Low-rates-what-does-this-mean-for-you?

Low rates – what does this mean for you?

The RBA decided to once again leave interest rates on hold at 0.1% at its recent March meeting, which means yet another month at the lowest interest rates ever.

In fact, if you have been paying off a mortgage at any stage over the past few years, you have been doing so in a historically low interest rate environment.

The RBA does this to stimulate the economy. The lower the interest rates are, the less money you spend on your debt, which means you have more to spend elsewhere. This extra spending helps prop up the economy.

But how you put that money to use is up to you. Recent research has shown the pandemic changed many of our spending habits, with Australian households saving an estimated extra $120 billion between April and December last year, due to restrictions on travel, hospitality and more. We seem to be more cautious about spending on material goods and luxuries and now choose to funnel extra cashflow back into our homes.

First things first

In order to take advantage of low interest rates, you need to make sure you’re paying the lowest that you can be.

Get online and check out loan comparison websites to see what else is out there. If there are better deals, you can consider refinancing with another lender; or, if you don’t want to leave your current bank, give them a call and ask them to match the better rate.

It’s a competitive market for lenders and they are keen to retain customers, so banks will often grant you a better deal if you pick up the phone and make them think you are ready to take your debt elsewhere.

Pay your own mortgage off sooner?

Now that you’re happy with your interest rate, where to next? One option is to keep making the same mortgage repayments, or even increase them and pay down your mortgage as soon as you can. Traditionally, people would want to pay their house off ASAP. Paying a bit extra when you can manage can shave years off your repayment term and save you tens of thousands of dollars over the life of the loan. You own your own house and any money that comes in. But is that still the best option?

Conditions have changed

Paying off your house early used to be beneficial when interest rates were much higher. For example, when banks were offering an average of around 7% on standard variable products, the accumulative effect of compound interest meant you would end up paying more than the purchase price of the property in interest alone over a 30-year loan term.

Now though, it’s a different story. You can get much better returns by focusing on acquiring new, quality debt rather than paying off existing debt which is attracting very small interest. Investing in property with plenty of upside for growth and good rental return can be a great way to take advantage of low interest rates.

Make lower repayments?

An option is to make lower repayments on your mortgage and free up more cash for your day to day life. That extra cash could be used to pay for something you need, or again, to invest in shares or property.

Making minimum repayments on your owner-occupier mortgage will free up even more cash to leverage into as much quality debt as you can manage.

You might use that cashflow to acquire multiple investment properties, which pay a rental income and appreciate in value throughout the rest of your own mortgage term.

Then, later down the track, you have the option to sell off some of your assets and use the capital gains to pay off your remaining debt, while keeping remaining properties for further income and equity. Or, simply keep holding the assets and benefiting from their growth and returns for as long as possible.

 

 

Package-loans-VS-basic-loans-under-variable-rates

Package Loans VS Basic Loans Under Variable Rates

The mortgage market is full of options as lenders try to attract business in a competitive landscape.
Getting advice from a mortgage broker can be a great way to get an idea of what type of home loan will suit your situation, but it’s also good to educate yourself on the types of products that are out there.
Let’s take a look at two main categories when considering a home loan product: package loans versus basic loans.

Do good things come in packages?

Package loans have become very popular in recent years and account for more than 50% of loans written by major lenders.
Package loans usually combine your home loan with other common financial products, which may include a mortgage offset account, transaction or savings account and credit card. They are eligible for interest rate discounts off the standard variable rate, fee waivers on loan approval and valuation fees.

Basic home loans are not packaged with anything. They are ‘no-frills’ loans where you save money on upfront and ongoing fees, because you don’t have the flexible features that cost more to administer but often allow you to save much more money long term.

What a fee-ling

In return for packaging products, lenders will make it worth your while by charging one annual fee for multiple loans, rather than separate fees for each product.
If considering a package loan, find out whether that one annual fee includes the other home loan fees you may not know about, such as an application fee, property valuation fees, redraw fees, switching fee (from variable to fixed and vice versa) and offset account keeping fees. Other fees to be aware of are the application or establishment fee, bank solicitor fee and settlement fee, when setting up your home loan.
These can vary in price, but average between $150 and $700. They are usually nonrefundable but major banks are often happy to waive these fees, so make sure you ask ahead or negotiate, as this could be the difference between choosing a package or basic.

