Jesse Read – Page 2 – Read Finance

First Home Super Saver Scheme - Home with the words "First Home Buyers" written over it.

Using Super as a First Home Buyer in Queensland

09/06/2023 Jesse Read

A common question from clients I get asked is “Can I use my super fund as a home deposit as a first home buyer?” and unfortunately, many of these people are left disappointed. On this page, I will go over who can use their super and how to prepare it so you aren’t disappointed like the others.

Unfortunately, it isn’t as simple as using your current super balance. You’ll need to be making voluntary contributions to your super yourself or by salary sacrifice while following the required process to be able to withdraw the funds when required for a home in Australia.

The First Home Super Saver Scheme

Starting from the 1st of July 2017, people have been able to make both voluntary before and after-tax contributions into their super fun to save for their first home with this scheme. Up to a maximum of $50,000 can be withdrawn, but this has to be from funds you have deposited or associated earnings from these funds in your super.

Be warned though, the maximum each person is able to contribute to this scheme each year is $15,000. However, when making the purchase of the property you and others are able to withdraw your own part from this scheme and combine them together. This means if a husband and wife each reached the limit of $50,000 each, they would be able to withdraw it and spend $100,000 towards their first home.

The benefits of using the First Home Super Saver Scheme are:

Voluntary Before Tax Contributions.
Potential to get associated earnings before the release of the funds.
Multiple people can combine their scheme release for a single property.
Can be used with the First Home Owners Grant.

There are some items you need to be aware of though. Funds are not released quickly, it can take between 15 and 20 business days to receive the funds. This also cannot be used to purchase an investment property as you need to intend to occupy the premises for at least 6 months within a 12-month period and have not owned property in Australia previously.

A determination is also required before getting access to the funds. It is also worth noting that if you have a Commonwealth debt such as a tax debt, they may take the funds from this scheme to pay it.

One other benefit of this scheme is the ability to use the First Home Owners Grant in conjunction with the First Home Super Saver Scheme. Different states may also have different grants which may be similar to the First Home Owners Grant that you may be eligible for.

You can learn more about the First Home Super Saver Scheme and get the most up-to-date information by visiting the Australian Tax Office website. This will provide you with up-to-date information about the scheme and the full eligibility requirements to help determine if it is the right fit for your first home saving goal.

Make sure to speak to your tax accountant who is vital to ensure you’re making the right decision regarding your tax affairs. They will help guide you if you’re trying to maximise or reduce the amount of tax paid within a financial year using this scheme.

Are you starting to look at your options when buying your first home? Reach out to me at Read Finance and see how I can help you.

Australian Home which shows the backyard, back of the house, and a pool.

Guides

7 Things to do before Getting a Home Loan

16/03/2023 Jesse Read

The reality is that most people in Australia are going to need to get a home loan in order to purchase their first home. As time has gone on, more and more requirements have been put into place on mortgage brokers to ensure that you get the lending product that suits your needs.

This article is going to go over 7 items that you may not have thought about prior to seeking out a mortgage broker or applying for a home loan yourself. Make sure you take notes on items that directly affect your current situation. Think about how you could use what is written here to better your situation.

1. Reduce Credit Cards

Having that plastic credit card in your wallet is great when used right, however the limit of each card is likely removed from the amount you’d otherwise be able to borrow. This means if you have credit cards with a limit of $50,000, that is $50,000 less you could borrow.

Not only that, the interest rate you’re paying on the balance. These are normally used as a convenience to gain points or rewards while making small to moderate purchases. Not for large purchases with a high interest rate.

So what can you do? Get rid of those cards that you aren’t using. Those you do keep, change the limit to something that you are comfortable with. Remember that lenders use the limit of the credit cards, not the balance you’ve currently used.

2. Clear Unsecured Loans

Unsecured loans are normally around 5-7 years long with a high interest rate. Not only do you owe what the balance is for that loan but also the interest over time. This increases your debt-to-income ratio, as well as your ability to repay a home loan.

Also if you have any principal only loans, it may be worth considering changing them to principal and interest to start paying off the balance of the loan.

3. Living Expenses Budget

Spending too much is also one way that affects how much you can borrow when buying a home. Taking control of your spending 3-6 months from when you apply for a loan can really make a difference.

You can manage this by setting up a budget, if you’ve never done that before don’t be afraid as it can be very simple. One simple way is to categorise each of the debits on your bank statements to see where your money goes and what transactions you can save money on.

