Paramount Finance Australia 4/4/24 Paramount Finance Australia 4/4/24

Homeowners now an extra $71,000 richer (on average!)

You may not feel richer, but if you’re a homeowner, there’s a decent chance your personal wealth has surged over the past 12 months thanks to soaring property values. And it could open up a world of exciting possibilities.

Sometimes you’ve just got to shake your head in disbelief at the resilience of the property market.

Despite a cost of living crunch and higher interest rates, national home prices have somehow ploughed on over the last year and a bit.

CoreLogic says home values nationally are up $71,832 since January 2023 – a jump of 10.2% in just 14 months – which averages out to an increase of $5,130 per month.

To put that into perspective, last financial year the average full-time Australian worker earned $6,565 per month after tax.

The thing is, higher values can give homeowners much more than a warm inner glow.

Rising property prices can also provide opportunities to boost your wealth further – without having to hammer in a For Sale sign out the front.

Let’s take a closer look.

Your home equity can unlock further wealth

An uptick in your home’s value can drive an increase in home equity – assuming your mortgage hasn’t increased.

Home equity is the difference between the market value of your home and the balance of your home loan.

So if your home is valued at $1,000,000, for example, and you have $500,000 left on your home loan, your home equity is $500,000.

The exciting thing about home equity is that it’s not just a number on a page. It can be a valuable resource that helps you forge ahead financially.

Three ways to make home equity work harder

Plenty of banks let you use home equity as security for additional borrowing or to refinance your current home loan – all without having to sell your home.

Here are three ways you could make your newly enlarged home equity work harder:

1. Refinance to save on interest

Your home loan is probably one of your biggest household expenses.

Refinancing to a new loan or lender can help you save with a more competitive rate, or by taking advantage of loan features that help you pay off the mortgage sooner (such as an offset account).

And the more home equity you have, the easier it can be to refinance.

2. Use your home’s equity to fund an investment property

Your home equity may be used as a deposit on an investment property in lieu of cash savings.

By becoming a landlord, you could benefit from regular rental income, potential tax savings, and an increase in the value of your rental property over time.

Not to mention having a nice little nest egg that could help fund your retirement or – if you’re feeling particularly generous – pass on to your children.

3. Put home equity to work funding renovations

One of the beauties of home ownership is that you can add value to your property – regardless of what the market is doing – with a few well-planned renovations.

But how do you fund those renovations if you’re tight for cash?

Well, one way is to tap into your home equity to fund the renovations.

So how does ‘cashing out equity’ work?

It might sound complicated – but we promise it’s not.

Let’s say you bought an $800,000 house three years ago that, partly due to last year’s property price surge, is now worth $1 million.

And let’s also say you originally took out a $600,000 loan for that house, which you’ve managed to pay down to $500,000 (you little beauty!).

By refinancing that $500,000 loan into a $700,000 loan (70% of your property’s new market value), you can unlock $200,000 in equity to help fund your renovations or as a deposit to buy an investment property.

It’s also worth noting that banks typically let you borrow up to 80% of a property’s market value.

Which means if you upped the ante and refinanced to an $800,000 loan, you might be able to unlock $300,000 in equity.

So if you’d like to make your home equity work harder, call us today for a clearer picture on how much equity you have – and how you can tap into it to potentially grow your wealth.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

Paramount Finance Australia 3/28/24 Paramount Finance Australia 3/28/24

FOMO, FOBO and FOOP – how they can hold you back

Nobody likes missing out on a good thing. But then again, who likes overpaying? So how do you strike the right balance when both fears can work against one another?

Nobody likes missing out on a good thing. But then again, who likes overpaying? So how do you strike the right balance when both fears can work against one another?

The property market rarely stands still. Interest rate movements, the number of homes listed for sale, and even the time of year can all drive shifts in the market.

And change plus commitment isn’t something we’re all comfortable with.

It can even see us put mental traps in place that mean we panic about missing out on a good buy, or alternatively, we convince ourselves it’s better to sit things out on the sidelines.

Let’s take a look at three mind games that can work against home buyers – and how you could beat them.

Fear of missing out – uh oh, FOMO

FOMO can be a real thing for home buyers, and it’s possibly starting to have an impact on the property market once more.

According to REA Group, today’s buyers are being gripped by a sense of urgency to make their move into the market.

The reason?

Growing expectations of interest rate cuts are sparking concerns that property values may soon skyrocket again.

Already, research firm CoreLogic says market data points to further growth in home prices.

The result is that autumn is shaping up as a particularly busy season as buyers look to race in before values head higher.

So should you sprint into the market too?

Well, before racing in to buy a home, have a chat with us and we can let you know if you’re home loan ready today.

Fear of better options – let go of FOBO

Some buyers never quite get into the market because of nagging doubts that an even better property could come along.

The thing is, no home is perfect. Buyers often find a bit of compromise is what gets them into the market.

To avoid FOBO, jot down the essential features you’re looking for in a home. Then back it up with a list of nice-but-not-necessary features.

If you can find a property that ticks the boxes for all, or most, of the must-haves you can be confident you’re buying a place that will suit the majority of your needs.

Fear of over-paying – forge a path past FOOP!

It’s possible that humans have wrestled with the question “am I paying too much?” for centuries.

No one wants to pay over the odds for their home.

However, this shouldn’t freeze you into taking no action at all.

Two simple steps could help dispel concerns about whether you’re paying too much for a property.

First, do plenty of research and check out comparable home values in the area you plan to buy in. It can help you identify if the asking price for a place is reasonable or over-the-top.

Remember, you can always attempt to negotiate on price – especially if you have home loan pre-approval, which shows sellers you’re a serious buyer.

Second, and perhaps more importantly, remember that property values typically rise over time.

For example, data from SQM Research shows that back in 2009 the average asking price for a house in Sydney was about $755,000. Fast forward to March 2024, and that figure has jumped to more than $1.9 million.

Hence the saying: “time in” the market generally beats “timing” the market.

Because if you plan to hold your home or investment for the long term, chances are you’ll look back at what you paid, and be glad you purchased when you did.

But … to help make sure you don’t purchase a house that’s beyond your means, get in touch with us today and we can help you work out your borrowing power.

In turn, you’ll be able to work out what your home buying budget is, and what your monthly home loan repayments will likely be.

Paramount Finance Australia 3/22/24 Paramount Finance Australia 3/22/24

Explainer: how construction loans work

There’s something very special about moving into a newly built home or putting the finishing touches on a major renovation. Maybe it’s the look and feel of new paint and fresh flooring, or just knowing you’ve kicked a worthwhile goal.

Whatever the motivation, plenty of Aussies are rolling up their sleeves right now, with the value of building approvals jumping 14.7% from December 2023 to January 2024.

Meanwhile, on the renovation front, we’re not just pimping our pads for looks and lifestyle.