Rate expectations

Banks will often give you a discounted rate for package loans. Market comparison platforms generally find that interest on average package loan products is between 0.25% and 0.5% lower than average standard variable rate loans.

That saving alone is more than enough to make up for the annual fees which can be higher than what you would be charged for a basic loan.

Unique borrowers can benefit

Flexibility is the key for borrowers such as property investors or the self-employed who want to free up cash flow and maximise future borrowing power. Features such as interest only repayments, line of credit and others will appeal to investors as long as they choose the package that suits their strategy, while credit cards and transaction accounts are useful to small business owners.

Break it down to the basics

So when would it be better to shun a package for a basic home loan? You may just want a simple, no frills home loan that you can quietly pay off. 

Basic loan products will likely offer you the low interest rates you want, but there may be loan features and loan flexibility that you may not realise you need.

 

 

Refinance-cash-rebates-What-you-need-to-know

Refinance Cash Rebates – What You Need to Know

A lot of banks seem to be offering cash incentives at the moment to tempt you to jump ship from your current lender and refinance with them.

Sums of between $1000 and $4000 are being offered up for borrowers that could use some extra funds in their account, with the added bonus of switching to (at least what they think) will be a better deal.

But just because they throw you a wad of cash, it doesn’t mean you’ll be better off over the long term… or even the short term.

Why do banks offer cash?

These incentive deals, nicknamed ‘cashback loans’, but actually known as refinance cash rebates, usually pop up in a competitive market for lenders. Banks need your money on their books and in times like these, when interest rates are so low, more people than ever want to be paying off a mortgage. It is also a time of unprecedented disruption in the mortgage space. Online only banks, second tier lenders and financial startups are emerging for a slice of the market. So banks need to stand out from their competitors.

At some point, banks came to the conclusion that offering cash was a good incentive. Maybe borrowers would be low on funds at the moment due to the strains of COVID, or would like the opportunity to pay off a bit of debt, or even buy something they need without having to use credit.

The survey says yes… sometimes

A recent study found that one in three borrowers were planning to refinance in the coming months. Of these, one in four surveyed would choose a cashback offer over a low interest rate. One in three millennials would opt for cash, but just one in 10 baby boomers.

Overall though, nearly half of the borrowers surveyed (46%) would opt for the lower interest rate over a cash rebate.

The good news for borrowers at the moment is that you may not have to choose one option or the other, because you can now get cash rebates on loans that already have super low interest rates.

What you should use the rebate for

The whole point of a rebate is that it is there to cover the costs of moving loans to another bank.

And there are quite a few costs involved. You will incur such expenses as government fees for discharge of title, discharge of mortgage, title registration, costs of title searches, settlement fees and solicitor documentation fees. If you go ahead and break a fixed rate mortgage term, you will also incur early exit fees.

So if you do opt for a loan with a cash rebate, don’t start planning your next holiday or big retail purchase without first covering off those costs.

Of course, putting that rebate straight back into your loan will save you even more when interest is taken into account.

For your consideration

While the rebates are usually enough to cover the costs of switching lenders, the savings made could dry up quickly if the loan is less flexible than your previous one, or if it doesn’t suit your specific needs.

Lower interest rates add up to significant savings over the life of a loan, usually much more than a few thousand dollars’ worth.

Of course, not many people these days choose a loan and stick with it for the full term – you may change homes a number of times – so if you refinance regularly, you can make good use of the incentives on offer at any given time.

Before you do take the plunge however, make sure you read the fine print. Most lenders will have a minimum loan amount that qualifies for the rebate. If you have a relatively small remaining balance on your loan, you may not qualify as it may not be worth their while to get you on board for a small amount only. Also, many of these deals are restricted to owner occupiers only, so if you are building an investment portfolio, you may not be eligible.

Independent financial advice will help you decide your best option.

 

 

Home-Expenditure-Measure-(HEM)-explained

Home Expenditure Measure (HEM) explained

There have been stories emerging in recent years about banks getting a little too familiar when assessing home loan applications. “Why did you spend all that money on duty free at the airport a few months back?”
“That was a big bill at that fancy restaurant, how often do you dine out at the top end of town?

