How Has the Fixed-Vs.-Variable Debate Changed With Rising Rates?
How Has the Fixed-Vs.-Variable Debate Changed With Rising Rates? Thanks to the new stress test introduced by the Office of the Superintendent of Financial Institutions (OSFI) last year, borrowers who prefer the security of a fixed rate are now having to contend with an elevated qualification baseline. That change, which came into effect in June 2021, saw borrowers required to qualify at either 5.25%, or 2% over the contract rate – whichever is higher – with rising fixed rates now, meaning the latter is the more common qualifying criteria. According to RATESDOTCA expert and licensed mortgage agent, Sung Lee, the said change had a direct impact on the mortgage amount that many borrowers can qualify for. He also added the fact that the spread between variable and fixed rates remains considerable only means that various options are more likely the preferred choice of many mortgage clients for the foreseeable future. “It’s important for consumers to really re-evaluate their budget to see if they can weather it. If not, it does make sense to consider converting to a fixed rate, so that they can put a cap on what that payment’s going to be.” – Sung Lee. Don’t hesitate to get in touch with us for clarification, or further advice, regarding any of the topics covered in this newsletter.
Building Costs Blow-Outs: How Brokers Can Help
Discover how brokers play a crucial role in mitigating the challenges of rising building costs for clients involved in property construction. As the industry faces ongoing supply chain issues, brokers provide essential assistance to ensure successful outcomes and guide clients through the process. Rising Costs and Supply Chain Issues Many Australians who have signed fixed-price building contracts are encountering price increases as a result of supply chain disruptions. Brokers are witnessing this common problem and stepping in to offer support and solutions. Assisting Clients Brokers, according to Sphere Loans Director Mirasol San Esteba, are actively filling gaps to help clients overcome these challenges. On one hand, the first option is for clients to raise additional funds themselves. On the other hand, brokers are ready to facilitate contract variations if necessary. Importance of Engaging a Broker Engaging with a knowledgeable broker becomes crucial for individuals planning to build a new home. Brokers play an essential role in educating clients about potential issues and ensuring effective communication throughout the construction process. Their expertise and guidance can lead to successful outcomes. Conclusion In the realm of property investment, brokers are instrumental in navigating the rising costs and supply chain issues faced by clients involved in property construction. By fostering open communication and providing valuable assistance, brokers help mitigate challenges and contribute to successful property investment journeys. Please get in touch with us for clarification, or further advice, regarding any of the topics covered in this newsletter.
How Important is Your Credit Score?
A recent survey of nearly 1,600 people revealed almost all respondents believed knowing their credit score was critical to improving their finances. To simply define, a credit score is a number that depicts a consumer’s creditworthiness. The higher the score, the better a borrower looks to potential lenders. According to the recent survey conducted by Digital lender SocietyOne, it concluded 97.7% of respondents thought it was important for Australians to know their credit score; 93.3% said they found it useful to have finally learned their score through SocietyOne, and those who wished to improve their credit score and overall finances embodies 73.5%. However, only 32.8% of respondents knew their credit score before being encouraged to check it and 60.9% were surprised by the result once they received their score. MoneyMe Chief Operations Officer, Jonathan Chan stated that “a credit score is an excellent indicator of financial health and many Australians appear to understand its importance. However, half of all Australians still have not applied for their score to know where they stand when applying for credit for a loan and finding out your score is only the first step”. In addition, Experian General Manager of Credit Services, Tristian Taylor reminded them not to “forget that a credit score is simply a view of your financial health and the way you work with credit. Keeping on top of your repayments and choosing the right financial products for your situation are important factors in maintaining a strong credit score.” Key factors that could influence the status of your credit score include: The type of lender you have applied to How well you’ve kept up with your repayments The credit limit of each of your credit products The type of product you have applied for The number of credit applications you make Any negative events, such as defaults, judgments, or bankruptcies. Please contact us for clarification, or further advice, regarding any of the topics covered in this newsletter.