Almost half the home renovations carried out in 2023 were designed with a ‘green’ focus to improve energy efficiency, according to Houzz Research.

The upshot is that planning a new build or renovation can be exciting and rewarding.

But long before you kick back and enjoy the fruits of your (or your builder’s) labour, you may need to decide how to pay for it all.

And a construction loan could be the right tool for the job.

How do construction loans work?

Construction loans work a bit differently from regular home loans.

Instead of receiving a lump sum from the lender, which is usually the case with a traditional home loan, a construction loan drip feeds funds in line with various stages of the project.

If you’re building a new home, for instance, a lender will typically make progress payments across five main stages, including:

– laying the slab;
– erecting the frame;
– reaching lock-up:
– fitting out your home; and
– completion of construction.

This arrangement can offer valuable advantages.

For starters, paying out smaller sums during the construction period may provide a level of protection for the borrower against a builder being paid for work that isn’t completed.

In addition, while the project is underway loan interest is only calculated on the funds drawn down, not on the final total value of the loan.

During the construction period, you’ll generally be asked to make interest-only payments. This can be a lot kinder on your household budget than principal plus interest payments, especially if you’re renting while the builders are at work.

What to watch for with construction loans

Building projects don’t last forever (though it can feel that way at times), and neither do construction loans.

When your new home or renovation is complete, your construction loan will typically roll into a regular home loan.

It can all sound very simple – and it usually (with any luck) it is.

However, a key challenge with construction loans is that they’re not offered by every lender.

That’s why it can be important to speak to us at an early stage.

We can help you identify lenders with construction loan options that meet your needs and budget, and guide you through the application process.

Our support can save you time and leave you free to focus on your building project.

So if you’re looking to build or renovate, talk to us today about your funding options and we’ll aim to help you get the ball rolling on your construction project sooner.

Paramount Finance Australia 3/21/24 Paramount Finance Australia 3/21/24

Why offset accounts are hitting new highs

Spare cash can be tight right now (cost of living crunch, anyone?). But if you’ve still got some savings plus a home loan, there’s a way you could make your surplus funds work harder.

Spare cash can be tight right now (cost of living crunch, anyone?). But if you’ve still got some savings plus a home loan, there’s a way you could make your surplus funds work harder.

Ever heard of an offset account?

They’re becoming an increasingly popular add-on feature to home loans, with new data showing that homeowners are stashing money in their offset accounts at a record pace.

In fact, balances in offset accounts have increased to 11% of credit limits, the highest share since APRA started collecting data on this particular stat in March 2019.

This essentially means that, on average, people with offset accounts are only paying interest on 89% of their mortgage each month.

So how do home loan offset accounts work?

An offset account is a cash account linked to your home loan.

The bank doesn’t pay you interest on the offset account. Instead, the balance of the account is deducted from (or ‘offset’ against) the balance of your home loan when loan interest is calculated.

For example, say you have $20,000 in an offset account and a home loan worth $615,000, which is about the size of the average new mortgage Australia-wide.

Instead of monthly interest being based on the full $615,000, the lender will only charge interest on $595,000 – that’s the $615,000 loan minus the $20,000 in the offset account.

This means you pay less loan interest each month.

And there’s an added bonus: because your loan repayment amount stays the same, more of each payment goes towards paying down the loan principal, which in turn helps to reduce next month’s interest cost.

And so on and so forth.

In this way, offset accounts are a way for borrowers to swing the mortgage pendulum more in their favour, with savings on interest plus the potential to pay off their home loan sooner.

Why are offsets so popular right now?

Long story short, offsets are increasingly popular right now in no small part due to high interest rates.

And because no interest is paid on the balance of the offset account, there is no tax impact.

That’s quite different from having a separate savings account, where a high income earner can lose a sizeable chunk of their interest earnings to tax.

The icing on the cake is that the home loan interest rates that lenders charge are typically higher than the interest returns they pay on savings accounts.

This means offset accounts can let borrowers make their spare cash work harder by saving more on loan interest than they could earn with a regular savings account.

Last but not least, some lenders allow you to have multiple offset accounts (with debit cards attached!) linked to the one home loan, which can allow you to put all your money to work each month – as opposed to having it in different buckets across a number of low-interest transaction accounts.

What to consider with offset accounts

First and foremost, the money you put into your offset account is potentially money you could be investing elsewhere.

So you’ll have to weigh up whether that money is better served by helping you pay off your home loan sooner, or investing towards your future in other assets.

Secondly, it’s important to be confident you are paying a competitive home loan interest rate.

That’s because offset home loans may come with loan fees and/or higher interest rates than more traditional loans. Not always, but sometimes.

Last but not least, offset accounts don’t tend to work with fixed-rate home loans. But … there are ways you could split your home loan so that it’s part fixed and part variable (with your offset account attached to the variable side).

That’s why talking to us about your home loan needs is important.

We can compare across our wide panel of lenders to help line you up with a loan that matches your needs – and discuss whether an offset account might be a suitable option for you.

Paramount Finance Australia 3/19/24 Paramount Finance Australia 3/19/24

How long does it really take to get a home loan?

Need a home loan in a hurry? You could be in luck. Plenty of lenders are keen to crunch loan approval times at present – but there’s a lot borrowers can do to potentially speed up the process, too.

Finding a home to buy can take time, and when the right place comes along it can feel as though you need to sign the sale contract fast to stake your claim.

But from there you’re going to need a home loan, and that’s where timing becomes critical.

The good news for home loan applicants is that average turnaround times have reached new record speeds at some of the bigger banks, while processing periods for smaller lenders have also reduced, according to the latest Broker Pulse survey.

But don’t let that lull you into a sense of complacency.

It’s important to have your loan ready to go by settlement – usually six weeks after you’ve signed and exchanged contracts (however this period of time can potentially be negotiated with the seller).

Otherwise, if you don’t have finance sorted by settlement date, the seller may be able to charge interest and penalty fees.

So, there can be a lot riding on getting your home loan approved in a timely fashion.

The general rule for loan approval times

How soon your home loan can be arranged often varies between lenders.

Some lenders boldly claim that it can take as little as an hour.

But that’s not usually the case.

To try and play it safe, allow about four to six weeks from the time you submit an application to having the funds available.

But of course, if you require funds sooner than that, then it could be a matter of us helping you line up a lender with quicker turnaround times (and then having us hassle them a bit for good measure).

What’s usually more important, however, is that you focus on the home loan that matches your needs, rather than racing in for a mortgage that can be arranged in record time.

5 ways to help speed up the home loan process

Fortunately, borrowers can do plenty to try and speed up the loan process.

Here are five steps you can take to help keep application and approval times tight:

1. Talk to us first

We can explain your borrowing power, let you know how big a deposit you may need, and check if your finances are in the shape it takes to get the green light from lenders. We also have access to resources that estimate how long approval times currently are with potential lenders.