These may not be exact quotes, but they are the types of questions people are being asked when applying for home loans these days. Don’t worry, the bank’s loan assessment team aren’t following you on flights or spying from adjacent restaurant tables, but they do have a forensic level of access to your expenditure.

It’s a far cry from the days of banks just approving loans that are around five times your yearly income, give or take a 2.25% repayment buffer in case of a rate rise or rainy day.

Times have changed

A decade of events like the GFC and royal commission on banking have forced banks to get serious about responsible lending. Regulations have been put in place so stop borrowers being approved for finance they are unable to cope with.

Meanwhile the ready availability of more and more consumer behavior data makes it easier to predict if you will be unable to service a loan. One feature of this brave new lending world is that lifestyle expenses are now taken into account when assessing loan applications.

You might say “I work hard, I can afford a mortgage, what I spend my spare money on is my business”. Well that’s true, but who a bank lends money to is their business too, and they now have to make snap judgements on whether it’s wise – and legal – to lend money to you. So, like it or not, your lifestyle spending habits go hand in hand with your loan serviceability. And that’s where the Home Expenditure measure (HEM) comes into play.

OK, so what is it?

Dreamt up by an economic think tank a number of years back, the HEM is a standard guide that lenders use to estimate what a potential borrower might spend on annual living expenses. That figure may then be added to whatever algorithm a lender uses to assess a loan application. The HEM is believed to be used for the great majority of home loans applied for each year.

The HEM takes into account the borrower’s location, their dependents, their total income (some lenders include rental income as part of the total gross income) and the type of lifestyle they live. Most borrowers fall into the ‘basic’ lifestyle category, estimated to spend just over $32,000 a year, while those considered ‘lavish’ spend closer to $60,000.

Items considered ‘absolute basics’ include food and supermarket, coffee, lunches and takeaway, entertainment (includes cigarettes and alcohol), domestic and international holidays, hairdressing and grooming, media streaming and subscription services, phone, internet and pay TV, utilities, transport, communication, kid’s clothing, while ‘discretionary basics’ may be gifts, private health fund, private education, fashion and childcare.

The HEM calculates the median spend on absolute basics, plus the 25th percentile spend on discretionary basics.

How do banks use it?

Ordinarily, if you apply for a loan, the bank will ask you to estimate your weekly or monthly spend on various expenses. They then compare your estimation to what the HEM tells them about people with a similar profile to you (those living in your neighbourhood, with the same number of kids, similar income, etc).
To be conservative, the lender will often use the higher of the two estimated spends when figuring out whether you can afford the loan. 

Is it accurate?

Banks have been criticised for relying too heavily on the HEM because it is often deemed to underestimate what people spend on lifestyle and may therefore leave them stuck, unable to pay off a loan. Banks have therefore been pressured to take extra steps in conducting their due diligence in verifying spending.

That is where some of those questions about your big one-off splurges may be asked. You may “conveniently forget” to include some of your more frivolous spending habits in your own estimations, but be called to answer for them anyway, which may make you seem untrustworthy. Honesty is the best policy when applying for a loan.

 

 

ZIN-Last-Call-For-2020

Last Call For Property Finance In 2020

If you can remember back to when we were able to go to the pub, ‘last call’ always signified that the bar was about to close for the night and this was your last chance to get a beverage.

‘What? Already?’

The end of the night can creep up on you, because time flies when you’re having fun.

However, you don’t have to be having fun. Time can also speed by when there’s a lot happening…like the year 2020 for example.

We’d barely begun picking up the pieces from the deadly bushfire season, when we were thrown into pandemic panic… if you can believe it, that first lockdown was now more than seven months ago.

While it’s felt like a long year for many (shout out to our poor friends in Victoria especially), it’s about to be all over.

So ask yourself, when it comes to your finance goals, what have you been able to achieve?

And is there enough time to make the rest of the year count.

Bank backlog

If you were still planning to buy property this year, you’re running out of time. An average settlement period of six weeks would take you through to Christmas, and that’s after you’ve sourced the property and made a successful offer.