Tax Trick to Get a $1 Million Property for $8000 a Year
Buying a $1 million investment property can seem daunting but there’s a perfectly legal way to pay just $8000 a year for it. In Australia, the property isn’t only the best performing investment class over the last couple of decades – it’s also something that can deliver you serious tax deductions and help you cut your tax bill while you build wealth. Owning an investment property isn’t nearly as expensive as most people think, especially after you factor in the available tax benefits, with statistics showing the average cost of a $1 million investment property is $8114 per year with an annual growth of $63,000, meaning that the net benefit to you (benefit fewer costs) works out to be $54,886 each and every single year. While owning an investment property does generally come with a cost, on the flip side, you benefit from owning an asset that grows in value over time. We wanted to unpack what drives these numbers so you can see how this might work for you. Initial Costs of Buying a Property When purchasing a property in Australia, there are several initial costs involved. These may include stamp duty, which varies depending on the state and can be higher in certain regions. Additionally, expenses such as building and pest inspections, as well as legal fees for managing the registration process, should be considered. However, with an incredible opportunity like acquiring a $1 million property for just $8000 a year, the investment potential becomes even more enticing. Ongoing Costs of Buying a Property In addition to the mentioned factors, buying a property may also entail ongoing costs such as apartments and townhouses having associated expenses, houses requiring payment of council rates, water rates, insurance costs, property management fees, repairs, and maintenance. Making principal repayments gradually reduces your debt over time, with mortgage interest costs involved. Financial Benefits of an Investment Property When you own an investment property the benefits are two-fold. In addition to the rent paid by your tenants, you are also likely to benefit from the growth in value of your property over time. Upon the recent calculation, Westpac data shows the averaged 6.3% growth return annually on Australian property since 1870. Given the continuous rise of property prices, we presume that the numbers would likely be significantly higher considering that this data is from 2019. Property Costs are Tax Deductible If the expenses on your investment property are more than the income you receive, you can claim this amount as a tax deduction at your marginal tax rate to reduce the after-tax cost of running your property. Based on Australian marginal tax rates, if your annual taxable income is above $45,000, your marginal tax rate + Medicare levy is 34.5%. This only means you’ll receive a tax refund of $0.345 for every dollar your investment property costs you. Meanwhile, if your income and tax rate are higher, you’ll receive even more back at tax time. This then will give you back at least a third of whatever you pay. Buying an investment property is something that can seriously accelerate how quickly you get ahead. But it does come with risks that are important to manage. It can fast-track your money success and go a long way to set up the future you want. Please contact us for clarification, or further advice, regarding any of the topics covered in this newsletter.
Crypto Crash: What Investors Need to Know
To firstly define, cryptocurrency is a digital or virtual currency secured by cryptography that makes it nearly impossible to counterfeit or double-spend. These are decentralized networks that are generally not issued by any central authority; hence are free from government interference or manipulation. The stock market which generally means the collection of exchanges and other venues is where the buying, selling, and issuance of shares of publicly held companies take place. Stablecoins, on the other hand, are cryptocurrencies the value of which is pegged, or tied, to that of another currency, commodity, or financial instrument. However, at the peak of November 2021, Bitcoin’s value reportedly slumped below $30,000 for the first time causing a massive collapse in the entire cryptocurrency market. Situations became out of control, for instance, investors are withdrawing their money, causing Tether (USDT) to lose its peg to the dollar. This unexpected crash caused great disbelief in investors as Bitcoin is often seen as a good hedge and/or will not be affected against inflation. But when the month of May 2022 came, the market, as well as crypto investors witnessed and experienced its greatest fall down due to the soaring high inflation rates and tighter monetary policy losing $600 billion in a week. Meanwhile, stablecoins which are backed by fiat currencies like the US dollar, gold, and even other cryptocurrencies are supposed to maintain their value. However, Terra (LUNA) and TerraUSD (UST), two native tokens of the Terra network, were likewise and the most badly affected by the collapse of Bitcoin and are currently trading at under $1 per token, specifically $0.000000999967 for Terra (LUNA) and $0.13 for TerraUSD (UST) as reported by coingecko.com. In sum, that week not only put an awareness that top altcoins like Terra can suffer overnight losses and struggle to survive, but at the same time has given investors and other crypto enthusiasts a wake-up call to invest carefully.
Opportunities To Save Tax With Super Contributions
Did you know that there are also some excellent tax benefits you can take advantage of right now – just by making your own voluntary superannuation contributions? When you retire, your superannuation is likely to become an important source of your income. That’s why it’s a good idea to top it up while you are working. Generally, money invested in super is taxed at a lower rate than your personal income tax rate and we want you to be aware of opportunities to save tax with super contributions. 1. Catch up on Super Payments Contributions From 1 July 2018, if you are a kind of person who has a total superannuation balance of less than $500,000, you now can make “carry-forward” concessional super contributions. With this, you can now access your unused concessional contributions caps on a rolling basis for five years while those amounts that have not been used after five years will expire. 2. How Low-income Earners are Taxed If you’re a low-income earner earning up to $37,000 per year, the low-income superannuation tax offset will ensure that you don’t pay a higher tax rate on your super contributions than your income tax rate. The said offset will be paid directly to your super account and the payment will be equal to 15% of your concessional contributions for the year, capped at a maximum of $500. Meanwhile, those high-income earners who have accumulated between $41,112 and $56,112 earnings during the 2022 financial year may also be eligible for super co-contributions from the government of 50 cents for each dollar, up to a maximum of $1,000 in non-concessional (after-tax) contributions. 3. How High-income Earners are Taxed If you earn more than $250,000 a year (including super contributions), your concessional contributions are taxed at an additional 15%, known as Division 293 tax, bringing the total tax on these contributions to 30%. Only the concessional contributions which make your total income exceed $250,000 are subject to the additional tax. Suppose your concessional contributions exceed the concessional contributions cap of $27,500 per year. In that case, the excess is included in your tax return and taxed at your marginal tax rate (less an allowance for the 15% already withheld by your super fund). You can choose to withdraw some of the excess contributions to pay the additional tax.