Lenders typically use something called the Household Expenditure measure which is commonly referred to as HEM. This is a minimum rate the lender uses as a person’s living expense and is different between lenders. So if you’re living on beans and rice but not getting the income required to service the loan, it won’t matter how much you save.

4. Refinance your debt

If you are getting a home loan or refinancing an existing one, you may have the option to refinance your existing debt into a home loan. This provides you with the option of making a single payment instead of multiple, as well as having an interest rate that is determined by what your home loan’s interest rate is.

5. Credit History

Although your credit score is not often used in Australia, your credit history is. Any blemish on your credit history could be the reason a lender chooses not to provide you with a loan.

By making repayments on time is one of the best ways to ensure your credit history is not negatively impacted.

6. Searching for Properties

Lenders take into consideration the property you are buying when you go for a home loan. These differ from one lender to another which could limit which lender you could get a loan from or the amount they’ll let you borrow.

Commonly you will see restrictions on these:

Studio apartments
Student accommodation
Inner city apartments
Properties under 50sqm
Rural and Remote properties
Stratum Titled apartments
Commercial zoned residential properties

7. Self-Employed and Tax

The last thing on this list you need to watch out for is if you are self-employed. Working with a great accountant can do wonders for the tax your business owes as well as putting in place various tax efficient strategies. It is worth knowing that a business with low profit restricts the amount you could be eligible to borrow.

Make sure if this is the case for you that you reach out to your tax accountant and discuss the options available for you. I would always recommend using one for anything to do with tax.

Conclusion

It doesn’t matters if you’re buying your first home to live in or as a wealth creation tool for your future. These 7 items are things you need to consider taking action on before getting a home loan.

Contact us at Read Finance if you are planning on buying a home, it is never too early and we can help guide you through the process as well as help find the home loan lender that best suits your needs.

Refinance

Debt Mistakes when Refinancing

15/03/2023 Jesse Read

If you are planning on refinancing your home loan in the near future, make sure you don’t make these mistakes with your debt. This article will go over ways to help you maintain and remove high-interest debt when you are looking at refinancing.

Financial debt can overwhelm a person, especially when it can be easily accessed nowadays by simply filling out a form online. So it is no wonder people are looking for options on how to reduce their current debt or lower the effects it has on their budget.

Consolidate Your Debt Into Your Home Loan

If you have debts, they may be able to be consolidated into your home loan when you refinance. The benefit of this is that you’ll be making a single payment for all the debts you consolidate instead of multiple. This way you’ll also know what the interest rate is as it’ll be your home loan repayment.

Keep in mind that your current debts may have break fees, so it is important to understand whether it is more beneficial to keep the current debt with the current lender instead of refinancing it to another.

It is important when doing this that you change your spending habits if you’re doing to due to financial pressure. Otherwise, you could end up in the same or worse situation.

Get the Loan That Best Suits You When Borrowing

You may not be aware of this but some mortgage brokers are also finance brokers who can help you secure loans beyond your home loan. For example, if you’re looking for a personal loan, we at Read Finance go through the same steps to ensure that the loan we get for you is one that best suits your needs.

Here are some suggestions to think about when picking a new loan to ensure it suits your needs:

Determine what you need to loan for.
Ensure the interest rate and fees and competitive with other options.
Make sure the product is right for you. There are multiple loan options to consider including but not limited to personal loans, secured and unsecured loans, and lines of credit.
Read the fine print so you know exactly what you are signing up for and the terms and conditions of the loan. This way you don’t get any nasty surprises down the road.

Think Before Co-signing or Being a Guarantor of New Loans

Consider your current and future financial situation before being a guarantor or co-signing any loans. If the borrower fails to pay the loan, you’ll be liable to repay it.

Since you could be liable to repay the loan, it may also reduce your borrowing capacity depending on a lender’s policies. This is why you should consider the pros and cons of becoming a guarantor and seek independent legal advice separately from other borrowers.

Plan Ahead by Paying More

If you’re planning on refinancing in the future it may be wise to lower your debt over time now. This is because when the time comes to refinance, you won’t have to worry as much about the debt-to-income ratio. A ratio that is used in lending to calculate how much you owe to the amount of income you have coming in.

