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Mortgage Financial Fitness Financial Planning

Second Mortgage: Can You Handle the Effects of Inflation Before Retirement?

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How do you protect your finances from inflation especially if you have a second mortgage?

While it is impossible to avoid inflation, you don’t have to suffer the huge impact of the decline in the purchasing power of your money, although you have a second mortgage. If you are careful with your spending decisions today, you may not even have to worry so much about your finances tomorrow. But, as your income increases, bear in mind that your expenses may soar as well. Even if it doesn’t, the prices for goods and services can increase in time.

Shield your finances from the detrimental impact of inflation:

Build Your Home Equity

If you want to get approved for a higher amount of loan in the future, make sure that you build your equity today. You can apply for a second mortgage on top of a first mortgage to save on interests and fees or to make improvements that will increase its future value. While equity usually pertains to the actual value of your home that you own or the amount you paid for. It can also refer to its future value.

It may take a couple of hundred dollars or thousands of dollars to increase the value of your home. But, if you follow the tips below, you can increase your home’s value with just a few extra bucks a month:

  1. Apply for a short-term low-interest loan (payable on installment basis) to pay for necessary repairs. Look into plumbing and heating problems, roof leaks, and the possibility of installing lightbulbs with slightly higher wattage to add to the value of your home on a budget. Clean the yard (if you have one), mend the fences, and paint your walls with fresh colors to make online casino it more appealing
  2. Make your house appealing to the realtor by doing a basic cleaning, eliminating unnecessary items and junks to make it more spacious and eliminating house smells
  3. Install energy saving devices and make environment friendly improvements that future buyers may look for in a home

The comparable selling price in your neighborhood can limit the value of your property. While you may not get a higher value for a home in a neighborhood with huge incidents of foreclosures, making small improvements can help you increase its value before you apply for a second mortgage, or before you retire.

Invest your money wisely

Choose the right investments. It can be in the form of UITF, stocks, bonds, or savings accounts with good interest rates. Some people invest in real estate in industrial areas, or in bustling cities for better returns in the future. Put in money into your retirement savings accounts, pay off loans you took from it and update your payments regularly. If you don’t have a good health plan, perhaps it is time to get one—as you are nearing your retirement age.

Evaluate your budget

Have you been spending excessively in the past year? Or was the expense due to existing debts? Perhaps it is time to earmark certain areas in your budget. Collect the receipts, bills and every proof of purchase you can get, create a spreadsheet of possible adjustments you can make and work towards minimum deviations to make your budget work.

Make lifestyle changes

What is the kind of lifestyle that you really want? As you inch towards your retirement age, it is important to decide how you like to spend it. If you want a life of luxuries, make sure that you have enough money to cover it. Otherwise, it is advisable to minimise luxury spending and to adopt a new lifestyle that matches your current and future income.

Augment your income to avoid the effects of inflation

It is never too late to seek for new opportunities to generate income. Explore fresh opportunities using your profession or business. Anyone can begin a company with a business loan. A company PR manager can start a consulting business on external communications, while a company accountant can also launch his own book keeping service. In the same way entrepreneurs who feel that they can no longer manage their business right after retirement, can take on private consulting jobs for startups.

Anything that would add value to your financial portfolio is worth the effort-as long as it will not put you into the same level of stress when you were still in active service. Interest rates on second mortgage, personal loans, consumer loans and basic commodities keep getting pricier over the years. What our grandparents spent for a carton of milk in the past may just be enough to buy a candy today. Change in price happens because of inflation.

The value of money reduces in time and allows us only to buy a smaller percentage of the commodity or item than its previous value. For example, if the inflation stands at 5% per annum, a $20 burger could get pricier by a dollar the next year. So, if you have a second mortgage, it is advisable to build your equity over time. And, if you don’t have one, you may look into the benefits of getting a second mortgage to have extra money not only to pay your existing debts but to pursue lucrative endeavours that would increase your income.

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Mortgage

Is a Second Mortgage a Wise Investment for People With Bad Credit?

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Not sure whether to get a second mortgage is a wise investment for people with bad credit or not?

Here are a few things to keep in mind before conditioning your mind into making new monthly mortgage payment again.

Some people don’t think second mortgages a wise investment

Some people, especially retirees don’t like the idea of carrying a second mortgage throughout retirement, despite the thrill of reinvesting the money into something lucrative. New homeowners with enough home equity to use for good business ventures also don’t think that the second mortgage is a brilliant financial strategy? But, just like any other investment-carrying, a second mortgage can be a good idea in certain situations, but there can be drawbacks too

Here are two factors you must consider before hopping into second mortgage loans for people with bad credit.

