Does it seem like the finance world is dominating the news at the moment?
Between the ongoing Royal Commission and the recent federal budget we wouldn’t really blame you if you were starting to ‘switch off’ to finance news.

Is there a problem with ‘switching off’? Well possibly – especially if changes in the finance world that could affect YOU end up slipping under the radar!

So what upcoming changes do you NEED to know about?

It’s probably fair to say that EVERYBODY should know about changes to credit reporting. Why? Because credit reporting could affect EVERYBODY!

And yes, changes are coming…

rom 1 July 2018 mandatory comprehensive credit reporting (CCR) comes into effect with the big 4 banks required to participate fully in the credit reporting system.
The mandatory credit reporting will give lenders access to a deeper, richer set of data enabling them to better assess a borrower’s true credit position and their ability to repay a loan.

What is CCR?

CCR was introduced in 2014 – at that time Australia shifted from a negative reporting system to a positive reporting system. However, up until now it has not been mandatory for lenders to adhere to the CCR guidelines. That has NOW changed for the big 4 banks.

What is the difference between the two systems?

Negative reporting system – recorded negative events in your credit history such as overdue debts, defaults, bankruptcy etc. Lenders based their assessment of your borrowing potential solely on this information. They could also access information on credit applications you have made but were unable to see whether those were approved or not.

Positive reporting system – this regime makes it easier for lenders to conduct a comprehensive and balanced assessment of your credit history. It now contains information on your repayment history for credit cards, home loans and personal loans including:
• whether you have made a payment or the minimum payment required
• whether the payment was made on time It also contains information on your consumer credit liability including:
• type of credit account opened
• when it was opened and closed
• the name of the credit provider, and
• the current limit on the credit account

Your repayment history is stored on your credit file for up to two years.

Why was CCR introduced?

CCR has brought our reporting system in line with many other Organisation for Economic Co-operation and Development (OECD) countries. Under CCR it is now easier for lenders to conduct a comprehensive and balanced assessment of a borrower applicant’s credit history.

The positive? If you have a good credit rating it could potentially allow you to negotiate a better deal on your mortgage, personal loan or business loan.

The negative? If you have a poor credit rating you could find that obtaining credit becomes more difficult and/or expensive. On the other hand, it may also be easier to show you have recovered and stabilised your financial situation after a negative event such as a default.

Not with the big 4 banks?

It is expected most other lenders not currently adhering to CCR will follow suit – before they are required to do so! The government is also considering extending this mandatory reporting to gas, electricity and phone service providers.

In short, at some point in the future ALL of your financial habits – both good AND bad – will be an open book to potential providers of finance and financial services.

The bottom line? There has never been a more important reason to pay attention to:
• your bill paying habits
• your credit card usage, and
• staying on top of debt…

It COULD make a world of difference to your future ability to be approved for finance.

Need some help to make sure your credit report is in tip top shape? Contact us for a chat about debt consolidation. It may not be suitable for your situation but could be worth exploring.

If it’s time to get on top of debt contact us for a copy of our debt consolidation spreadsheet and we’ll explain how it works.

 

All lenders are likely to ask for the same information. If you’re approaching a lender for the first time you’ll need to be ‘identified’. When you apply for a home loan you have to show identification up to the value of 100 points. A driver’s licence earns 40 points, a credit card can earn 25 points and a birth certificate 70 points. Only original documents qualify. It’s not unusual for a home loan application form to take up to ten pages.

Your lender will want to ascertain your:

  • capacity to repay,
  • financial risk,
  • collateral (will the property you are buying be adequate security for the amount borrowed?), and
  • existing assets.

You will also be asked:

  • if you have dependent children,
  • how long you have lived at your current address,
  • what you owe and own,
  • your personal insurances, and
  • your credit card details.

It is compulsory to have:

  • your two most recent pay slips,
  • group certificates for the past two years, and
  • documentation from your employer detailing income and length of employment.

Have you had a change of name?

If you are a couple preparing to apply for your first home

loan together it is equally important that all required

documentation reflects your new marital status and/or

any change of name.