Depending on your loan terms, it may also be beneficial for you. If you are not able to pay on time at a due date you may not get penalty fees added. Again though, this really depends on the loan’s terms.

Lastly, paying off your debts sooner will increase your cash flow in the future once those debts have been paid off. Allowing you to use those funds for future investments, hobbies or even holidays.

Conclusion

After going through this article, I hope that you’ve gathered valuable insight into how debt can impact your home loan and have learned new ways to manage your debt. Don’t let debt overwhelm you. Ensure you talk to us at Read Finance when looking at taking out or refinancing a personal or car loan so we can find one that best suits your needs.

Strategy

5 New Year’s Resolution Ideas for a Home Loan

15/01/2023 Jesse Read

It’s time to set up your New Year’s resolutions and one important resolution you could be considering is to do with a home loan. So we’ve created a list of five ideas you can review and see for yourself if they align with your goals.

1. Reviewing Your Goals

Defining your goals is a great way to start with your New Year’s resolutions. This way you can get an accurate idea of what you want to achieve and then work out from there the way to achieve it. Make sure you set a deadline to achieve it as well.

For example, if you are looking at saving for a new home loan you should get an idea of the area you want to move into, the size of the house or apartment, and from here work out the amount of money you need to save.

2. Saving for a Home Loan

If you’re a first home buyer, next home buyer, or working towards an investment property then saving for a home loan may be the suitable new year’s resolution.

An idea to help save money for a home loan is to set up a budget and strictly stick to it. There are tons of software available for purchase, but you don’t need to rely on software to do it. You can easily set up a spreadsheet to track your spending or use the old method of sorting your budget funds into labelled envelopes.

There is a simple formula to work out how much you need to save a week to reach a savings goal. Check the formula below and the example to assist with understanding it.

Formula: S / W = A

S = Saving Goal
W = Weeks to Save
A = Answer

Example: If you wanted to have $10,000 this year you would put $10,000 in a calculator and then divide it by 52 weeks to get your answer. The answer is that $192.31 needs to be put away each week for a year to save $10,000.

Formula: 10,000 / 52 = 192.31

3. Home Loan Review

One New Year’s resolution that is straightforward is to get your home loan reviewed to see if your current mortgage is still one that best suits your needs. You may be missing out on important features you previously didn’t want such as an offset account or even paying a much higher interest rate. This is why it is important to get your home loan reviewed.

You can get your home loan reviewed complimentary with me at Read Finance. Giving you professional advice on how your current loan compares to others in the current market. Providing you with the ability to change using our service if it’s in your best interest and you are interested.

Some people don’t realise the amount of savings they could have if they refinance to a lower rate. Take a look at this table which shows the estimated monthly saving you could get on a lower interest rate.

Estimated Monthly Savings With Lower Interest Rate

	-0.5%	-0.75%	-1%
$225,000	$67	$101	$133
$400,000	$121	$180	$238
$700,000	$211	$314	$416
$1,000,000	$302	$449	$594
$1,300,000	$392	$583	$772

Refinancing can also provide you other benefits that you should talk about such as debt consolidation, funds to renovate, or funds to invest. Eliminating your debt alone could be its very own New Year’s resolution.

4. Extra Repayments

Making extra repayments on your home loan to reduce the principal will not only reduce the amount you owe but also the amount of interest that you pay over the lifetime of the loan. Paying an extra $200 for the lifetime of a $300,000 loan at a 5% fixed interest rate for 30 years would save you around $69,000 in interest while paying it off just over 6 years earlier.

An alternative option is to have an offset account that you place extra money into to reduce the amount of interest you pay.

Some home loans that are on a fixed rate won’t allow you to make extra repayments, or they’ll limit the amount. Paying extra on top of these could lead to extra fee’s being charged.

5. Renovating

If you plan on renovating your home and don’t have the funds saved up, you could consider refinancing your home loan if you have enough equity in the property. Using those funds to pay for the renovation.

If you are lucky after the renovation, your home loan’s estimated value will increase after you have completed the renovations. A positive for if you plan on selling or renting the home out after you are done.

Conclusion

These are five news years resolutions you should really think about when it comes to a home loan in Australia. The value you get out of following one of them could be life-changing so make sure you do your research and contact us to help you achieve your goals.