2. Get your paperwork together

Gather all the documents a lender is likely to ask for, including copies of payslips, birth certificates and other ID, plus bank account statements for the past 3-6 months. If you’re unsure, this is a step we can help you with!

3. Try and hold off on any major changes

Big life changes, such as starting a new job or business just before you apply for a loan, can leave lenders asking questions. Try to maintain your budget – your usual spending/saving patterns – and your current job, to avoid a ‘please explain’ from lenders, which could delay loan approval.

4. Double-check you’ve completed the application accurately

Any mistakes on your application form can see the paperwork returned to you for corrections, putting the brakes on the whole process. Once again, we can help minimise any potential discrepancies in your application.

5. Ask us about loan pre-approval

Waiting until you’ve paid a deposit to apply for a mortgage can be a high-stakes, high-stress strategy. Loan pre-approval is a way to help you speed up the loan application process while also potentially boosting your bargaining power with vendors.

Call us today for more tips on getting your loan across the line – we’d love to help you move into your new home sooner.

Paramount Finance Australia 3/1/24 Paramount Finance Australia 3/1/24

Where are the bargain homes located in your suburb?

Location may be a big driver of property prices, but in any given suburb a few streets can be all that separates paying top dollar for a home or potentially scoring a bargain. Here’s how to use a tool to find pockets of value in any given neighbourhood.

Each suburb has its own median house price, and sites like realestate.com.au can provide a useful guide to median values for a particular postcode.

However, the median is obviously only the middle point in each suburb’s dataset – and it’s common for prices to vary widely across a single suburb.

Fortunately, there is an easy online tool that can help you identify more affordable pockets in the suburbs you’re looking to buy in.

New interactive price tool

PropTrack has developed an interactive property price tool that reveals the median values across different parts of each suburb.

The price differences can be surprising.

For example in Beecroft, on Sydney’s leafy north shore, the median house price is about $2.4 million.

But as PropTrack’s price tool shows, in certain parts of Beecroft, the median rises to more than $2.8 million.

Yet, several streets away, that figure is closer to $2.2 million.

There is a reason for the $600,000 difference.

The more affordable parts of the neighbourhood lie adjacent to the M2 Hills Motorway.

It’s a similar story in Melbourne’s popular inner suburb of Fitzroy North.

Known for its character-filled terrace houses, Fitzroy North has a median house value of $1.6 million.

But if you want to live near Edinburgh Gardens – the suburb’s attractive parkland – be prepared to pay closer to $3 million.

In Brisbane’s Fortitude Valley, the trendy James Street Market side of James Street has a median house price of $3 million, whereas across the road towards Brunswick Street there’s a median house price of under $1.9 million.

These price differences are not unusual.

According to a PropTrack analysis, home buyers can typically save around $365,000 by buying in the more affordable areas of a suburb.

In some neighbourhoods though the price gap becomes more of a chasm.

In the Perth suburb of Subiaco, for instance, several pockets of homes have median values topping $2 million.

Head just around the corner to Subiaco Oval and the surrounding homes are priced closer to $840,000.

What to watch with bargain buys

By this stage you’ve probably noticed a trend.

Nearby features can have a real impact – good and bad – on surrounding property values.

Access to the beach, great views or a local park can push property values higher.

On the other hand, homes bordering a 6-lane highway or nearby industrial estate can offer bargain buying – as long as you’re prepared to live with whatever is keeping the price lower.

And then there may be not-so-obvious factors – such as flood zones or upcoming changes to council zoning – so it’s worth doing your research.

After all, there’s a lot you can do to renovate a home, but you can’t change the location.

Seizing opportunities

That said, pricing differences within suburbs can offer opportunities to save.

A single street can be all that separates an expensive home from its more affordable neighbour.

Buying in the cheaper neighbourhood lets you enjoy all the amenities of the more expensive postcode, without the higher price tag.

It’s also worth keeping tabs on any planned local developments that could have the potential to transform today’s ugly duckling pocket into tomorrow’s upmarket enclave.

Thinking of buying? Call us today to understand your borrowing power – it’ll help let you know where you can afford to buy.

Paramount Finance Australia 2/23/24 Paramount Finance Australia 2/23/24

Home buyers rejoice! More listings are hitting the market

Great news for home buyers! After an extended run of low listings, the number of homes coming onto the market is skyrocketing. So could this have an impact on the property market? Let’s take a look.

Great news for home buyers! After an extended run of low listings, the number of homes coming onto the market is skyrocketing. So could this have an impact on the property market? Let’s take a look.

Take a look around your local suburb, and chances are you’ll see freshly minted For Sale signs popping up all over the place.

That’s because a large number of homes are coming onto the market.

Research firm PropTrack says the property market is off to a strong start for the year, with the number of new listings nationally on realestate.com.au up 12% year-on-year in January.

Melbourne and Sydney had their busiest January in over a decade.

Activity was also strong in Hobart, Brisbane and Adelaide, with Canberra experiencing its busiest-ever January for new listings.

Only Perth bucked the trend, recording slightly fewer new listings this year compared to January 2023.

Why the uptick in listings?

The rise in new listings reflects strong demand, very low unemployment and population growth.

Home buyers are also enjoying a more stable interest rate outlook.

February saw rates remain on hold, and PropTrack says financial markets are now expecting a reasonable chance that interest rates may start to fall later in the year.

What does more listings mean for home buyers?

More homes coming onto the market gives buyers the benefit of increased choice, and that’s a real plus if you are looking for your first home or upgrading to your next place.

But the rise in listings may not push home prices down.

That’s because we are still seeing plenty of keen buyers.

As a guide, CoreLogic estimates 115,241 homes were sold over the three months ending January 31 – an 11.9% increase on the same period last year, with high levels of migration being a big driver of demand.

CoreLogic adds that expectations of lower rates later this year could see house price growth accelerate.

How you can prepare

More choice can be a good thing for buyers. However, it can become easy to lose track of what you’re looking for in a property, especially if you’ve attended a large number of inspections.

That’s when it helps to draw up a list of must-have home features (such as aspect, block size or parking requirements) followed by nice-but-not-necessary features (like, say, a swimming pool or a shed) to assess each home you visit.

It also makes sense to be ready to act when you see a property you’d like to buy.

Having home loan pre-approval in place lets you set a buying budget, so you can focus on homes within your price range. It also means you can make an offer with confidence – and stay one step ahead of less-organised buyers.

Talk to us today to get your home loan ducks in a row and take advantage of a wider choice of homes listed for sale.

Paramount Finance Australia 2/23/24 Paramount Finance Australia 2/23/24

They’re back! Why property investors account for one-in-three new home loans

Lending to property investors is soaring once again. We lift the lid on what’s driving investor interest – and what it could mean for the property market throughout 2024.

Lending to property investors is soaring once again. We lift the lid on what’s driving investor interest – and what it could mean for the property market throughout 2024.