If you’re in a position to offer a shorter settlement to the vendors, you might be able to get the deal done, but if you need to borrow money from the bank, that could be a whole new kettle of fish.

The pressure put on the banks by COVID and its financial mess means many have a backlog of loan and other applications they will need to get through before assessing yours.

There are stories out there at the moment about buyers picking up great property deals, only to run out of time to settle before the bank is able to pick up and process a loan application that they would be all but certain to grant.

The flipside is that if you don’t need finance approved, you may be able to swoop in and pick up a property from an eager vendor while your competition struggles to get their finances sorted.

As government grants and economic stimulus begin to wind up, there will be a lot of people looking to offload assets to free up capital or get rid of some of their debt.

A motivated seller may mean you pick up a property for $50,000 cheaper than you otherwise would have and that will be money you have earned on the way in when the market gets back into the swing.

Get in shape for summer

There is never a wrong time to make sure your finances are in the best health possible.

Look at the interest rates you are paying on investment properties or your permanent place of residence.

Chances are, you will be able to get a better deal by refinancing, or even calling up your own bank and threatening to look elsewhere unless they give you a rate reduction.

Especially since the RBA dropped rates yet again. With the official rate set at 0.1% there are now lenders offering rates below 2% and RBA Governor Philip Lowe says it will realistically be at least three years before rates look like rising again, so you’re in a strong bargaining position for a better deal.

Prepare for next year

While you’re at it, look at whether you can get a better deal in other areas affecting your household budget.

If you have been with the same energy provider or health insurer for longer than a year for example, you are missing out on a better deal from elsewhere.

Pick up the phone and you may save thousands and make sure you’re ready to start the new year with maximum borrowing power freed up.

Set your 2021 goals now and get the jump on those that do so in January. Make plans and get what you need into place to make sure next year is a great one.

And talk to a Zinger Finance strategist to see what you need to do to get finance ready for your 2021 goals.

Emotional-Rollercoaster-Of-Signing-Your-First-Mortgage

Emotional Rollercoaster Of Signing Your First Mortgage

Whether you’re an owner occupier or an investor, signing off on your first mortgage usually comes after a lengthy ride on an emotional rollercoaster; a ride which doesn’t actually end when you sign the contract! No, it keeps hurtling along until settlement, and even then you are only just beginning to deal with decades of ups and downs that come with property ownership.

When you go through the process, it’s hard to believe that there are so many home owners already out there! How did they all do it?

Anticipation

The first leg of the property journey can be exciting. You have set a goal, know what you need to do financially to get there and now it’s just about making it happen by making sacrifices and saving money. Every savings milestone achieved comes with the reward of satisfaction and the excitement of that end goal becoming closer.

Feeling overwhelmed

Once you have saved enough for a deposit, the next stage can be tough because you’re flinging yourself into something you wouldn’t know the first thing about… mortgages.

There are so many products and lenders, with different rates and features, and you have no idea which is the right one for you. There are complex words, epic amounts of fine print to read and understand, and many potential roadblocks to your eventual loan approval. Don’t go in blind, engage a mortgage broker, as they will be able to show you the best options for you, empower you to make a choice and even set up the preapproval process for you. They will also demonstrate what different purchase prices would mean for your budget, which will help you realise how much you can actually afford to spend.

Hope and hopelessness

Now it’s time to find the property you want to buy. You hit up open homes, auctions and spend hours scanning real estate portals to find the right property. You begin each week with a spring in your step and feel a tinge of excitement every time a new listing lands in your suburb of choice; but as this continues on for days, weeks and months, the hope turns to doubt, the tinge of excitement becomes instant cynicism; and that initial hopefulness can flip to the opposite. Just ask anyone who was looking for a property in the middle of Sydney’s recent boom. Some were looking for more than a year.

The best thing to do is remember that it won’t last forever. And the joy you will feel when you finally get there will be worth it.