Refinance

When to Refinance to a Fixed Rate Home Loan

04/11/2022 Jesse Read

The news has been posting stories non-stop over the last few months about interest rates rising. A seven-month period in 2022 saw the cash rate increase by 2.75%, causing many banks to pass these increases on to their customers. This has led some people to consider what home loan options are available to them.

A fixed rate home loan is a loan where the interest rate is fixed for a certain amount of time, usually between 1 and 5 years here in Australia. Having a fixed rate is just one of the options available to you.

Refinancing your home loan to a fixed rate can still be done at any time subject to the lender’s terms and conditions. That said, an optimal time to do it would be when the benefits outweigh the negatives while still being within your financial risk tolerance. Contact your mortgage broker to help refinance your home loan to one that suits your needs.

Why Refinance to a Fixed Rate Home Loan

Refinancing has many pros, but you should also be aware of any cons. Some of these are listed below to help you consider whether it might be right for you.

Pros of Switching to a Fixed Rate Home Loan

Better Rate – Recent cash rate rises have seen some fixed rates lower than the current variable rate. Interest rates can easily be compared between lenders, but ensure you include any fees that could occur when refinancing.
Fixed Repayment Rate – If you are worried about interest rates rising, having a fixed rate can give you peace of mind knowing that you’ll be paying the same amount each week, fortnight or month of the fixed rate term, depending on how often you pay. .
Change Lender – If you’re unhappy with your current lender, you might want to change to another one that might have the support you want, or which has closer branches.
Consolidate your debts – You may have the option to consolidate your current debts into the loan when refinancing. The benefit of this is that your interest rate may be much lower than a personal loan, credit card, or car loan.
Shorten or Extend Loan – It is a great time to review how much you are currently paying, the current timeline of the loan, and your financial risk. Then when refinancing, you can look at extending or shortening the life of the loan.
Cashback Bonus – Various banks offer an incentive when you refinance your home loan to them. This could range up to a few thousand dollars depending on the size of the loan and various other factors.

Cons of a Fixed Rate Home Loan

Less flexible – Extra repayments unavailable or capped, may not have access to extra features such as redraw or full offset accounts. If this is important to you, an option to consider might be a split loan with part on a fixed rate and part on a variable rate.
Rate is locked in – Unlike a variable rate home loan, the interest rate cannot rise and fall. Your rate is locked in initially for the period of time you’ve selected. This is a downside because it may fall well below the rate you are currently paying and there may be a break fee to change back to a variable rate early.
Fees – LMI, settlement fee, loan establishment fee, mortgage registration fee, loan service, and/or exit fees and charges.
Break Cost – If you’re not happy with your interest rate, lender, or loan there may be a hefty cost to break your fixed rate loan. This is a good reason to think about how long you plan to fix your rate for if you are planning on refinancing again in the near future.
Extra Work – It is common that once your fixed rate period ends your loan will transfer to a variable rate. You will need to remember to review your home loan prior to the end date to determine if you want to refinance into a new fixed rate or leave it at a variable rate. Using a confident broker who keeps track of these for you is one way to keep on top of this.

Consolidating Your Current Debt With a Fixed Rate Refinance

You may have the option of consolidating debts you have into your home loan when refinancing. This way you are borrowing against the equity in your home. People look into this because the home loan rate can be a lot lower than credit card and personal loan interest rates.

Not every debt can be consolidated and it depends on the policy of the home loan you have. That is why it is important to have someone knowledgeable like a mortgage broker to help you is important.

Can You Split a Home Loan Between a Fixed and Variable Rate

If you want to be able to have an offset account, make extra repayments beyond a certain amount, or have other features found commonly in a variable rate loan, it may be worth looking into having a split home loan. A split home loan allows you to have two or more different loans of various sizes.

Example:
You could have a home loan of $800,000 total but split into two loans.

Loan 1: $500,000 – Fixed Rate.
Loan 1: $300,000 – Variable Rate.

This gives you the features of both a fixed and variable rate home loan.

One reason you would look into doing this is if you wanted the options available with the variable rate while also having the majority of your repayment being on a fixed rate. That way you won’t get a significant surprise if the lender raises your home loan’s interest rate.

Since each lender and their home loans have different policies, you need to have a good understanding of what each of the loans allows you to do. You also want to make sure you know what options you want available in case anything changes in the future for you. It is also good to workshop different scenarios to ensure you make the right choice. This is why it is imperative that you use a knowledgeable mortgage broker who can go over this with you and provide a solution that fits your needs.