It looks like property investors are back … and in a big way.

The latest ABS figures show that in December 2023, banks lent over $26 billion in new home loans – and one-third of this figure, a whopping $9.5 billion, was to property investors.

That equates to 36.2% of all housing loans – the highest market share for property investors since mid-2017.

It’s also quite an uptick from December 2020, when the ABS says investors took out just 23.6% of mortgages.

So why the big shift in recent times?

What makes an investment property so attractive?

There are many reasons why people may love owning a rental/investment property.

An investment property can be a source of extra income, and right now, some investors are pocketing very attractive rental yields (that’s annual rent divided by the purchase price of the property).

PropTrack, for example, is reporting yields as high as 9% in some suburbs.

Investors may also expect to see their property grow in value over time, which could add up to some pretty impressive capital gains.

CoreLogic looked at the results of 86,000 property resales in the third quarter of 2023, and found 93.5% were sold for a profit, with the median gain coming at $298,000. Not bad at all.

And home values are tipped to jump a further 6% in 2024, according to ANZ Bank.

Add in rental vacancy rates hitting record lows of 1.1% in January 2024, and many investors are attracting good tenants, which can be great for cash flow.

How could the return of investors impact the market?

On a personal level, buying an investment property could potentially be a boost for your long-term financial well-being.

ABS has acknowledged that rising household wealth in Australia is being supported by house prices that have continued to grow despite higher rates.

More broadly, PropTrack points out that the re-emergence of investor activity “heralds good news for the overall health of the market, helping to drive more new construction”.

Long story short, the benefits of more rental properties could extend beyond individual investors.

Is an investment property on your radar?

If you’re thinking about buying a rental property, or you’d like to add to your current property portfolio, talk to us today about your options for an investment loan.

We can help you work out how much equity you may be able to leverage, as well as your overall borrowing capacity.

From there, we can help you track down a suitable mortgage with a competitive rate from our broad suite of lenders, leaving you free to focus on finding your ideal investment property.

Paramount Finance Australia 2/12/24 Paramount Finance Australia 2/12/24

When will the next RBA cash rate call be made?

Happy days! The Reserve Bank kept rates steady in February. But a shake-up in the number of times our central bank meets each year is raising questions about how long the rate pause will last. Here’s what we could expect.

It seems fitting that in a month known for Valentine’s Day, the Reserve Bank of Australia (RBA) has shown borrowers some love by keeping the cash rate steady at 4.35%.

In reality though, the latest rate pause has nothing to do with romance or affection.

It’s more to do with keeping a lid on rising living costs.

After months of steadily rising prices, inflation looks to be heading south – currently sitting at 4.1%, down from 7.8% in December 2022.

That’s exactly what the RBA has been aiming for with their interest rate hikes.

Long story short, home owners can breathe easy – for now at least.

But when will the next cash rate decision be made?

RBA rate calls won’t be as frequent in 2024

Aussies are used to RBA rate decisions being made on a monthly basis, with a break for the holiday season each January.

That’s changing this year.

Instead of 11 meetings, the RBA will meet just eight times to decide interest rate movements, handing down their decision on the second day of:

– February 5-6
– March 18-19
– May 6-7
– June 17-18
– August 5-6
– September 23-24
– November 4-5
– December 9-10

What do less frequent meetings mean for borrowers?

So, whatever rate decision is made in March, home owners need to live with it for almost two months until the RBA meets again in May.

As such, some pundits believe fewer meetings will naturally lead to fewer rate movements. Farewell to back-to-back rate hikes every month, for example.

However, experts also warn it might lead to bigger increases or decreases as the RBA has fewer opportunities to move the needle.

And that’s not to say individual lenders can’t, or won’t, change their home loan rates whenever they like, regardless of RBA rate decisions.

For example, Mozo reports that a number of lenders lifted their variable rates in December 2023 despite the RBA keeping the cash rate steady.

Buy now or wait for rates to fall?

While the February rate pause will be welcomed by borrowers, the RBA has cautioned that further rate hikes “cannot be ruled out”, especially if inflation starts to climb again.

Even so, plenty of lenders including NAB, the Commonwealth Bank and Westpac, expect to see interest rates fall this year.

There are no guarantees – a lot can happen over the next 12 months. But it does raise questions about whether now is a good time to buy a home, or if it makes sense to hold off until rates head lower.

On one hand, a drop in interest rates could boost your borrowing power.

The catch is that lower rates could stimulate home buying activity, potentially driving home prices higher.

If this happens CoreLogic warns we could see new measures introduced to contain housing credit risk such as changes to lenders’ loan-to-value ratios.

So when might be the right time to buy?

We believe the ideal time to buy a home is when you feel ready to do so.

And a good way to find out if you’re ready is to speak to us about your borrowing power.

We can help you crunch the numbers to let you know how much you could borrow, which in turn helps you figure out what kind of property you could afford to buy.

If that sounds like a good plan to you, give us a call today.

Paramount Finance Australia 2/1/24 Paramount Finance Australia 2/1/24

4 tips for self-employed home loan applications

Applying for a mortgage when you’re self-employed may have you jumping through more hoops. But it needn’t deter you from getting into the property market. Here are 4 tips to help you apply for a mortgage like a boss.

Being your own boss sure has its advantages: the flexibility of setting your own hours, building your own business to represent your values, having someone else fetch you coffee…

But when it comes to home loans, you may have more to prove than the average applicant.

You see, lenders may view you as a little more risky. That’s because, in their eyes, you may not have a steady paycheck to make those all-important repayments.

But being self-employed needn’t stop you from getting your slice of the great Australian dream.

Planning ahead and knowing what lenders generally look for could give you an edge when it comes to mortgage application success.

1. Get your finances in order

As a self-employed applicant, having rock-solid finances is important.

Even if your business is booming, most lenders will see you as more of a risk for defaulting. That’s because self-employed incomes can be less consistent.

Lenders want to know that the likelihood of you making regular repayments is high.

And to mitigate risk, loan options available to you may have a lower loan-to-value ratio (meaning you may need a higher deposit) and/or have a higher interest rate.

So, to prepare to apply, consider getting your finances in check by:

– Building up a healthy credit score.
– Lowering your living expenses by focusing on the essentials.
– Saving up a healthy deposit (aka genuine savings) and a cash buffer.
– Running your business on accounting software such as Xero, MYOB or Hnry so you can provide up-to-date and accurate profit and loss statements.

2. Gather your documents

It’s important to keep your business and personal finance documents up to date, so you’ll be ready to rock and roll.

For verification of income, many lenders require two years worth of lodged business and personal tax returns.

It’s a great idea to tell your accountant in advance that you’re planning on applying for a home loan. That’s because some of the financial wizardry they apply to lower your tax bill might work against your application and lower your borrowing capacity.

