your needs.

 

Article Source: Homeloans

Are you earning enough income from your investments?

Return On Investment

Generally income is the cash flow generated from an asset such as term deposits, bonds, equities and property. How much importance you and your clients place on receiving a regular income from your investment, can potentially affect your lifestyle.

People opt for less volatile, or defensive, assets such as term deposits and bonds, particularly during volatile times. While this makes sense, we believe you should keep an eye on the income you are receiving from these investments.

How is income calculated?

• Term deposit:

    The income from the term deposit is known as the interest rate. It is calculated by dividing the cash flow by the value of the investment.

• Share in a company stock:

    The income from the share is known as the yield. It is the annual dividend paid per share as a percentage of the share price.

• Residential property:

    The income is known as the yield. It is the annual earnings from rent as a percentage of the property’s value.

Don’t forget about the impact of rate cuts on your investment income!

At AMP we believe that defensive assets can be an important anchor for your investment strategy, they can provide stability and a regular income. Don’t forget that Term deposits and savings accounts that were paying more than 6% pa a year or two ago, are now paying less than 4.5% pa¹. So for every $1,000 you would have received from a term deposit when rates were 6% pa, you would now only receive $750 at a rate of 4.5% pa.

Shares as a source of long-term income

Shares can generate income for you when the company pays dividends to its shareholders. The advantage of this is that if the company is continuing to make a profit, you may receive a regular income, which is generally paid on a half-yearly basis.

As investors, we tend to focus on the capital growth potential of shares rather than the income they provide.

However, Australian shares have proven to be a good source of long-term income through dividend payments.

Article Source: Homeloans

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