Home equity is a second mortgage

Do you have more than enough equity to take the plunge? Don’t wait for another housing bubble to burst. Use your equity as a form of leverage before the home values plummet sending many mortgages down the sink. Know where your equity stands, before you sign up for a new loan.

Since second mortgages allow you to borrow up to 80% of your home’s value-it is not enough to know how much you can borrow, but how much you can repay. While the second mortgage has lower interest rates than other types of loan, remember that you are still securing the loan with your home. While it reduces the risk for your lender, it increases the risk on your part-because inability to pay it could mean losing your own home.

Diversification

A lot of people suffered during housing bubbles because they got fooled by attractive real estate returns in the past years. But, those who opted to get a second mortgage to diversify their portfolio were able to do better and can be expected to do so in the future.

You are shifting your assets from your home by getting a second mortgage and investing in ETF’s or mutual funds or in a business venture, thereby diversifying your portfolio to enhance your net worth.  Aside from the fact that diversified portfolio outperforms residential real estate returns, getting a second mortgage is also tax-deductible. So, if your home makes up a huge portion of your net worth, it is advisable to get a second mortgage and use it as a tool for diversification. But, despite the potential advantages of this strategy, it can also have some side effects.

If you want to take out a mortgage as a form of leverage, you should know how to handle your other investments wisely.  Remember that by getting a second mortgage to diversify your assets, you also expose your home and your additional investments to risk. Increased risk exposure requires increased wealth management strategy as well.

In short, if you are scared of downward fluctuations, make sure that you have personal skills to handle all your new investments before you get a second mortgage for diversification purposes.

Learn more about second mortgage loans for people with bad credit and the financing options available for you by talking to Australian Lending Centre’s credit consultant today!

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Refinance and Refinancing

4 Important Considerations Before you Refinance Your Home

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Are you planning to refinance your mortgage? If so, here are some important considerations to take into account before you refinance your home.

What is your purpose for refinancing?

Refinancing is a type of debt you will get. So, it is important to determine the whys and wherefores before securing it.

People often decide to refinance their mortgages because of the following reasons:

Lower the current interest rate.

Lowering your mortgage by two percentage points can make a noticeable difference in your portfolio. So, if the original mortgage rate is higher than your refinancing option and the monthly payment will be lower, then you might consider refinancing.

Pay for the closing costs of the original loan.

Homeowners who do not have the funds to bring to the closing table can transfer the closing costs of the initial loan to the new loan.

Invest into retirement.

Homeowners who are nearing g retirement can take advantage of short-term refinance mortgages. They can use the proceeds of the loan to invest in a diversified portfolio. While it is not advisable for those who largely depend on the market for retirement income, retirees with a steady flow of income and large pension don’t have to worry. After all, increasing the number of your finances can help you generate growth even after retirement.

Other viable reasons include managing your credit to improve your credit scores, changing loan type, shortening loan term, and getting cash for home improvement. You can also access the equity in your home to cover important personal expenses and deal with life-changing events such as a wedding, divorce, sickness and financial losses. Refinancing is also a good option for those who plan to consolidate their debts and use cash-out refinance to pay for credit card debts with high interest.

In short, refinancing is a good option for people who need instant cash, and those who want to get out of debt fast, reduce their loan payments, strengthen their portfolio and invest into the future.

How long will you stay in your house?

If you don’t see yourself staying in your property for the next 15-years, or so, when your loan term is longer, then refinancing may be a costly choice for you. Aside from the fact that you cannot move anytime soon, the closing costs would outweigh the savings you accumulated from refinancing your mortgage.

What is the value of your home?

The cash you can get and the interest rate depends on your home’s value. Talk to a licensed appraiser to determine the value of your home, so you can decide whether or not you can make some improvements to increase its value and the chance of getting refinanced.

What are your options?

While traditional financial institutions offer refinancing products, an experienced and highly reliable alternative lender like Australian Lending Centre can help you find the most suitable loan products, based on your needs.

You can talk to our refinance specialists to get the best interest rates, regardless of your credit history and financial standing.

Contact us today and we will do our best to help you refinance your home loan.

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Refinance and Refinancing

Why Should You Consider Refinancing Your Home Loan?

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People take a home loan refinancing into consideration when they’re no longer satisfied with their actual home loan or when they want to make some house renovations.

Refinancing becomes a choice when your lending needs have changed or when your home loan is starting to pose difficulties.

  1. Home Loan Refinancing has lower interests rates

This is the main reason why Australians take into consideration refinancing their mortgage. The easiest way to figure out if it’s worth the trouble to switch your home loan is to calculate if the costs of the refinancing will be paid off in the next two years.