Also, keep in mind that business owners who do lots of “cash jobs” can find it harder to obtain a home loan because they have less income to show for their work.

On top of running your credit score, some lenders may want statements from loans and credit cards for proof you can make regular repayments.

They may also want to see verification of assets such as any property, savings and investments.

Some lenders may want to see the whole kit and kaboodle when applying for a loan. Some may need less.

And some offer low-doc loans if you don’t have extensive documentation. But they may come with higher interest rates or the need to pay lenders mortgage insurance (or both).

Exactly what documents are required depends on the lender and the type of loan.

3. Choose your lender wisely

Not all lenders are comfortable providing self-employed loans for the reasons mentioned above.

And every time you apply for a home loan your credit history is “pinged”. The more this occurs, the more of a red flag this may pose to lenders.

So targeting lenders that have a track record of approving self-employed loans might be a wise move.

Having a reputable mortgage professional on your side may be helpful here. Which brings us to our next point …

4. Get in touch with us today

Just as you’ll want to give your accountant plenty of notice, so too will you want to reach out to a mortgage broker sooner rather than later.

That’s because we can help you work out your borrowing capacity, and provide you with other tips that you can start working on now that may eventually help make your application more attractive to lenders.

So if you’re self-employed and think you’ll be seeking a home loan in 2024, get in touch today.

Paramount Finance Australia 1/29/24 Paramount Finance Australia 1/29/24

First home buyers charge back into the market

Hats off to Australia’s first home buyers! The latest lending data shows they’re refusing to let last year’s rate hikes and rising property values dampen their goal of buying a home. Here are five tips to help you buy your first home in 2024.

You’ve gotta hand it to first home buyers in the current market.

Not only were they faced with 13 cash rate hikes in just 18 months – which can obviously affect borrowing capacity – but property prices still rose 8.1% in 2023, according to CoreLogic.

Still, they won’t be deterred.

The latest lending data from the Australian Bureau of Statistics shows a massive 20.3% jump in the number of loans to first home buyers last year.

But it takes more than grit and determination to buy your first home. A few handy hints can also help.

If you’re hoping to buy your first home, below our top tips can help you become home loan-ready in 2024.

1. Make a visit to your mortgage broker your first step

First home buyers are often unsure about what’s involved in buying a home. That’s fair enough.

We can help you know where you stand in terms of loan approval, the costs you should plan for, and the steps you can take now to help improve your finances.

2. Save, save and save some more

Lenders like to see you have a decent track record of regular saving. It shows you have the discipline to manage home loan repayments.

Take a look at your budget, work out where you can trim back, and consider funnelling as much into savings as possible.

It may mean cutting back on luxuries and treats for a while but it’s not forever. And the more you save now, the less you potentially need to borrow.

3. Consider lowering your credit card limit

When you apply for a home loan, lenders are often more interested in the limit on your credit card than the balance outstanding.

That’s because you could, in theory, max out your card after buying a home, which may affect your ability to manage mortgage repayments.

The average card limit is about $9,500, according to a Finder analysis of RBA data.

Shrinking this down (with a quick call to your card issuer) might get you over the line for the loan you need.

4. Check out first home buyer support schemes

There’s a tonne of potential support for first home buyers – from First Home Owner Grants (FHOG) to possible savings on stamp duty.

We can explain what you might be eligible for, but research of your own can narrow down your choice of property.

Some support payments are only available if you buy or build a new home, and many have property price caps.

5. You may not need a 20% deposit

Sure, a 20% deposit is a target worth aiming for.

But you may be able to buy with less.

The First Home Guarantee and Regional First Home Buyer Guarantee let first home buyers get into the market with just a 5% deposit and no lenders mortgage insurance.

That might mean you’re ready to buy now!

Call us today for a chat about buying your first home, and discover how we can help you find a home loan that matches your needs at a competitive rate.

Paramount Finance Australia 1/19/24 Paramount Finance Australia 1/19/24

How your deposit size can shape the rate you pay

It’s commonly known that the bigger your deposit, the smaller your home loan, and thus, the lower your monthly repayments. But today we’ll look into another way your deposit size could reduce your repayments: by potentially reducing your interest rate.

A question we’re commonly asked (believe it or not!) is “how can I get a lower interest rate?”

There’s no straightforward answer to this one as it usually depends on a myriad of factors, including whether lenders see you as high risk or low risk, the competition in the market at the time and, as we’ll discuss today, how big your deposit is – or more technically, your ‘loan to value’ (LVR) ratio.

What’s LVR?

To cut through the jargon, LVR refers to how much of your home’s value you’re borrowing.

If you plan to buy a home priced at, say, $600,000 using a deposit of $120,000, you’ll need to borrow $480,000, or 80% of the property’s value. For lenders, this means you have an LVR of 80%.

Why does this matter?

Well, a bigger deposit lowers your LVR. This in turn helps reduce the risk you represent to a lender.

A loan with an LVR of 80%, for example, may be seen as less risky than one with an LVR of 90%.

As a general rule, lenders tend to reward borrowers for that reduction in risk with a lower home loan interest rate.

But note: these figures don’t include stamp duty and other up-front costs, which you may also need to budget for.

Average interest rates by LVR

Mozo checked out the average variable rates for different LVRs.

As you can see below, for home loans with an LVR of 95%, meaning a 5% deposit, the average variable rate is about 7.38%.

Borrowers who can pull together a slightly bigger deposit may see their rate fall. As a guide, on an LVR of 90% (deposit of 10%), the average variable rate falls to 7.13%.

That’s a potential rate saving of 0.25%. This may not sound like much. But along with lowering your monthly repayments, a lower rate could mean paying less in interest charges over the life of your loan.

– LVR 95%: average variable rate of 7.38% p.a.
– LVR 90%: average variable rate of 7.13% p.a.
– LVR 80%: average variable rate of 6.85% p.a.
– LVR 70%: average variable rate of 6.81% p.a.
– LVR 60%: average variable rate of 6.77% p.a.

How your LVR can see you save in other ways

Your LVR doesn’t just shape the rate you’re likely to pay.

If you have a small deposit, usually less than 20%, you could be asked to pay lenders mortgage insurance (LMI).

This is a type of cover that protects the lender if you can’t keep up your loan repayments.

LMI can be a substantial up-front cost.

There are options for first home buyers with a small deposit to avoid this expense. The First Home Guarantee Scheme, for instance, allows eligible buyers to purchase a first home with just a 5% deposit and no LMI.

What if I’m refinancing my home loan?

If you’re refinancing your mortgage, your LVR will be shaped by home equity.

The same basic rule applies. The more equity you have in your place, the smaller the loan you may need.

This may help lenders see you as a lower risk (all other things being equal), so chances are you may be offered a lower rate.

How we can help

With so many loans and lenders to choose from, home loan interest rates can vary widely.

Yes, your deposit or home equity can play a role in the rate you pay. But a variety of other factors come into play also.

