Our Panel of Lenders is Extensive!
To discuss your loan options please call our office on 03 9882 2500 or email;
Refinancing: For Better or Worse?
The majority of our clients who approach us to refinance their home loan are doing so for either one of two reasons
- The interest rate on their current home loan is too high
- Refreshing their home loan to a new 30-year term will lower the monthly repayments, since the balance is being paid off over a longer period of time. This improves borrowing capacity for further lending.
Refinancing to lower your interest rate is a great strategy, so long as there are minimal exit fees to leave your existing lender and minimal application fees for the new lender – and a reasonable interest rate reduction – for the switch to be worthwhile.
It is the second point about refreshing the loan term to reduce your repayments that perhaps many borrowers miss an important side effect.
There is a difference between reducing your expenses and saving money. Well, at least in this case there is! For example, let’s say you have a $500,000 home loan and your interest rate is 4.00% pa. You have had this loan for a while now and have 20 years remaining. Your monthly loan repayments in this case would be approx. $3,030 per month with principal and interest repayments. You decide that to help lower your monthly repayments, you refinance and refresh your loan to a new 30-year term. If the interest rate is essentially the same, you are now paying off $500,000 over 30 years with monthly repayments of approx. $2,388 principal and interest. If your monthly repayments were $3,030 and they are now $2,388, you are saving $642 per month, right?
Wrong!
Your cash flow has improved by $642 per month, but by refreshing your loan term to 30 years you are now paying interest on a $500,000 loan over 30 years, not 20 years. In fact refinancing in this case would mean you will pay an additional $132,171 in interest over the next 30 years, compared to if you stuck with your old loan with 20 years remaining.
Therefore, it is important to consider that if you plan on refinancing your home loan to improve your borrowing capacity the best way to minimise your total interest cost is to make additional repayments to pay your loan down faster. It would be a good idea to maintain these repayments, even though you may not need to, as it will save you considerable interest and boost your home loan redraw at the same time.
If you would like any further information, please Contact Us.
Curious about your own living expenses?
Our Budget Planner will help you calculate your living expenses and net savings
Living Expenses
Do you ever stop to try and understand where and how you are spending your money?
The ease and convenience of quick transactions has created a social change in the way we spend our money. People do not just go to the ATM anymore and pull out a bulk amount of cash for the week or fortnight to spend on optional activities and items.
Facilities and services like “tap and go”, “after- pay”, “food delivery” and “drivers” have made accessing products and services convenient, increasing irregular spending patterns and therefore pushing up our average monthly spending without even realising!
For those looking to borrow money now or in the future, Lenders are taking a much closer inspection of potential borrower’s monthly living expenses for several reasons, however one that may not be front of mind is “social change”!
Being more aware of where your money is being spent by exploring applications such as “Pocketbook”, “Trackmyspend” or proprietary applications from your Bank can assist to help budget and potentially save money in today’s fast paced and convenient society.
It is important to understand your discretionary spending and where you may be able to cut back on the “wants” and focus on your essential “needs”.
From a finance perspective, living expenses can affect your ability to obtain approval for a loan. Lenders break down living expenses across approximately 12 categories, with many subcategories inside those. These are split into “Basic/Needs living expenses” and “Discretionary/ Wants spending”. The expenses are usually broken out as follows;
Basic/Needs living expenses or mandatory expense types:
1. Owner-occupied property utilities, rates and related costs
2. Clothing and personal care
3. Groceries
4. Medical and health
5. Transport
6. Insurance
7. Telephone, internet, pay TV and media streaming subscriptions
8. Recreation and entertainment
Discretionary/ Wants expense types such as:
9. Investment property utilities, rates and related costs
10. Childcare
11. Education
12. Other
If you were to look through your bank statements or phone applications that track your spending, it is important to be aware of and understand your average monthly living expenses – this means which of those expenses are recurring, which are the one offs and also those discretionary expenses you would not be willing to forgo to maintain the quality of life you wish to live once you have purchased a property.
First Point Group are happy to have indepth conversations with you, to help provide a more accurate view of your monthly expenses so that we can better determine your financial situation and repayment ability. That way once a loan application is submitted to the Lender it should be a smooth process with no surprises!
How to Negotiate in a Softer Housing Market
Vendor/Seller expectations are still high, but buyers want low prices in a slowing market.
After six years of rapidly rising house prices in the Melbourne & Sydney markets the recent property slowdown took some people by surprise – not least those with a home to sell. We had a situation where buyers believed the market was dropping while sellers still assumed it was strong, so there was a gap between their expectations. Now people have had time to adjust so when it comes to negotiation the gap should not be so wide.
Whatever the state of the market every negotiation is based on the same premise – vendors want to receive the highest possible price while buyers want to pay as little as possible. Both parties, however, need to give careful thought to how they approach a negotiation when the market is in decline.
Be realistic
From a vendor’s point of view, it’s crucial that you price your property correctly from the start. The best homes won’t sell if they’re overpriced and therefore vendors need to be realistic.
Some potential buyers are waiting for prices to fall further so there are fewer people actively looking. Buyers have more properties to choose from so it’s harder to convince them to pay a premium price. And the longer a property stays on the market the less likely it is to sell at a higher price – buyers can easily determine how long the property has been on the market and will use that against the vendor.
Unless a vendor bought in the last couple of years they will probably receive a higher amount for their property than the original purchase price. If they are selling to buy another property the vendor will be paying a reduced purchase price. It can be more helpful to think in terms of the changeover price, rather than fixate on the price you may have been able to achieve a 6 – 9 months ago. A bit like the way we think about car changeover prices.
Take offers seriously
If a property is on the market it’s there for a reason. This isn’t a time to be testing the market or selling a property if you are in a hurry. If you do need to sell you should be prepared to take offers seriously, even if it’s not at the level you were hoping for. At least enter in negotiations to see how far you can get your potential buyer to increase their offer.
