Home Loan Tips Archives | AXTON Finance

Moving Made Easy: How Upmove Takes the Stress Out of Relocation

Posted on 16/09/202411/10/2024 by Clinton Waters

We help clients every day arrange competitive home loans for new homes and renovations, and one of the inevitable outcomes is moving all of your belongings from one place to another. We’ve all been through it—moving ourselves or helping friends—and it’s rarely fun. Whether it’s trying to fit a bulky couch down a narrow staircase or managing fragile items, moving is almost always stressful.

While you could go online, search for a removalist, and cross your fingers, there’s a much better way to ensure your move goes smoothly. Upmove is a platform that connects you with trusted removal companies, making it easy to get reliable, competitive quotes without the hassle of calling around. Whether you’re moving locally or interstate, you can compare and book professional removalists quickly and easily, removing the worry that usually comes with moving.

Given how time-poor most of us are, and how much we dread moving, why not simplify the process? We highly recommend Upmove to our clients for a stress-free experience. Whether you’re moving for a new home, renovation, or relocation, Upmove helps you stay on budget while ensuring that your items are in good hands. You can explore their services and book your next move here: Melbourne Removalists.

At AXTON Finance, we pride ourselves on making the process of buying a new home or renovating as seamless as possible. Whether you’re upsizing, downsizing, or simply relocating, we know exactly what the banks need to make your dream home a reality. And when it’s time to move, don’t let the stress get to you. For your next home move, consider using Upmove for an efficient, hassle-free experience: Melbourne Removalists.

Let us handle your home loan while Upmove handles your move, and make the entire process as smooth as possible.

Why Income is Key to Getting Your Loan Approved?

Posted on 04/09/202424/09/2024 by Rix Almonicar

When you’re applying for a home or investment loan, your income is one of the most important factors lenders consider. It helps them decide if you can afford the loan and how much they’re willing to lend you.

What is Borrowing Capacity and Why Does It Matter?

Borrowing capacity is simply how much a lender thinks you can afford to borrow based on both their rules and government affordability guidelines for regulated credit. This is based on all of your assessable income, current debts, and other financial commitments. Knowing your borrowing capacity is essential because it ensures that you’re taking on a loan you can manage without financial stress.

Why Your Income Matters Most

Your ability to make regular loan repayments—what lenders call “servicing income”—is crucial. Lenders look at different types of income to see if you can handle the loan, including:

Your Salary or Wages
Part-Time and Overtime Pay
Income from Casual Jobs (usually with a consistent income over 3-6 months)
Rental Income
Dividends from Investments
Income from a Trust
Business Profits
Some Government Pensions
Insurance Payments

For certain incomes, like bonuses, lenders might only count a portion (say 80%) to account for any variability.

Equity and Debt-to-Income Ratio: Why They Matter

While having equity (like owning a portion of your home) is important, your ability to make repayments is even more critical. Lenders also check your Debt-to-Income (DTI) ratio, which ideally should be less than six times your gross income. This ratio helps them ensure you’re not taking on more debt than you can handle.

The Buffer

Australian banks are required by APRA (The Australian Prudential Regulation Authority – the regulatory body in Australia that oversees the financial services industry to ensure the stability, safety, and soundness of financial institutions) to add a three (3) percent margin to the actual home loan rate to ensure that you home loan repayment is manageable should interest rates rise.

At the time of writing this article (September 2024) it is generally expected that we are at or near the height of the current rate increasing cycle that started in May 2022 when the RBA raised the official cash rate from the historically low level of 0.10% to 0.35%, marking the beginning of its efforts to tighten monetary policy in response to rising inflation.

So while we are near the absolute highest rates are likely to go the three percent buffer has reduced peoples borrowing capacity by a significant degree and in some cases it has even restricted people being able to refinance loan limits they already have even if it results in a cheaper repayment (there are exceptions to this rule so call us to learn more).

Credit Score and Reporting

Your credit score plays a significant role in loan approval. In Australia, VEDA and Illion are the main credit reporting agencies in Australia. A VEDA score below 500 can make it tough to get approved, while a score of 750 or above is ideal. Positive credit reporting gives lenders a clear view of your credit history with other financial institutions, so when looking to get pre approved for any form of finance it’s important to keep your repayments on time and avoid defaults.

Tips to Boost Your Borrowing Capacity

If you want to increase your borrowing capacity, here are some steps you can take:

Reduce or Close Credit Card Limits: High credit limits can reduce how much you can borrow.
Avoid Buy Now, Pay Later Services: Services like Afterpay and Zip Pay can indicate you’re stretching your budget to a potential lender
Limit Credit Applications: Too many applications can hurt your credit score.
Cut Down on Car Loan Repayments: These can eat into your ability to afford a new loan.
Stick to a Budget: Lenders will ask about your living expenses, so cutting back before applying for a mortgage can help show you’re ready to manage the repayments.