That’s why it’s important to speak to us if you’re buying a first home, your next home, or refinancing.

We can help you find a home loan that’s suited to your needs at a competitive rate in line with your LVR and any other contributing factors.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

Paramount Finance Australia 1/16/24 Paramount Finance Australia 1/16/24

The pros of having a mortgage broker on your side

What exactly can a mortgage broker do for you? Well, we don’t mean to toot our own horn, but we can make your home loan journey a whole lot easier, letting you focus on the fun part: planning for your new home!

The words “home loan application process” can strike fear in the hearts of many.

Trawling through different loan products is a time drain. The bureaucratic tape can be a headache. And let’s not forget banks scrutinising your finances.

But it doesn’t have to be a drag.

The majority of home loan seekers have now cracked the code: turning to mortgage brokers to help them land a loan.

In fact, between July and September 2023, mortgage brokers wrote 71.5% of all new residential home loans in Australia, according to the MFAA.⁣
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That’s the second-highest mortgage broker market share the industry has ever recorded.⁣
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Let’s find out why so many Australians have jumped on the broker bandwagon.

1. We do the legwork for you

Let’s face it, life gets busy. You’ve probably got a million things on your plate.

Carving out time to deep dive into home loan products across lenders can be tough. And often overwhelming.

Mortgage brokers can take that tedious task off your hands – we can assess your situation and find home loan options to suit you and your goals.

We’ll even lodge paperwork and apply on your behalf, then chase things up to ensure everything goes as smoothly as possible.

And fret not: all brokers are bound by a best interests duty.

That means we’ll always put your best interests first – not ours nor the bank’s!

2. We could help boost your chances of success

When looking around for a loan, having a knowledgeable professional on your side could be a game-changer.

We can explain the whole home buying and loan process, which is particularly helpful if you’re a first-home buyer or if it’s been a while since you’ve applied for a mortgage.

We know the application process inside and out and can prime you to have your paperwork and finances ready to roll the moment the perfect property comes along.

We have a wide range of lenders within our network – potentially providing you with access to a variety of home loan options across different banks and lenders.

Whether your financial situation is complex or straightforward, we can use our panel of lenders to help you find a suitable loan. We can also let you know which lenders have a history of approving applications similar to yours.

This potentially cuts down on countless hours trawling through lender websites for the right type of home loan. It may also lower your risk of rejection, which can negatively impact your credit score.

3. You’ll get continued support

Once you’ve been approved for a home loan, the party doesn’t stop there.

We can continue to support you by regularly reviewing your rate with your bank on your behalf.

That way you can avoid the “loyalty tax” – where new customers tend to get the lower rates.

You can contact us any time with any questions you may have. And when you’re ready to refinance, unlock equity in your home, or anything else finance-related, we’re here to help.

Get in touch today

Are you ready to make the home loan process a whole lot easier?

Get in touch today to get the ball rolling. We’ll take care of finding your home loan so you can focus on planning for your new home.

Paramount Finance Australia 1/4/24 Paramount Finance Australia 1/4/24

5 New Year’s resolutions for your home loan

Thought of a New Year’s resolution yet? Or perhaps you’ve broken one already? Either way, check out our list of possible mortgage goals for 2024 – try one, or have a go at them all – to save a bundle in the year ahead.

It’s that time of year when Aussies love to set resolutions.

According to Commonwealth Bank research, as we dive into 2024, three out of four Australians will make at least one financial resolution, often involving plans to follow a budget or spend less.

But when it comes to New Year goals, it’s worth shining a spotlight on your mortgage.

After all, it’s likely to be your largest debt, and setting (and achieving) a few goals for the year ahead can help you pocket savings and become mortgage-free sooner.

Here are our top 5 home loan resolutions for 2024.

1. Give your home loan a health check

Don’t just assume you still have the home loan that’s right for you.

Chances are, life has dished up a few changes over the past few years.

Or maybe there are big things on the horizon for 2024 – like starting a family, upgrading to your next home, or tackling a major renovation.

Checking that your mortgage is still well-suited to your needs can be a starting point to achieve these goals.

Talk to us about a free home loan health check to be confident you’re heading into 2024 with a loan that still ticks all the boxes for your situation.

2. Ditch lender loyalty

Interest rates soared in 2023. Yet less than one in 10 home owners refinanced their home loan to get a better deal last year, according to Canstar research.

At the start of 2024 we’re still seeing big variations in rates between banks, with many lenders still offering lower rates to new customers, according to Reserve Bank of Australia (RBA) statistics.

So, staying loyal to a lender can cost you.

We can compare your mortgage to many others in the market to see how it shapes up in terms of rate, features and flexibility.

That’ll help you decide whether to stay, or save by switching to a new loan and/or lender.

3. Check you’re not paying for features you don’t use

Home loan features can be very handy, but the more features a loan has, the higher the rate (or fees) may be.

That’s not a problem if you regularly use features such as, say, an offset account to save money.

However, if you’re not using particular loan features, you could save with a more basic loan that potentially comes with a lower rate.

Not sure which features your loan offers? Call us today for a quick rundown and we’ll help you check it all out.

4, Plan now for the end of a fixed rate

The fixed-rate cliff is not over yet.

The RBA says 450,000 home owners will roll off a super-low fixed rate in 2024.

If that includes you, it could pay to act now.

We can help you plan ahead and decide the right course of action – be it reverting, refixing or refinancing – so that your finances won’t be too squeezed when the end of your fixed rate rolls around.

5. Leverage your home loan to achieve other property goals

A home loan doesn’t just have to be a debt.

It can also be a valuable tool that lets you work through a personal bucket list by putting home equity to work.

And you could be starting out 2024 with a lot more equity than you realise.

Back in January 2023, the median home value across Australia’s state capitals was $770,374, according to CoreLogic.

Fast forward to January 2024, and the median value has increased to $832,193.

That might mean extra money (aka equity) up your sleeve to build wealth through an investment property, for example.

Call us today to get a clearer picture of your home’s potential equity – and how you could use it to tick off your wish list in the year ahead.

Paramount Finance Australia 12/21/23 Paramount Finance Australia 12/21/23

Merry Christmas! Season’s greetings from all of us to you

The year has flown past, and as our thoughts turn to trees, tinsel and turkey, we’d like to thank all our fantastic clients for your support throughout 2023.

The year has flown past, and as our thoughts turn to trees, tinsel, and quality time with friends and family, we’d like to thank all our fantastic clients for your support throughout 2023.

It’s been quite a year, with higher interest rates, soaring national property values (who’d have thought?) and a few welcome surprises including more help for first-home buyers.

There is plenty in store for 2024, and we look forward to partnering with you again to help you navigate whatever goals you have planned in the new year.

In the meantime, we hope you can take the time to relax, unwind and enjoy all the fun of the festive season.