When buyers have the upper hand, presentation is particularly important. You need to be clear about the attributes of your home – the unique selling points that make it desirable. It may also be worth spending some time and money on minimising anything that would cause concern. You don’t want potential buyers to go away with the impression that there are another five homes they’d be equally happy with.
A good Buyers Advocate can help you identify your property’s strengths and weaknesses then demonstrate and sell its strengths.
In a softer market, it’s vital that you start by getting good advice on everything from pricing to presentation. The right Buyers Advocate will also help you market the property effectively. This needs to be considered on a case by case basis – for example, advertising in print media may work well for some but, for others, it would be a waste of money.
Be ready to act
As a buyer today, you’re well placed – but you shouldn’t be too complacent.
If you see a property that appeals to you it’s also likely to appeal to other people, so you can’t afford to sit back and wait in the hope that the price will fall. You may wish to throw your cap into the ring and start the negotiation process.
Some tips to help get the best results from your negotiation
If you’re selling
- Set a realistic price from the outset
- Find a good Buyer/Seller Advocate you can trust
- Take extra care with presentation – you want potential buyers to fall in love with your property
If you’re buying
- Do your research – be clear about a realistic market price
- Let the agent know if you’re interested in a property
- Don’t wait too long for a bargain – the market could turn at any time
First Point Group has a long and established relationship with an excellent Buyers Advocate – please contact us for further details.
Would you like reliable advice on negotiating your next property sale or purchase?
We have some excellent contacts for a Buyers Advocate service who can negotiate the purchase or sale of property on behalf of our clients. Contact Us if you would like a referral.
There are many different types of business finance we can help with
Further information of the Business loans we can assist with can be found on our website.
Small Business Loan – 6 Common Mistakes
A small business loan can be invaluable when you’re establishing your business or when an unforeseen expense occurs. Here are six common mistakes businesses should avoid when it comes to commercial finance.
Mistake #1: Not getting the right loan
A thriving business requires enough capital to meet expenses, expand and invest, but it’s important to know why you need the funds and what loan best suits that need.
For example, do you need to cover short-term cash flow shortages? A line of credit could help, where you can access funds up to a pre-approved limit, and only pay interest on the outstanding balance.
Maybe you need new equipment? In this case, ask us about an equipment loan / chattel mortgage, where the asset being purchased is used as security. This can potentially help make the loan easier to secure, and the interest costs are usually tax deductible.
Mistake #2: Not having a business plan
Lenders want to understand your business’s operations and how it will make money – in other words, that your current and future cash flow will cover the repayments of the loan.
A strong, well-considered business plan demonstrates your goals and how you plan to reach them, and shows you’ve thought through all the details. When you can clearly explain your business model, products, services and target audience, lenders will be in a better position to tailor a financial product to your needs.
Mistake #3: Not having thorough, up-to-date financials
Precise, current financial records allow Lenders to understand your business’s exact position. If you can’t provide enough information, they will either reject your application outright, or ask you to spend more time preparing the necessary details.
Before approaching a lender, get your books up to date and prepare your balance sheets, profit and loss statements, recent business activity statements (BAS) and tax returns, cash flow projections, and debtor and creditor reports. Depending on the size of your business, you may also need to provide information on your personal financial status.
Mistake #4: Not paying attention to interest, fees and hidden expenses
It’s crucial to understand and calculate the full cost of a loan before committing to it. Apart from interest expenses, there are likely to be application fees, administration fees, valuation and legal fees. These will be incurred regardless of the size of the loan, and they can usually be added to the loan.
Mistake #5: Not checking your credit history
Is your credit record clean? You should find out, because lenders are certain to check it when assessing your application. This can have a big impact on the interest rate you’re offered.
Ask for a copy of your credit file from a reputable credit reporting body and go through it carefully to make sure all the information is accurate. If it’s not, take steps to correct it before starting the loan application process. An example resource is https://www.equifax.com.au/personal/products/my-credit-file
Mistake #6: Not understanding your loan options
Having the funds to run and grow your business is important, but make sure you take the time to understand your loan options to ensure the loan won’t create extra pressure in the long run.
We can help you find the right loan and secure the commercial finance that’s most suitable for your business. It will also ensure you avoid making these six common mistakes.
David’s Dolomites Holiday
By David Lamperd – Director
My wife, Margie, and I recently left a cold Melbourne Winter to thaw out in some wonderfully warm weather of northern Italy.
The first three days of our month-long holiday were spent in the beautiful metropolis of Venice – a city built on more than 100 islands meaning you don’t need to worry about cars when exploring – just 400+ bridges over countless canals. The incredible art museums were supplemented by the many authentic pizza restaurants and wonderful bars – so easily accessible by foot or water.
The highlight of our Italian holiday was spending a week on a self-guided trek through the Dolomites – arguably the most beautiful mountains in the world – located about a two hour bus ride north of Venice. We joined our equally energetic friends in the beautiful village/ski resort of Cortina – the site of the 1956 Winter Olympics – and after some intensive carb loading of pizza and red wine we started our climb further up into the mountains.
Whilst some of the walking was quite challenging we were rewarded by some very pleasant accommodation at the end of each day and (surprisingly) about a foot of snow one evening whilst staying at the very pretty Lake Misurina. We visited one of the best known mountain groups – the Tre Cime di Lavaredo (three peaks of Lavaredo) which once formed part of the border between Italy and Austria. There are therefore many fortifications, trenches and tunnels which set the scene for some of the most ferocious fighting of the First World War. Our trek finished in Cortina but our memories of these spectacular mountains will remain for a life time.
A thoroughly enjoyable holiday – all locations we visited I can highly recommend.