Buying is Cheaper than Renting for First Time Buyers
Buying Cheaper than Renting for 40pc of First Home Buyers According to a poll conducted by Great Southern Bank, owning a home is cheaper than many hopeful home buyers anticipated, with more than 2 out of every 5 recent homeowners paying less on their mortgage than they did on rent. Here, 42% of existing homeowners reported spending less on their mortgage than renters, while another 26% pay approximately the same from the poll of 1,500 homebuyers. Megan Keleher, chief customer officer of Great Southern Bank, said that “many would-be homeowners overestimate the costs of holding a home loan.” “Our study reveals that many first-time house purchasers pay more on rent than they do on a mortgage – and this trend is only expected to continue in the current rental market,” she said. In fact, almost twice as many recent homeowners living in regional areas reported a decrease of 44% in their housing costs rather than an increment of 26%. Meanwhile, for those first home buyers who are renting and still looking to buy one, 61% are expecting to pay less on their mortgage each month compared to their existing rent. Ray White’s Chief Economist, Nerida Conisbee, supported this perspective emphasizing that “with many incentives available, buying was looking a lot better than renting”. Despite an interest rate rise, Conisbee presumes that “numbers of first home buyers who would potentially pay less on their mortgages than their rent is likely to increase this year”. Whereas, Megan Keleher additionally said, “interest rates have been at record low levels for some time now, making home loans even more affordable”. Please contact us for clarification, or further advice, regarding any of the topics covered.
Six Ways to Increase My Credit Score
Are you overwhelmed by the feeling like your credit history is a mess? There are ways that you can get back into lenders’ good books. Wanna know how to increase your credit score? Here are 6 ways to improve your credit score. 1. Check-Out your Credit File to See Where you Stand If you want to increase your credit score, it is important to check out your credit file to see where you stand. Out of all the many credit reporting bodies available that you can approach to get your credit file in Australia. CheckYourCredit, Equifax, Illion, and Experian are only some of the major ones you can check, and where you can request a free copy of your credit report more frequently and/or every 12 months in Australia. This is an important step as this will tell you which areas need to be addressed. 2. Make Sure There Aren’t Any Errors After having the copy of the credit report, it is a must to thoroughly review it to make sure there are no major errors or listings on the report. This checking practice then will give you the assurance that your money is free from eros, and secured, and will help to prevent you from identity fraud, such as a fraudster taking out several credit cards under your name. 3. Pay your Bills On-time Regardless, it is a good attitude and a must to pay bills on time. Regularly practicing this behavior will not only help you stay at peace with pending bills but also make the lenders aware and be impressed that you are responsible with your funds even if you have made missteps previously. 4. Have a Credit Card To ensure you are even more creditworthy, it is a good idea to make measured credit card use as this will benefit you to make your payments regularly and on time. Doing so will serve as evidence that you are more than capable of managing debt. Also, to properly utilize your credit card in good use, it is a must to only buy things that are a ‘need’ rather than a ‘want’ and ones that you know you can repay immediately. 5. Pay Off Any Outstanding Debts Having pending bills could damage your credit score, that’s why paying any unpaid bills or debts as fast as possible should be the top priority. 6. Minimize New Credit Applications To increase your credit score, it is advisable to refrain from making multiple credit applications. Applying for multiple credit applications can accumulate hard inquiries, where lenders request to review your credit history before lending you money. Such applications occurring over a short period of time can put your credit score at risk.
Refinance Opportunities
Srbinovski says Australia’s property investors are consistently top-of-mind when ubank makes decisions around product and policy enhancements. “We know the investor market is important in the Australian property landscape,” he says. “It’s up to us to really cater to them and give them the tools they need to thrive, whether it’s educating them about the landscape or providing competitive rates.” Fedder says Suncorp Bank has seen its investment loan portfolio grow by close to 5% over the last 12 months. “We’ve created new opportunities to fund these loans by delivering a simplified credit policy and reducing the volume of documentation that customers and brokers need to provide,” he says. “We’ve also been dedicated to providing consistent service and turnaround times, which we know are key in the current property investment market.” You may read the whole article here: http://bitly.ws/sor4 Call us now for 45 minutes one on one free financial consultation session. 1300 074 675 or message us on WhatsApp +61 488 859 637
Bitcoin: Why is the largest cryptocurrency crashing?
Bitcoin is trading at $21, 974 (£18,000). It’s fallen 25% in the past five days alone, to its lowest value in 18 months. Its peak of almost $70,000, in November. Experts say this is because of the wider global climate. It’s not just in the crypto world things are not looking good. Recession looms, inflation is soaring, interest rates are rising and living costs are biting. Stock markets are wobbling too, with the US S&P 500 now in a bear market (down 20% from its recent high). As a result, even the big investors are less free with their money. And many ordinary investors – not rich hedge-fund owners or corporations but people like you and me – have less to invest in anything, full stop. In order to stabilise it, people who still have Bitcoin would need to hold on to it and others would need to start buying it again. This has happened before. Crypto fans will tell you now is a great time to buy, because it’s cheap – and you then have to sit tight and watch it turn the corner. This is how it’s always worked. Call us now for 45 minutes one on one free financial consultation session. 1300 074 675 or message us on WhatsApp +61 488 859 637