As a minimum you will require 100 points of ID in your

new name including:

  • Marriage Certificate
  • Medicare card
  • Driver licence
  • Passport etcl

While not a requirement it is recommended you have the documents certified to avoid delays once they are in the lender’s hands.

Are you self employed?

Self employed applicants should provide their past two years’ tax returns or past two years’ financial statements and accountant’s details. Some institutions may even ask for a profit and loss statement certified by a registered accountant.

Also needed are:

  • savings details,
  • bank statements including transaction, saving or

passbook accounts,

  • investment papers including managed funds or

term deposits,

  • details of personal loans, car loans, credit cards or charge cards, and • tax liability if self- employed. Details of life insurance policies and superannuation as well as approximate value of other assets such as furniture and jewellery should also be included.

Loan approval

It is best to have your loan pre-approved before you make any offers. Knowing that your finance is pre-approved will mean you are able to concentrate on a price range and give your full attention to the purchase. Remember that a vendor may also accept a lower than advertised price knowing that your finance is organised. They may want a quick and hassle free sale. Once your loan is formally approved, we arrange mortgage documents for you to sign. We will go through the mortgage contract with you to ensure you understand the contents. It is essential you contact your finance specialist to discuss the process BEFORE lodging any loan application documents.

 

Let’s team up and make it happen!

Call 0401 388 153 or click tab and we will contact you

Please Contact Me

Facebook_Image_mmcJanuary and February are traditionally the months we see a peak in job seeking activity *1. Perhaps a consequence of all those new year’s resolutions for self improvement?

Research shows Gen Y is now actively exploring and entering the property market. They are also well known as the job hopping generation with an average of just 20 to 32 months in a job2. In fact, the national average job tenure across all age groups is now 3.3 years. Today’s job market is a far cry from the days of a ‘job for life’.

So what impact does a new job have on your ability to be approved for a home loan?
For younger generations, a stable job with a secure income can sometimes be the catalyst to buying your first home or investment property. But although you may be delighted with your exciting new job, your lender may not be quite so happy.

When assessing a home loan application lenders will usually consider:

  • how often you change jobs
  • whether you are staying within the same industry, or
  • if you are taking your career in a new direction

These factors influence the lender’s assessment of whether you are a good credit risk. They tend to prefer applicants who have a stable employment history with 1 to 2 years of steady or increasing income to determine the loan amount you are capable of repaying.

Switching jobs shortly before or after applying for a mortgage may make it harder to qualify.

Most lenders prefer you to be in your current position for 6 to 12 months to borrow 80% of the property value. There ARE a few lenders who allow you to borrow up to 95% of the value of the property (for an owner occupier loan) – sometimes even if you have just started a new job.

Are there lenders who can help?
Many lenders now understand younger generations are in high demand, are highly skilled and are career opportunists who actively change jobs to seek a higher salary or better working conditions. Not all lenders require you to be in your job for more than a year and some are tailoring products and qualifying criteria to meet these new norms.

What if I’ve only been in my job for 1 month?
Some banks recognise that despite a short employment history, many individuals are in a strong financial position and have industry experience. Your length of time in a job will be less of an issue if you have other sources of income, eg investments, royalties, second jobs etc. The lender may need proof this income has been steady for a couple of years and that you expect it to continue.

What if I am changing my career?
If you are considering a career change or have recently changed jobs, it does not necessarily mean you need to put your borrowing plans on hold. Increase your lending options by talking to us when you first start thinking about any life changes and definitely before making any decisions.

Do you move house often?
The stability of your home address is also considered, along with many other factors in lenders’ sophisticated credit scoring analyses to assess whether you are a good long term risk. If you are currently renting and planning to seek finance soon, speak to us before your next move to allow us to prepare your application in the most positive light.

We can generally find a lender who will help, however if you are changing to a completely new industry or role then this will certainly reduce your chances of securing an approval. That’s WHY you need us to help!

What do the banks think?
Most lenders won’t approve a loan during the process of switching to a new employer but there are some that may consider approving your home loan before you have commenced your new role. If you can show stability with your prior employers they may take the view you are moving to a new employer to take advantage of a better salary or working conditions.