Interest rates and fees can build up, so don’t just look at the lower interest rate that comes with refinancing. Take into consideration all the fees implied in the process.

  1. It’s more compatible with your renovation project

Home loan refinancing brings benefits to homeowners who desire to invest in structural renovations that aren’t compatible with personal loans.

Refinancing allows you to use the equity in your property as collateral. This is an option only if the value of the house outpasses the cost of renovations.

Some home loans don’t offer the option for a construction loan, so you may just have to go into refinancing in order to find one that fits your needs.

  1. Consolidating debts is a good option

Home loan interests rates are lower, and this is why many people add their personal loan or car loan to their mortgage. Dividing the payments over the course of the next 25 to 30 years will ensure much smaller monthly payments, but raise the interest rates.

You could benefit from this option of refinancing if discipline and regular payments are something that you’re used to. You could add a personal loan to your house loan, but instead of paying it off for 25-30 years, choose to pay it over the course of the next five years. This will allow you to sort your personal debt faster and even save almost 75% of the interest rate that you would have spent by prolonging the payments to suit your house loan.

  1. Refinancing offers flexibility

If you’ve come to the point where a fixed rate isn’t your best alternative, and you want and actually can pay out the loan faster, then home loan refinancing is an alternative. Being able to pay according to your income will get you out of debt faster, and it also comes with the split facility, a redraw facility, and an offset account.

  1. When mortgage payments are too big

Sometimes, our finances can’t support the mortgage payments and we’re forced to look for an alternative that requires a smaller amount per month. Even though the interest rates could go higher, there are times when our budget isn’t able to cover the payments, so refinancing is in order.

Home loan refinancing comes with advantages and disadvantages, so before taking the step, see if it will suit your needs!

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News

What is a Margin Loan?

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What is a Margin Loan?

A margin loan is not your typical kind of loan. It is ideal for investors who frequently keep an eye on their investments. It allows investors to borrow money to buy shares or invest and use it as a guarantee. In case you barely have the time to monitor the movement of shares then do not go for it. It is mainly intended for dedicated investors who understand how margin loans work. It is a high risk type of loan which can help you increase your returns or lose a lot of money.

How it works?

Share prices are not just unpredictable but they also move frequently, it can go high or low. Many are into it because they earn heaps from it. Here’s an example. Say you have a number of shares and you earned incredible returns, you have the desire to buy more shares but you have insufficient funds. You borrow money to produce the cash. The lender will now take the shares as security or collateral. In case you are not able to repay the loan, the lender can sell it to recover the capital.

Margin Loan Risk

Why is it risky? Share prices are highly exposed to risk. Share value may rise or fall depending on certain circumstances. How do you determine the risk of your loan? Lenders gauge it by using Loan to Value Ratio or LVR. You can calculate it by dividing the amount of loan against the value of shares. Lenders will ask you to maintain the LVR below 70%. If the value of shares drop and you have reached the maximum LVR, you will be required to repay a portion of the loan or what you call a margin call. It is necessary to meet the margin call and you can do this by raising cash to be able to pay the lender. Sell a portion of your shares or produce extra cash. If these moves fail, you may provide additional security.

Manage Margin Loan Risks

  • Do not borrow beyond the maximum amount. The market can turn sour and it is highly advised to borrow conservatively.
  • Do not use your home as security.
  • Make sure you have cash for margin calls.
  • Make regular repayments. The add-on scheme bloats the loan amount. If you cannot afford regular repayments, pay at least the interest.

Contact Australian Lending Centre to find out more about margin loans.

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Debt Consolidation Financial Planning

Buying Shares from Big Banks Paying Off Well

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Buying shares is a form of investment. People do invest because of various reasons. Some do it out of concern for their future while others do it because they have extra cash and they want to put it in an investment. Setting up an investment is easier compared as before. Nowadays, you can invest online by making a phone call, which basically makes the transaction much faster.

If this is your first time investing, you have to familiarise yourself with the terminology, how it works, how you can earn from it and how much you can earn from it. Are you tired of the small interest rate of your savings deposit?  Investing in stock market is like a game where you have to bet on the market, not knowing if you are going to win or not. How do you identify which stock is profitable? Can it stand an economic crisis? The stability and profitability of a stock or share is very important. So where do you put your money?

Buying shares from big banks is paying off well. It is a profitable form of investment on which you can earn up to four times the value of your money. That is a huge difference compared from regular savings deposits which only earn 2.5% interest rate. The rates are not expected to increase in the next few years. So you cannot expect greater income from it.

