Can I use a home renovation loan or can I get a home loan to include renovation costs?

Yeah, well of course you can. We’ve got to be careful that you’re not classed as an Owner Builder.

The banks aren’t particularly fond of lending to Owner Builders.

So we’ll take that out of the equation, and let’s just assume that you are a normal purchaser, got a new house, but you want to put some add-ons

Yes, you can get a loan that includes renovation costs.

The banks may ask to see invoices for the works that you are going to do, and also have that work reflected in evaluation for improvement in the cost or the value of the property.

Another option is to get a home renovation loan Australia that includes a little extra for renovations and have a component of that loan sitting there for renovations, that might be an easier way.

All this is dependent on the equity that you do have.

If you’re under an 80% LVR, most banks will allow you to take your loan to that, and really not ask any questions about the nature of why you want that additional money.

Another loan structure you could do is have that additional money sitting in an offset account and that way, it’s just waiting there for when you want home improvement loan.

The post Can You Get A Home Loan That Includes Renovation Costs? appeared first on Nieuvision.

Best Time To Refinance Home And The Best Time To Refinance A Home Loan

Is it good to refinance your home loan? Absolutely it is. Is it good to refinance your home loan every six months? Probably not. We have to do the mathematical formula on it, right. Because obviously there is that cost to moving your home loan. So if you move too frequently, the interest rate benefit and saving that you may be receiving through lower interest rates may be offset by the cost of the fees that you’re being charged each time you need to refinance. Plus the time cost of yourself going through that whole process as well.
I know certain people that may be looking every six months to refinance. Again, I think that’s probably too quick. I’ve definitely recommend an annual review of your loan just to see where you’re at and what the situation is. Doesn’t mean that you have to move every year.

What are we looking at? We’re definitely looking at the interest rates. What’s available to you? If you’re fixed, when’s it coming out? If you’re variable, what’s your variable rate? The other thing we need to think about is some banks charge a fee, an annual package fee or a wealth fee to get discounted interest rates. So we need to factor that in as well.

And those fees can vary bank to bank from $250 to $495. So we need to think about that when we’re talking about refinancing because $495 offsets some of the interest rate saving that you will receive through refinancing with the bank. So it’s not a clear black and white answer. But what I would always recommend is, if you’re loyal to the bank, it doesn’t hurt you to ask a broker the question of, “Am I going to benefit from refinancing from this bank?”

And in the past, I’ve recommended clients to stay where they are because their deal that they’ve got is pretty much unbeatable. So not worth moving. And then there’s others where there’s definitely a strong benefit to moving.

And the one little bit of information that I’d like to remind everybody is a lot of Australians what I’ve seen, were a bit relaxed or too relaxed when it comes to our home loans. And we don’t probably assess them enough. And we get too loyal to a bank to the point where we don’t want to move, and it’s costing us financially.

And banks won’t give you the best offer sometimes until you say you’re going to move. And then their best offer isn’t still the best offer that’s in the market.

Get in touch to know more about when is it a good time to refinance or best time to refinance home

The post When Is The Best Time To Refinance? (2020 Guide) appeared first on Nieuvision.

Debt to Income ratio is a term that lenders use to determine the serviceability of the loan.  This ratio identifies how much of your monthly income is applied towards the payment of ongoing debts such as credit card payments, personal debt, mortgage repayments or car loans.  It is your total monthly debts divided by your monthly income.

If your monthly income is $2,000 and you are spending $500 every month towards your repayments, your debt to income ratio is 25%.  Lenders do not want this figure to exceed 30-35% of monthly income.

Unfortunately, household debt in Australia is increasing and debt to income ratio is an important figure for lenders to take into account while deciding your loan serviceability.  A high debt to income ratio means you are spending too much money to repay debts and there is hardly any disposable income left over from month to month to pay for everyday living expenses.

As a result:

1. You may struggle to pay any emergency expenses that arise;
2. Banks consider you at a higher risk of default and may not approve your loan at all; and
3. Too many rejected home loan or car loan applications will show badly on your credit report.

If you wondered why your money doesn’t seem to go as far as it should, it’s likely that rising debt levels are to blame. In fact, Australian households have the fifth highest debt levels in the world, with more average household debt than comparable economies like Canada.

Average Australian household debt is four times what it was in 1988, rising from $60,000 to $245,000 after inflation. The ratio of household debt to disposable income has almost tripled, from 64% to 185% during the same time.