There’s no doubt the next 12 months will dish up its fair share of surprises. But some things never change – we will be here for you in 2024 and beyond.

So, wear that ugly Christmas sweater with pride, relish the magic of the festive season, and celebrate all you have achieved this year.

May your happiness be large and your bills be small! We look forward to being part of your property journey in 2024!

Paramount Finance Australia 12/18/23 Paramount Finance Australia 12/18/23

Ho ho ho! The smart move that has 1 in 10 borrowers feeling jolly

Home owners have been battling rising interest rates for over a year and a half now. But a new report reveals the important step some savvy borrowers are taking to rein in higher rates and swap “oh no!” for “ho, ho, ho!”.

It’s no secret that refinancing has the potential to slice a big chunk off your monthly loan repayments.

And according to Canstar, 1 in 10 mortgage holders chased a better deal in 2023 and switched to a new lender to save on their repayments.

But what’s surprising to us is that 9 in 10 didn’t.

So what’s holding them back? Let’s dive in.

Some score a discount, others don’t

To be fair, many home owners have been on the front foot this year.

According to Canstar, 1 in 5 home owners with a mortgage have negotiated a better rate with their current lender – which is great news.

Having a chat with your bank can be a fuss-free way to save, especially if they come to the party with a rate discount.

A further 14% of home owners say they have tried to switch to another lender but weren’t able to do so because they didn’t have enough equity, or didn’t meet the new lender’s requirements.

That’s why it pays to speak with us before talking to a lender.

We have in-depth knowledge of different banks’ lending criteria, so we know which lenders are likely to give you the green light for a better deal.

Too many borrowers wearing higher rates

The thing is, there are plenty of home owners who have just copped rising rates without taking action.

As Canstar puts it: “Too many borrowers remain complacent even in the face of rising repayment costs”.

The scary thing is, half (49%) of Australia’s home owners with a mortgage don’t intend to change lenders at all.

Some believe they have a good interest rate. But as many as 1 in 5 think refinancing is too hard.

Busting the myths

Let’s sort some facts from fiction.

First up, it’s great if you think you are paying a competitive interest rate. The key is to know for sure.

Right now, variable home loan rates are anywhere from 5.69% (very rare) through to 9%-plus.

With that sort of range, there’s plenty of scope to save, especially as lenders often make lower rates available to new customers.

There is an easy way to know if you’ve got a good rate: pick up the phone and call us.

And if you’re worried that refinancing is hard work, rest assured that we’ll do the bulk of the leg work for you.

We’ll sort through hundreds of home loan options to find the loan that’s right for your needs. We’ll also make the paperwork easy, liaise with your old lender, and your new bank. Simple.

So if you’re keen to find out if you can do better with your home loan these summer holidays, give us a call and we’ll help you put your best foot forward going into 2024.

Paramount Finance Australia 12/7/23 Paramount Finance Australia 12/7/23

What’s tipped for house prices in 2024?

If buying a home is at the top of your wish list for 2024, don’t miss our rundown on how the property market has fared in 2023 – and why the new year is shaping up as potentially another big year for real estate.

As we turn the page on 2023, let’s take a quick rear mirror look on how home values moved over the past 12 months.

In a year that saw five official rate hikes, and a cost of living squeeze thanks to high inflation, home prices still jumped by 7% nationally.

Several cities eclipsed those gains, with double-digit price growth in Sydney (up 10.2%), Brisbane (10.7%) and Perth (13.5%).

But it wasn’t just price growth that took everyone by surprise.

The speed of home sales was also astonishing, with plenty of suburbs in Perth, Sydney, Brisbane and Melbourne selling houses in as little as eight to 25 days on average.

Will property values keep rising in 2024?

Well, higher interest rates are starting to take a little heat out of the market.

According to CoreLogic, home values across Australia rose 0.6% in November – the smallest monthly gain since early 2023.

But here’s the rub.

The factors that pushed prices higher in 2023 are still in place, and plenty of experts are tipping house prices will keep rising in the new year.

Three factors that could drive prices higher

Three main drivers look set to support house price growth in 2024, including:

1. Strong population growth: Population growth is rebounding strongly, driven by high immigration levels. More people generally means more demand for housing.

If you’re not convinced, a recent Domain report says “unprecedented” population growth will exert “extraordinary upward price pressure” on the property market.

2. A housing undersupply: On the supply side, we’re just not building enough new homes.

Australia’s housing shortage made headlines through 2023, and it doesn’t look like it’ll get better any time soon. Building approvals for new homes are reported to be well below average levels.

3. A rental market that’s as tight as a drum: Anyone looking for a rental can face an uphill battle. Vacancy rates are at record lows, making rental conditions tough.

This could encourage more people to buy a place of their own through one of the government’s low deposit buying schemes.

The First Home Guarantee scheme for instance, lets first home buyers get into the market with just a 5% deposit and zero lenders mortgage insurance.

Price growth is expected to be (slightly) lower next year

Most experts are tipping house prices will keep rising in 2024 though maybe not at the breakneck speed seen nationally in 2023.

That said, price growth won’t be anything to sneeze at.

Domain is forecasting house prices to jump 5-7% nationally, and in each capital city by:

– 7-9% in Sydney
– 2-4% in Melbourne
– 7-8% in Brisbane
– 6-7% in Perth
– 7-8% in Adelaide
– 3-5% in Canberra
– 2-4% in Hobart

The bottom line is that we could be facing another bumper year of price growth in 2024, and if buying is on your radar, it may be worth trying to buy sooner rather than later to potentially avoid paying more.

So call us today to get the ball rolling on a home loan that helps you achieve your new year property goals sooner.

Paramount Finance Australia 11/30/23 Paramount Finance Australia 11/30/23

More lenders sign up to low deposit first home buyer scheme

First home buyers with a small deposit now have an even wider range of lenders to choose from. We reveal the latest banks to join the 5% deposit scheme that’s helping more buyers get into the market sooner.

First home buyers have just received an early Christmas gift, of sorts, with an uptick in the number of lenders that have signed up to the Home Guarantee Scheme (HGS).

Three Westpac brands, St.George, Bank of Melbourne and BankSA, have added their names to the list of lenders available to first home buyers under the HGS.

If you’re not familiar with the HGS, it gives first home buyers an opportunity to buy a place of their own with as little as a 5% deposit (and no lenders mortgage insurance) through the First Home Guarantee or Regional First Home Buyer Guarantee.

First home buyers aren’t the only ones to benefit. The HGS also includes the Family Home Guarantee, which allows solo parents to buy a home with just a 2% deposit.

More competition is good news for home loan rates

According to Housing Australia, which runs the HGS, first home buyers can now choose from 33 lenders participating in the scheme.

This includes most of the big banks (ANZ has not signed up) plus a generous variety of small banks, credit unions and non-bank lenders.