Four seasons in one contract

You’ve found the right home and made an offer within your budget. This part of the process is an emotional rollercoaster in itself. You feel excitement and nerves as you wait for your offer to be accepted, then joy when it is! Though this turns back to some anxiety when you realise there is still time for someone to come up with an offer over the top of you, so you need to get down there with your deposit and sign the contract right away. This can often mean a quick trip to the solicitor or conveyancer for final checks and read-throughs to make sure there is an appropriate cooling off period, in which time any outstanding pest, building or strata inspections can be done. This time between acceptance and signing the contract can feel like an eternity, but it is of the utmost importance that you get everything right. The stress turns to relief when the deposit changes hands and the contract is signed by both parties and you can allow it all to sink in.

Settlement city

The period between signing and settlement can be stressful too, as you may need to wait for final loan approval from the bank. The reality is that you have taken a sizable gamble and risk losing your deposit, and your new home, if something happens to cause your finance to be rejected by the lender. You realise that pre-approvals are much easier to get than official approval and there may be some back and forth with the bank in question if they need you to clarify spending or send further documents to prove you can make your repayments. However, if you have a good mortgage broker, they will have been on top of any potential hurdles and will also help explain and respond to further bank requests.

And when the settlement date arrives, it’s happiness, pride and relief all at once. You did it! And you have taken the first steps towards your future. 

ZIN-Should-I-Invest-Or-Buy-My-Own-Home

Should you invest or buy your own home?

Whether to buy an investment property (IP) or permanent place of residence (PPOR), is really a question about the goals of the individual.

Do you want to own your own home right away, start paying it down and perhaps consider investment options later? Or do you want to create long term wealth and a passive income stream, so that you are able to purchase your dream home later in life?

The case for a PPOR

Pros

-Buying your own place of residence comes with a number of benefits. First of all, you may be able to access government grants for first home buyers, especially if buying off the plan or a new build property. Benefits differ state by state and depend on the value of the property and how long you are planning to live in it.

-You will get access to better interest rates, discount periods and more flexible loan features from lenders than if you were a property investor.

-If and when you decide to sell your PPOR, you will be exempt from capital gains tax, which will be a big bonus if you hold the property through multiple growth cycles.

-You can truly make the home your own. You can renovate and put permanent changes in place to add to the home’s appeal, without having to ask a landlord first. Not answering to a landlord also means you won’t face suddenly being made to move out.

-The money you pay goes towards your own long term wealth, while if you were renting, you’d be financing someone else’s goals.

Cons

-Your location will be governed by your first home buyer’s budget and you therefore may not be able to afford to live where you really want to. This could mean long commutes to work or being a long way from friends or recreational favourites. This is one reason some people buy IPs in areas they can afford and then rent a home (usually cheaper than mortgage repayments) in their ideal suburb.

-Aside from the CGT exemption, there are no other tax deductions or benefits to be had from a PPOR. You are also the one paying the bank, so your home is not creating an income like an investment property might.

-Putting all your savings into buying the best PPOR you can afford will often mean your borrowing power is all used up. It could be some time before you can create enough of a buffer to borrow money for investment or other purposes. Being stretched like this can also cause financial stress.

The case for an investment property

Pros

-You can make your decision based purely on what stacks up financially, without the emotional attachment of needing to purchase something you really want to live in.

-If your investment property generates good rental return and you are able to rent where you want to live for less than a PPOR in that area would cost to buy, your borrowing power will not be so tied down. You can therefore use your cash flow to sink into further investments.

-You will be able to claim various associated costs as tax deductions. Interest paid on the loan, management fees, insurance costs, depreciation, educational expenditure, buyers’ agency fees and advertising/marketing costs are all examples.

-Making savvy investments can mean accumulating enough equity to buy a better PPOR later in life.

Cons

-If you are renting where you live you will be at the whims of a landlord, lease agreements and strata regulations. You may struggle to find a rental that allows pets or fulfils your other needs.

-You won’t have access to any government help or grants that first home buyers enjoy and will usually have to pay more interest as banks are tasked with dissuading investors from dominating entry level markets.

-If you have to sell investment properties, you will pay CGT, which is hard to take if your strategy is to invest for growth!

-Non-savvy investments might make it even harder to get a good PPOR down the track than it is now.

So what’s the verdict?

It’s really up to the individual. Both sides of the coin have their ups and downs. You need to figure out which path suits you best and then make a start. Independent financial planners and advisers can explain everything in clear terms, to help you make the right decision.