Declining interest rates, low unemployment and a strong economy have driven Australians to take on more debt and at the same time cushioned the impact of repayments. However, these conditions can be a double-edged sword because interest rates will rise at some point. For households with mortgages and typical levels of debt, a 2.5 percentage point increase would mean debt repayments would rise from 16% to 23% of income, taking annual interest payments from $15,464 to $21,687, or an extra $6,223 per year.

These are mind-boggling figures and should prompt us to scrutinise our own everyday finances, paying particular attention to our debt levels. Ask yourself if you can better manage your finances, including everyday cashflow, as part of a clear, long-term plan to pay down debt. How will you cope if interest rates start creeping back from their current historic lows? What is the contingency plan in the event of job loss or unforseen health event that prevents work?

With Australians – from first home buyers right through to retirees – now in record amounts of debt, managing the debt issue requires prudence in order to impact positively on wealth later in life and provide the sort of retirement we aspire to.

Below are some points to either reduce debt or increase income:

Reduce Debt

• Make a budget to see where you are spending and where you can cut down.
• Reduce wasteful spending (such as your daily take away coffee and treats).
• Only have one or two credit cards and reduce the limit to what is necessary.
• Identify all of your debts and start paying off the ones with the highest interest rates first.
• Switch to cash to avoid buying beyond your means (a good trick at Christmas time).

Increase Income

• Take up part time work or dabble in your hobbies to make extra money – such as running cooking classes or helping the neighbours with their lawns.
• Rent out a spare room to country university students.
• Be a smart supermarket shopper (there are plenty of tips online).
• Compare utility providers and insurance covers yearly.
• Ask your boss for a raise.
• Refinance your existing home loan to one with a lower interest rate for minimising the interest payments and consequently, adding to your income.

Understanding your debt to income ratio can help you improve your financial condition significantly.  Apart from increasing your chances of home loan approval, it will also free up income that you can apply towards other life goals such as building your investment property portfolio.

MORE INFO:
Ann-Marie Bosco
Finance Consultant
e: abosco@nieuvision.com.au

– – – – – –

Disclaimer: We recommend that you seek independent financial and taxation advice before acting on any information in our articles and newsletters. They contain general information only and have been prepared without taking into account your personal objectives, financial situation or needs. We recommend that you consider whether it is appropriate for your circumstances. Your full financial situation will need to be reviewed prior to acceptance of any offer or product. Interest rates are subject to change without notice. Lenders terms, conditions, fees & charges apply.

The post What is Debt to Income Ratio? appeared first on Nieuvision.

Even worse is credit defaults: if you have a default on your credit history, financial institutions will decline your loan immediately.  So make sure you always pay your bills.

When you decide it is time to go ahead and purchase your first property, you will be required to supply a lot of information to get your application approved. One of the biggest things that most people forget to declare is any debt they have, and this is a big mistake when it comes to financial institutions. All financial institutions expect expect full disclosure from potential clients, and they must declare all debts including Personal Loans, Credit Cards, Store Cards and any other Finance they have taken out to purchase goods. Financial institutions do thorough credit checks when loan applications are submitted and nothing gets past them. In some cases they will request clarification as to why something wasn’t declared, while in other cases they will simply decline the application without asking why.

So make sure you always declare your credit liabilities when asked about them, because it will make the loan process a lot smoother.

The post The Credit Traps to be Aware of appeared first on Nieuvision.

The first and easiest question is just buy it in our name, be that as single person or husband and wife. This alone is fraught with implications. How do we split the ownership? This split can influence your returns for the good and the bad.

Let’s consider John and Jane. John decided to stay at home and be the parent as his income was less, Jane a professional on a great salary in the 38% tax bracket stayed at work. They anticipated this to be the situation for the next 10 years. Jane was also annoyed at the tax she paid and wanted to look at property to reduce her tax payable.

John and Jane however went 50-50 on the contract meaning Jane would lose half of the tax benefits in rental losses as they would pass on to her husband even though he will gain no benefit. The flip side to this is 50% of the capital gain will also go to John, so if the property is sold whilst he is still a stay at home day, then tax will be reduce.

No person in this situation is the same. Ensure when you decide to enter into the property market you not only think for now but think for the future, whilst it can be unknown we have to plan for all aspects of investing.

The post How to buy property appeared first on Nieuvision.