2012

ISSUE 6

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Welcome to Mortgage Watch

I hope you find the information in this issue useful and informative. Please feel free to pass this newsletter to family or friends. Regards, Denjola Bhutia

Follow our handy hints to avoid silly season overspending

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Reviewing your home loan regularly can make good financial sense

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With some smart strategies you can keep your home safe this Christmas

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mortgage

Mort gage management t ips for t he New Year

The start of a new year is prime time to review your mortgage and take control of your finances. Here we discuss some practical tips to help you get ahead in the coming year. Put features to work If your loan offers generous features, ensure you are making good use of them. For instance, an offset facility works by deducting the balance of a linked savings account from the loan principal when monthly interest is calculated. This reduces the interest component of each payment so more of your money goes toward paying off the principal. For example, if a borrower keeps $5,000 in a 100% offset account from the start of the loan term, then on a $300,000 loan repayable over 30 years at 7.8% interest p.a., the term Turn small change into big savings

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would be reduced by around 1 year and 8 months, and the borrower would save $43,130 overall. Additional repayments can play a vital role in helping you become mortgage-free faster. On a loan of $300,000 repayable over 30 years at 7.8%p.a., rounding each monthly repayment from $2159.61 to $2,200.00 means paying just $40.39 extra each month. A homeowner who starts this strategy five years into the loan term and persists throughout the life of the loan will save over $23,000 in interest charges, and cut approximately 16 months off the loan term. Continued on page 2

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Make a dent Lump sum payments will also help pay off your loan sooner. Consider tipping any windfalls like a tax refund or salary bonus into your home loan and reap the rewards of long-term savings.

Consider reviewing your mortgage regularly The mortgage market is constantly changing, so it worth speaking to s your mortgage broker to see if your

current mortgage is still the best choice for you. Having a mortgage broker review your home loan options costs nothing but it could lead to big savings on a better mortgage deal.

Solving silly season overspending

When the festive season left Anne O Donnell with a financial hangover, her home loan provided a welcome remedy. The New Year period sees many Australians battling a legacy of silly season overspending, and Anne O Donnell knows how easily it can happen. A few years ago I went crazy with my Christmas shopping recalls Anne. An expensive outfit for the office party, another for New Year Eve, lavish gifts s for my family and friends it all went on my credit card. By January my card balance had blown out to $2,500. In the months that followed, Anne struggled to make inroads into her card debt. By June I realised serious action was needed to get things under control says Anne. The solution was for Anne to fold the card balance into her mortgage. She explains, I owned my unit for a d few years so my equity had increased. Drawing on my mortgage let me pay off the card in full, and by making extra repayments on my loan I minimising m the additional interest expense. Determined to stay out of card debt, Anne now reserves her credit card for emergencies. Consolidating credit card debt or personal loans into a mortgage offers the savings of a lower interest rate but it a strategy s that calls for discipline. When consolidating debts into your mortgage your loan term will usually increase, which could mean paying more in overall interest on the bigger, consolidated debt. Making additional repayments is the best way to avoid this downside. Following a budget is an important way to regain control of spending and avoid a financial fiasco next festive season. Take a look at the government s Understanding Money website (www.understandingmoney.gov.au) for a free budget planner. Your mortgage broker can provide further information on how your home loan could offer a remedy for silly season overspending.

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Shop before you sw ap

have been banned on variable rate loans taken out after 1 July 2011, they could still apply if you have held your current mortgage for less than five years. Your mortgage broker can review your loan contract to see if you likely to be impacted by exit re fees. You may also need to budget for discharge fees on the old loan (allow around $350), and possibly upfront fees on the new loan. These costs will vary between lenders, and again your mortgage broker can crunch the numbers for your situation. You may also be up for Mortgage Registration fees usually about $200, which are payable to your state or territory government. It is important to note that if you are borrowing 80% or more of your home s market value, Lenders Mortgage Insurance may be applicable. You may be able to add this cost to the loan balance, but it will mean paying interest on the premium over time. Your mortgage broker can take a look at the potential costs of refinancing and help you work out whether switching will put you ahead financially. Take advantage of improved features For some home owners, the appeal of refinancing lies in taking advantage of improved loan features. Flexible payment and rate options can make your loan easier to live with. Other features like an offset account or redraw can help you pay off the loan sooner. Your mortgage broker can take a look at a range of home loans from the lenders on their panel to see if there a s more suitable loan out there for you. A better deal could be just around the corner.

Refinancing your home loan can make good financial sense with the potential for savings, improved loan features or just a chance to achieve important personal goals. The term refinancing simply means switching from one home loan to another. It a step that can offer a s number of advantages including the opportunity to save money with a lower interest rate or access improved loan features. Switching can also provide a means of accessing home equity, which can provide low cost funding for home improvements, investing or other personal goals such as going on a holiday. However refinancing can come with some downsides. There is a certain amount of paperwork involved, and switching can come with a range of costs (more on these later). On the plus side, your mortgage broker can streamline the process and help

you decide if refinancing could work for you. So even if you comfortable with re your current home loan, it worth s knowing how refinancing works and reviewing your situation on a regular basis. Competitive market puts borrowers in the driver seat s One of the main reasons home owners choose to refinance is the potential to secure a cheaper loan. In today's highly competitive lending environment new mortgage products are launched every day and banks are keen for your business, so now can be an ideal time to shop around. As a guide to the savings refinancing can help you achieve, switching from a $300,000 loan with a rate of 6.4% to a loan with a rate of 5.9% could cut $92 from your monthly repayments. That s an overall savings of up to $27,692 over a 25 year term. As noted earlier, refinancing does involve some costs. Although exit fees

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Tis t he season t o be careful

Keep garden tools and ladders locked away - these could be used to break into your home. If you planning a vacation, re ask the neighbours to leave their car in your driveway to create a lived in appearance. Check if they can collect your mail too. Keep friends and family safe We often so busy with the holiday preparations that it re s easy to overlook home safety. Take a few minutes ahead of Christmas to make yours a safe festive season. Christmas lights and candles are one of the great pleasures of this time of year. But with over 10,000 house fires in Australia annually, it a pleasure that calls for sensible management. s If you decorated the garden with festive lighting, remember ve that electricity and water don mix. Be sure to switch lights t off before watering plants, and only use lights certified for outdoor use. Inside your home, turn off all Christmas lights and extinguish candles before going to bed. The festive season brings joy, laughter and the potential for hazards. But with some smart strategies you can keep your home safe this Christmas. Santa may not be the only visitor to your home this holiday season. Christmas is also a busy time for crooks, when the combination of absent owners and a home stocked with new gifts can be very lucrative for burglars. Statistics from insurer NRMA show 1 in 4 Australian households have been burgled. Keep your home secure by installing quality locks on doors, and preferably windows too. Improved security can also lower your home insurance premiums. Be sun smart Providing plenty of shaded areas in the garden and outdoor entertaining areas of your home can protect your guests from sunburn and heat stroke. Have lots of iced water and soft drinks available for your guests, and go easy on the alcohol. If you have a swimming pool, check that the gate and fencing is child-proof. Above all, enjoy yourself. There nothing more special than s celebrating the festive season with those you love in the comfort of your own home.

If you are interested in reviewing your finances please do not hesitate to give me a call or drop me a line at the address below. Kind Regards, Denjola Bhutia

Nine Ten Finance & Mortgage Solutions Denjola Bhutia P:0413 064 852 M:0413 064 852 E:denjola@nineten.com.au

Information included in our newsletters is for general information purposes only and must not be considered financial advice. You should seek independent professional advice in relation to financial, taxation and legal matters relevant to your individual circumstances.