The extra sweetener is that more lenders can boost competition, which potentially encourages banks to keep their interest rates low for first home buyers.

Buying with a 5% deposit helps get you into the market sooner

Saving a deposit is often the key barrier for first home buyers. And when home prices and cost of living are rising, it can seem like the goal posts are constantly moving out of reach.

The beauty of the HGS is that it lets first home buyers jump into the property market about four years earlier (on average) than they normally would.

So, it’s no surprise that last financial year one-in-three first home buyers purchased with the help of the HGS.

Better yet, new data from Housing Australia shows that first buyers who have tapped into the scheme are now sitting on $82,000 in home equity, on average.

It’s a great result, especially when you consider that the average first home deposit across the scheme was just $35,200 in 2020, rising to $36,400 in mid-2023.

Compare that to the average deposit of $159,000 across the broader first-home buyer market, and it’s easy to see how the 5% deposit scheme gives first-home buyers a valuable leg-up into the market sooner.

How to choose the right loan for you?

With more than 40 lenders offering 5% deposit home loans under the HGS, the challenge can be choosing the loan and lender that’s right for your needs (or finding one that will take you on if your application is a bit touch and go, or if you’ve just started your own business in recent years).

The simple solution is to give us a call.

We can explain whether you’re eligible for the low-deposit scheme, and answer any questions you may have.

We’ll also take the time to understand your needs, so you can be confident that the lenders and loan products we put forward to you are a good fit.

Paramount Finance Australia 11/23/23 Paramount Finance Australia 11/23/23

How to manage your home loan over Christmas

It may be called the silly season but a few smart strategies could help you enjoy the festive season this year without missing a beat on your home loan. Check out our tips to share the Christmas cheer this year without breaking the bank.

Store shelves are starting to be lined with tinsel, ‘Santa stop here’ signs are popping up around the neighbourhood, and chances are you’re beginning to hum a few bars of Jingle Bells.

Yes, Christmas is just around the corner, and now’s the time to plan for what can be a pricey time of year.

After 13 rate hikes in close succession, plenty of homeowners are feeling the squeeze of higher home loan repayments.

The good news is that you (hopefully) won’t have to cancel Christmas this year. Below are three clever hacks that could help you manage your mortgage over the festive season.

1. Follow Santa’s lead – make a list (or two)

Plan ahead by listing all the fixed expenses you’ll face in December such as utilities, your home loan, car loan, and credit card repayments, as well as less frequent bills such as council rates that may fall due before Christmas.

Add up the total to know how much you need to set aside. It’s a good idea to try and prioritise these bills over seasonal spending.

Next, draft up a Christmas spending budget that allocates money to gifts, food, drinks and decorations.

Finetune your budget based on your ability to pay, bearing in mind the upcoming costs you identified in the bill list.

If things are looking tight this year, consider opting for Secret Santa instead of everyone buying everyone a present.

It can help make the giving experience more personal and is definitely gentler on the hip pocket.

Websites like elfster.com can help keep it anonymous and straightforward for everyone.

2. Plan for how you’ll pay

It can be tempting to pay for Christmas purchases with a credit card or buy now, pay later. But these options can just mean kicking the can down the road until January when payments fall due.

It’s also worth noting that late payments on either option could affect your credit score for any future home loan applications.

So where possible, consider reaching for your debit card for festive purchases. It’s hard to get into too much trouble when you pay using your own money.

3. Ask your lender for a gift

Christmas is the season of giving, so why don’t we hit up your lender for the gift of a lower interest rate?

Reserve Bank data shows there is still a gap between the rates on new versus established loans.

If you took out your loan through us, get in touch and we can either reach out to your lender on your behalf for a discount or, if they don’t come to the party, help you explore your refinancing options with another lender.

Don’t let Christmas spending ruin your home loan plans for 2024

It’s easy to get swept up in seasonal good cheer. But it can sometimes be important not to get too carried away with Christmas spending.

If you plan to refinance your home loan or purchase a house in 2024, a lender will likely look at your spending patterns over the past few months.

Hamming up your purchases in December can bump up your average living costs, and if you go way over the top, potentially see you knocked back for a new loan in the new year.

Want more tips to manage your mortgage over the holiday season? Call us today for more festive saving strategies.

Paramount Finance Australia 11/16/23 Paramount Finance Australia 11/16/23

The big stretch: should you extend your loan term?

If the November rate hike will seriously stretch your finances, one potential solution may be to extend your loan term. It can ease the hip pocket pain by lowering monthly repayments. But taking more time to pay off your mortgage can come with hidden downsides. Here’s what to weigh up.

Will the RBA’s latest 0.25% cash rate rise squeeze you financially? (not to mention the other 12 rate hikes!)

The majority of lenders lost no time increasing their variable home loan rates following the Reserve Bank of Australia’s 0.25% Melbourne Cup Day rate rise.

According to Mozo, the 13th rate hike since May 2022 has pushed up the average variable rate to 6.62%.

What does that mean in dollars and cents?

On a $500,000 variable rate home loan payable over 25 years, the latest 0.25% rate hike can see monthly repayments jump by $78.

For homeowners who didn’t have much fat left to cut from their budget, those extra dollars can be hard to find.

One potential strategy that may help to lower repayments is to stretch out your loan term.

How extending your term can reduce repayments

If you have a 25-year loan, your lender may give you the option to extend for up to five more years, possibly pushing out the term to 30 years.

If you get the green light, this kind of reset can significantly lower your monthly repayments.

On the $500,000 mortgage we looked at earlier, moving from a 25-year loan to a 30-year loan could cut monthly repayments by around $214 – even after allowing for the November rate hike.

The hidden cost of a longer term

There’s a lot to love about the prospect of slashing a couple of hundred bucks off your loan repayments each month, especially as we head into the festive season.

But pushing out your loan term can come with a hidden cost.

Taking longer to pay down your loan means you’re also paying interest for longer. And while your repayments can decrease, the long-term interest cost can skyrocket.

Stretching a $500,000 loan from 25 to 30 years could mean paying a whopping $128,000 more in total interest.

It’s worth keeping in mind though that those extra interest repayments aren’t a given.

You may be able to close the gap and cut down the interest cost by either making extra repayments in the future, loading up an offset account, or paying off the loan early (if, for example, you receive a lump sum inheritance).

So the upshot is that stretching your loan term can be a short-term fix now, but you’ll have to weigh up the costs against the benefits, not to mention whether you think you’ll be in a better financial position later down the track to pay down the loan quicker (and thus reduce the interest payments).

Other ways we can help

Along with exploring extending the length of your loan, we could also help you look into other solutions to ease the pain of higher rates.

Options that may be available with your lender include:

– temporarily lowering your loan repayments;
– deferring repayments for a while; or
– shifting you to interest-only payments for a set period.

The common thread is that the earlier you reach out for assistance, the sooner we may be able to help you get some financial relief.