Why You Should Use a Mortgage Broker to Refinance

When you use a mortgage broker, you can be confident that they are working in your best interest. Mortgage brokers have a legal obligation to act in their clients’ best interests and to prioritise those interests above their own.

This means mortgage brokers are required to prioritise the costs of a home loan or any other credit assistance they provide to a consumer. They also need to consider items that do not associate with cost but still affect the consumer. If the broker doesn’t believe an option you request is not in your best interest, ASIC expects the mortgage broker to make reasonable efforts to explain why the feature of the offer may not be of good value to you.

This best interests duty does not apply to banks.

Your mortgage broker is well-placed to work with you whatever your unique situation, current and future goals, and financial risk.

What Do You Need to Do

Contact us at Read Finance if you are interested in discussing your refinance options. Click HERE to fill out a form and we’ll get back to you usually within 4 business hours or use the form on our Contact Us page.

First Home Buyers

Home Guarantee Scheme Explained

01/07/2022 Jesse Read

The Home Guarantee Scheme (HGS) came into effect on the 1^st of July 2022 with the goal of continuing to help Australians purchase their first, new or existing owner-occupied home. It consists of two different schemes: the First Home Guarantee (formerly First Home Loan Deposit Scheme) and the Family Home Guarantee. The scheme came with an increased price cap for city and regional property purchases.

As the HGS involves multiple guarantees, below is a table summarising the different guarantees.

	First Home Guarantee	Family Home Guarantee
Minimum deposit	5%	2%
Property type	New or Existing	New or Existing
Allocated places	35,000 in the 2022 Financial Year	5,000 in the 2022 Financial Year
Borrowers eligibility	Couple or Single	Single Parent with at least one dependent child
Purchasing history	First Home Buyer	First Home Buyer or Previous Home Owner

Summarised Guarantee Comparison Table

The people who can benefit from the Home Guarantee Scheme are first time home buyers who have not previously owned property and single parents with at least one dependent child. You can check your eligibility on the National Housing Finance and Investment Corporation government or contact us and set up a consultation.

To apply for one of the guarantees in the mortgage guarantee schemes applications need to be made with the participating lender or your authorised representative, such as your mortgage broker.

Property Price Caps range from $400,000 to $900,000 around Australia, depending on the state and location. Depending on the location in Queensland, the price cap is $700,000 or $550,000. You can review the table below to see which one affects you.

Location	2022-23 Financial Year Price Cap
Capital city, regional centres (Gold Coast & Sunshine Coast	$700,000
Other	$550,000

Queensland Property Price Caps

You can find a complete price cap of each location list separated by state and region on the NHFIC website.

List of Participating Home Guarantee Scheme Lenders

There has been an increase in the number of lenders participating in the Home Loan Guarantee Scheme. Five additional non-major lenders have been added. You can review the list of the 32 participating lenders below.

Australian Military Bank
Australian Mutual Bank
Auswide Bank
Bank Australia
Bank First
Bank of Heritage Isle
Bank of Us
bcu
Bendigo Bank
Beyond Bank Australia
Border Bank
Community First

Credit Union SA
Defence Bank
Firefighters Mutual Bank
G&C Mutual Bank
Gateway Bank
Great Southern Bank
Health Professionals Bank
Indigenous Business Australia
Illawarra Credit Union
IMB bank (IMB Ltd)
Mortgageport
MyState Bank

Newcastle Permanent Building Society
P&N Bank
People’s Choice
Police Bank
Q Bank
Queensland Country Bank
Regional Australia Bank
Teachers Mutual Bank
The Mutual Bank
UniBank
Unity Bank Limited
WAW

FAQ

Where can I find out more about the Home Guarantee Scheme or keep up to date on future changes?

You can find more information about the HGS on the National Housing Finance and Investment Corporation government website. As a mortgage broker, it is vital that we also stay up to date and can inform you of updates, answer questions you have, and check if you are eligible.

What deposit amount is required?

The First Home Guarantee requires a minimum deposit of 5%, while the Family Home Guarantee requires a minimum of 2%.

What else should I do if I am looking at using one of the Home Guarantee Schenes?

The NHFIC recommend that you should talk to your broker or bank about any issues that may arise from a change in your specific house price or interest rate. As a home buyer, you should also seek independent financial and legal advice and determine whether the terms of the HGS suit your individual circumstances.

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