The Difference Between A Financial Strategist And A Broker

When an average Australian feels sick, they go to a GP and if their situation is pretty standard, that GP finds them a solution. However when they have a unique issue that requires a level of expertise beyond the powers of that regular GP, they are referred to a specialist. Sure, the GP may have a good general understanding of the illness, but it takes someone who has dedicated their professional life to having the absolute BEST understanding of that area of medicine to get the patient the outcome that they need.

It’s similar when it comes to buying property. A first home buyer, upgrader, or any other would-be owner-occupier can visit a mortgage broker and find out the loan product that suits them.
It’s a simple fix. The broker has relationships with a number of lenders, they can negotiate interest rate deals with them and recognise aspects of a customer’s finance that may be the difference between getting a loan approved or rejected and make sure the necessary elements are in place before an application is made. They can then prescribe the lender best suited to the client (out of the ones in their ledger) for this particular property purchase. In short, they have a great general understanding of the mortgage world.

See a specialist


There is nothing wrong with a good broker, but not all will take the time to analyse whether the short term loan solution they are offering up is actually the best strategy for your long term goals. So, if you’re a budding investor who wants to make a purchase now, without affecting a long term goal to buy 6, 10, 20 or even more properties, a regular mortgage broker may not cut the mustard. You will need to see a specialist… a financial strategist.

A financial strategist can help you focus on the long game. You may want to buy your first investment property and quickly release equity to also pick up your second. A financial strategist can show you how to do this without running into problems in the future when you want to be financing properties 6, 7 and beyond.

Debt strategy


Financial strategists can help you build a debt strategy; which is a plan for both accumulating debt and then removing it in the following years to free you up for further investments. They can help you with ways to structure your debt so that banks will be open to keeping on lending you money. They can educate you on features that you may not have known existed, such as security swaps, portable loans, the best ways to use debt to maximize cashflow and minimize tax and even the odd tweak that could take you forward after being stuck with one or two properties only in your portfolio.

The ability to keep moving forward and expanding now will see benefits compounded by being more invested for longer and allow you to live life on your own terms in the future.

Talk to Zinger


At Zinger Finance we have a team of strategists that specialises in helping clients build large property portfolios. We can assist everyone from first timers right up to sophisticated property investors. The Property Investor Program includes a free financial health check; advice on how to reduce debt, free up equity and leverage assets; a long term financial strategy with a step-by-step action plan; ongoing care in the form of regular portfolio reviews to make smart adjustments when interest rates, laws, policies and regulations change; and a raft of other features. You can find us at zingerfinance.com.au, by calling the office on 1300 367 925, or emailing the team at info@zingerfinance.com.au.

 

What Is A Guarantor Loan?

What is a guarantor loan? Is it right for me? How does it work?

A guarantor loan could help you to buy your first property without a deposit.

But, is it right for you? And will it stand in the way of your financial independence further down the track

What is a guarantor loan?

Let’s say you are 18 years old. You have just come out of the probation period of a new job and are earning a regular income. You want to buy your first property but you haven’t been able to save up a deposit.

Your parents, on the other hand, have a house that they have paid off. Mum and Dad still have some working life ahead of them and want to help you get started on your property journey.

A guarantor loan would allow them to put up their property as collateral, along with the one you want to purchase, in order to cover the deposit amount.

This way, you could get finance for the property without needing to raise a cash deposit.

How does it work?

Each of you would have to get independent legal advice before executing this strategy.

Then, your parents would sign to give you access to their debt-free property to guarantee the deposit component of the loan.

Your parents’ property, and the one you are buying, would be cross collateralised, which makes you financially tied to your parents.

You would still be able to access whatever first home buyer benefits are applicable as the purchase would be in your name.

What implications are involved?

Madhu Ramana, CEO of Zinger Finance, says you should only use a guarantor loan as a last resort.  He says there are many implications involved in this sort of structure.

After settlement, your parents will receive information about every credit-related activity you undertake.

“Because your parents are guarantor on the debt, they will be exposed to everything you are doing on a credit note,” he says.

This means that if you want to release equity further down the track, apply for a credit card or apply for a car loan, they will need to sign off on it.

You are basically tied to their hip – they have to give their formal approval on every credit application you make.