Buying Shares

Buying shares is a bit risky especially if you can’t afford to lose the amount of money you have invested. The stock market’s movement is affected by the law of demand and supply, and other factors. Economic crisis can happen and anyone can be affected by it especially investors. Yes it is quite risky; you have to be careful where you put your money. Bank dividends continuously grow and it would take another recession or economic crisis for it to decrease. The stock market is quite stable; this is the reason why investors who seek for greater dividends capitalize on it rather than on bank savings.

Before you invest, make sure that you deal with full service brokers. These brokers must provide information, tailored investment plans and make recommendations. Buying shares or stocks is a little tricky for beginners; make sure you are guided by the right people who have extensive experience in this field. Always talk to your broker and discuss the price of shares before you buy or sell your shares.

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News

What is Bitcoin?

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Understanding Bitcoin

More and more Australians are becoming aware of something called “Bitcoin”, even though many of them aren’t quite sure what it is. Although a recent phenomenon, Bitcoin has already managed to capture the imaginations of many people from different backgrounds and from all walks of life. Bitcoin is somewhat a form of currency. It’s like currency in the sense that you can use it to buy goods or services at establishments which honor Bitcoin. In the past, there were not many companies which would be willing to accept it as a form of payment. However with each passing month, it seems that more websites are announcing that they are willing to receive it as payment.

Continue reading “What is Bitcoin?”
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Investment Property Loans

Suburbs Where it is Cheaper to Buy Than to Rent

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Australian Lending Centre uncovers a number of suburbs in Australia where it is more affordable to buy property than rent.

According to research by property specialist RP Data, there are 74 suburbs across Australia where the monthly cost of renting is higher than that of a mortgage repayment. This is split respectively between regional and metro areas.
While the news is good for buyers, the report will set off alarm bells for tenants who are currently renting.

RP Data national research director Tim Lawless said, ”The effect of these combined factors means that renters are now doing their sums to determine whether paying off a mortgage is actually going to be cheaper than paying a landlord.”

Chris Riotto of the Australian Lending Centre has commented that; ”Low interest rates and current Government incentives are positive factors for Australians looking to buy a property and now with this new information on areas where it is cheaper to buy than rent consumers should definitely be weighing up their options’.

If you would like to talk to someone today about getting a mortgage or refinancing do not hesitate to contact us here at the Australian Lending Centre where our mortgage team will run through the options that may be available to you.

Call us on 1300 138 188 or simply fill out an express enquiry form on this page of our website.

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Home Loans

Selling Your Home or Investment Property

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Congratulations on the prospective sale of your property. It is often an exciting and yet stressful time. Let’s face it, putting your property on the market is a big step.

So tell me, why are you selling?

There are many reasons you could be selling your property, do you want to upsize? Maybe you want to downsize? Perhaps you are finding the burden of your existing mortgage just too much?

If you are struggling with your current monthly commitments and need short term funds to help you over the hump until your property sells, call us now on 1300 138 188 for a confidential enquiry with one of our team.

Continue reading “Selling Your Home or Investment Property”

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Financial Planning Financial Fitness

Generation Y Become Cautious Investors

Generation Y Become Cautious Investors
Generation Y Become Cautious Investors

Generation Y has never seen a recession. A survey has found that they are taking notice of the current global financial crisis, which has weakened their appetite for investing.

Once known as being among the most adventurous and carefree of all investors, those born in and after 1980 have suddenly become more conservative than their baby boomer parents. The portion of Generation Y who treat investing as a hobby has dropped from 30% in 2008 to just 7% in 2009.

This collapse in interest in investment marks a significant shift for a generation that until recently had only known a rising share market, a strong economy and low unemployment.

For Generation X (those born in the decade or so before 1980) the proportion of those investing for a hobby had a gentler decline, from 18% in 2008 to 14% in 2009.  The Baby Boomers (the generation before X) remain a powerful force in investment as they have been less deterred by the market turmoil.

The experience of a falling share market, collapsing companies, an uncertain economy and high unemployment have contributed to generation Y developing into cautious and conservative spenders when it comes to investment.

On the other hand, Generation Y has actually increased the money that they spend on going out, by 31% compared to the same time last year. They are spending more on smaller purchases such as iPhones, GPS navigators and electronic games.

The comfort of still living at home with their parents contributes to their ability to spend more frivolously. The amount of twenty-somethings still living at home has grown by around 300% in the past 20 years.

In saying this, Generation Y’s are still striving to save that ‘housing’ deposit as they follow in their parent’s footsteps by wanting to invest in property.

With the help of Australian Lending Centre, the objective of owning a home may be achieved with competitive interest rates and a variety of tailored home loan options.