What should I do now?
TALK TO US! Our role as your finance specialist is to keep up to date with the constantly changing borrowing criteria of most lending institutions so we can suggest a solution for your individual situation.

*1. seek.com.au
2. mccrindle.com.au

The BIGGEST myth about property investing

is that most of us think we can’t afford it!

Click HERE for your free 20 page copy of “Investing in your Future”

Most of us worry about our future, and most of us are waiting until the mortgage is paid off before we do anything about it.

Sydney University anthropologist and author Stephen Juan said it now takes two incomes and 30 years to pay off the average home. Half a century ago, it was one income and 15 years. So… If our working career begins in our early 20s, we typically purchase a house in our late 20s or early 30s. If the above is true, then we would probably manage to pay our house off by the time we are 50! That’s if we are fortunate enough not to separate and have to start over again (statistics predict that over one third of us will). We turn 50, then decide to help our children to step into the property market as it’s now three times more expensive for them than it was for us, AND we realise we don’t have enough super or investments to retire ourselves. Instead of retiring in five to ten years’ time when we are still healthy enough to enjoy it, we now have to work until we are 70. Let’s hope we are keeping ourselves fit and healthy to ensure we are still employable post 50. Do you want to know the number one biggest mistake? Waiting until we pay off the mortgage. That’s 60% of us! If we wait until 50 to start planning for our retirement, then we are almost guaranteed to have to work until we are 70. However if we start planning as soon as we purchase our first home, then we have a much greater chance of getting ahead financially, well before 50! But the problem is that we listen to our parents, friends and family (who aren’t necessarily financially well off ) and we delay – just like they did – then wonder why we end up in the same predicament of seeking government assistance when our working life ends. Did you know that most of our financially astute and secure clients started planning for their retirement before (or at the same time) they purchased their first home? There are many ways to achieve the lifestyle we all want at the end of our working life: building a good property portfolio, getting good financial planning advice and ensuring all the associated risks are taken into consideration. The biggest myth is that most of us think we can’t afford it, or are worried we will lose our home if we invest.  “The biggest problem is that most of us leave it far too late”. Whatever your age or circumstances, if you are in the 82% of people who are worrying about their financial future, you should call the office NOW to see how we can help you. Please don’t leave it too late.

Please don’t leave it too late. Click HERE and start investing in your future

How Do I Pay Off My Mortgage Sooner and become Mortgage Free?

 

 

 

 

 

 

 

 

 

 

 

To become Mortgage Free, Pay more, more often. Want to pay off your mortgage early? Then make bigger mortgage repayments, more frequently. You’ll own your own home sooner and save a bundle on interest.

Act now – you pay most interest up front. Most mortgages are structured so that you pay off most of the interest in the early years. If you are serious about wanting to reduce the interest you pay on your Home Loan, you’ll act now.

Get rid of car loans and credit card debt. You’re generally paying a higher interest rate on small loans (e.g. a car) and your credit cards so it makes sense to eliminate those debts first. So, put a rein on your credit card usage and then tackle your mortgage.

Make sure you’re paying off the right mortgage. When you entered the mortgage market, you might not have been as well informed as you are now. Or the market might not have been as competitive. Stay in close contact with your MFAA member. They can let you know if there is a new home loan product that will save you money over the term of the mortgage.

Flexible mortgages. Most debt-retirement strategies depend on you being able to pay off more of your mortgage sooner. Read the fine print or talk to your MFAA member to see if you have the flexibility you need to reduce your interest charges.

Pay more and pay often. Assuming you have a mortgage that lets you pay extra, you should pay more and pay often. The interest charged on a $ 300,000 home loan at a rate of 7.15% over 30 years with monthly repayments is over $ 420,000. By paying off an additional $ 50 a month, you’ll reduce the interest bill by $ 39,000 and your loan term by 2 years and 4 months. You could look at making repayments weekly or fortnightly rather than monthly. Over 30 years the savings add up. To learn more, talk to us today today.

Information source: MFAA