Another major thing to consider is that, as a guarantor, they are exposed to extra risk. If you are self-employed and come up against major liabilities, they risk facing financial hardship or even losing their house. 

If your parents are close to retirement, the arrangement may impact their pension.

Who would it suit?

Guarantor loans may be helpful for young adults starting out in their career whose parents own their home outright and are middle aged. Often, it is the parents themselves who guide their grown up child in this direction.

Who wouldn’t it suit?

For self-employed people who face liabilities or sporadic income, guarantor loans wouldn’t be a good choice.

It also wouldn’t suit anyone, whether they be a borrower or guarantor, who wants to build a property portfolio quickly.

Is there a better way to go about it?

Madhu says that while guarantor loans have their place in the world of finance, there are other ways to go about it without tying yourself to your parents.

“Should people take out guarantor loans? If that is the only choice, then by all means. At least you’ve now got an extra asset,” he says.

“But if there are other choices, then I would say to use that as the last resort.”

He compares it to working out at the gym. Let’s say your personal trainer had you doing bench presses – and your parents were sitting on top of the weight.

Instead of this heavy arrangement, Madhu says you could work out to a comfortable level without your parents needing to be there.

He says if they are prepared to be a guarantor, then they must be confident that you can handle this amount of debt. 

“You could also do that in a different way in which you could keep your financial affairs totally independent,” he says.

What are your other options?

Instead of being a guarantor, your parents could release equity from their property. Alternatively, they could get a line of credit, and give this to you to use as a deposit. 

Under this arrangement, you would be legally responsible to pay back the loan but your properties wouldn’t be cross-collateralised.

Your parent’s property would still be in their name, and your property would be in your name.

To do this, you would still need to seek legal and financial advice before drawing up a contract. That contract, however, would be between you and your parents. The bank would not be involved.

Madhu says, it is better for each party to stay independent from one another, and reduce the limitations involved.

“Keep the structure simple. Keep your lives independent because you never know what life will throw at each one of you,” says Madhu.


Disclaimer: Please note that the information given in this video blog is only applicable to a number of scenarios and may not be relevant to your financial situation. For more tailored information regarding your own credit report, we would urge you to seek advice from a professional who is privy to your personal circumstances and can give information specific to your financial situation. Please get in contact with our team if you have any questions regarding your own credit report, or would like any help regarding your own finances.

What Does Refinancing Entail?

What does refinancing entail?

For those who already have one or two properties, refinancing can be a great way to save money and improve loan structure.

But what does refinancing entail?

Let’s break it down.

What is your current structure?

This is the first thing we look at for clients who are interested in refinancing. At Zinger we understand how important it is to structure lending correctly, especially if our clients are building a property portfolio.

How much are your properties worth?

Once we have sorted out your loan structure, we then order valuations on your existing properties. This gives us a clear idea of what we are working with.

Which lender should you choose?

Then it is a matter of narrowing it down to a few different lenders and comparing the products they offer to find the best one for you.

How will the new structure work?

After finding the right product, we then take the time to discuss how the new structure will work.

We may suggest making a few changes that will help you benefit more from the new loan. This could include changing the account splits or increasing/decreasing and redistributing certain debts.

Don’t forget to tell your accountant.

Once you have all this info from us, it is important to relay it back to your accountant so they can lodge your accounts correctly come tax time.

Everyone is different.

Since we all have different situations, it is important to speak with a finance expert who has a broad knowledge of the industry as well as a proven track record in helping people achieve their property goals.

Refinancing – The basic steps:

1) Value existing properties

2) Choose best bank and product

3) Lodge application

4) Gain formal approval

5) Settlement.


Disclaimer: Please note that the information given in this video blog is only applicable to a number of scenarios and may not be relevant to your financial situation. For more tailored information regarding your own credit report, we would urge you to seek advice from a professional who is privy to your personal circumstances and can give information specific to your financial situation. Please get in contact with our team if you have any questions regarding your own credit report, or would like any help regarding your own finances.

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Norwest Macarthur Point, Suite 118, Level 1, 25 Solent Circuit, Bella Vista NSW 2153

Zinger Finance can find a solution, no matter what your finance needs are. If we can’t help, we will find you someone who can!

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