Take the Next Step

Curious about how much you can borrow? Find out with AXTON Finance expert mortgage broker in Sydney today by booking a quick 15-minute FREE discovery meeting here.

Don’t Get Rejected – How to Get Your Loan Approved the First Time

Posted on 27/05/202427/05/2024 by Nick

Understanding Loan Rejection Rates

Did you know that 40% of home loans are being declined? [Home Loan Rejection Rate Hits 40%] This alarming statistic highlights the challenges many face in securing a loan. Whether you’re a first-time homebuyer or a seasoned property investor, getting your loan approved can feel like navigating a minefield.

Why Are Loans Getting Rejected?

Unless you’ve been living under a rock, you’re probably aware that getting a home or investment loan approved has become more challenging. Successive interest rate increases from the RBA (Reserve Bank of Australia) Government-imposed speed limits on lending and the aftermath of the Royal Commission into banking and financial services have tightened lending criteria significantly. While we’ve seen similar conditions before, the current environment is exceptionally stringent.

Tips to Ensure Your Loan Gets Approved

Full Disclosure Is Key
Non-disclosure of debts, whether intentional or not, can have serious repercussions. Failing to disclose all your financial obligations can require a lot more explaining to the proposed lender and a pretty high chance that your loan will be declined. This includes not only major debts but also smaller commitments like store cards or buy now, pay later arrangements like Afterpay. Remember, attempting to hide any debt is considered fraud and will be found out during the application process due to positive credit reporting in place with almost all Australian banks and credit providers.

Having a good credit score
Lenders rely heavily on your credit history when making lending decisions. Some may even approve a loan based on your credit score alone, especially if your loan repayments are consistently on time and your credit report is clean – no statements necessary!To maintain a good credit score, avoid applying for multiple home loans simultaneously or ‘shopping’ your mortgage around too much. This can lead to multiple lending applications appearing on your credit file, which can reduce your score in the medium term. Additionally, be cautious with other credit applications such as credit card requests, credit increases, car loans, and personal loans, as these can also impact your credit score negatively.There are a few credit reporting agencies in Australia with the two most common being VEDA and Illion. Each reporting agency is different but a VEDA credit scors above 700 is deemed best practice – anything under 500 would be challenging to get support from a major lender in many cases. You can get a free copy of your credit report through us here at AXTON Finance to see what your report look like – just reach out via the contact us tab.

Get an Accurate Valuation
When we ask the question ‘what do you think your property is worth’ we usually get the standard response of ‘well the house down the road sold for X’. It’s a great start but many lenders now allow brokers or bankers to order upfront valuations usually at nil cost to you. This can seriously mitigate the risk of your loan application being rejected, especially if your Loan to loan-to-valuation ratio (LVR) is close to the threshold that might cause a significant rate increase or add thousands in lenders mortgage insurance (LMI) fees. Keep in mind that valuations can vary significantly, it’s not uncommon that we see variances by over 10%, between different valuers so it pays not to lock yourself in with just one bank if this happens.

Work with a Trusted Broker
Finding an experienced broker (10+ years experience ideally) or banker you trust is crucial. An experienced broker brings years of expertise and knowledge of market policies, which can be invaluable for different scenarios. Going directly to a bank is like asking for the best car at a Ford dealership – they can only offer their product. With lending criteria changing daily, the DIY approach to loan applications is increasingly difficult and risky. A licensed mortgage broker can navigate these complexities and give you the best chance of success – first time.

Have Your Documents in Order
Ensure all your support documents are organized and complete. This includes proof of income, employment history, credit history, and any other financial obligations. Having everything ready can streamline the application process and reduce the likelihood of delays or rejection.

Be Prepared for More Questions
These days, pretty much every lender is asking more questions. Be prepared to provide detailed information about your financial situation and be ready for follow-up queries. Transparency and prompt responses can help keep your application on track. Securing a loan in today’s market can be a little more challenging, especially if you choose to go it alone, but with the right preparation and support, you can improve your chances of getting approved and without the stress of a sloppy application. At AXTON Finance, we specialize in navigating these complexities and helping you achieve your financial goals. Contact us today to find out how we can assist you in securing your next loan.

Which Banks Offer Multi Offset Home Loans

Posted on 22/05/202427/05/2024 by Nick

What are the Benefits of Multiple Offset Accounts

Unlock the potential of your home loan by utilizing multiple offset accounts. This guide highlights how strategically using multiple offset accounts can enhance your financial control, save money, and accelerate the elimination of your mortgage.

What is a Multiple Offset Account loan

An offset account is a banking account linked to your home loan that reduces the balance on which interest is calculated. Most lenders only allow you to have one offset account per mortgage account which is great but does limit the control of your finances. By using a lender who offers multiple offset accounts, you can strategically distribute your funds, gaining flexibility and enhanced effectiveness over your finances.

Banks & Lenders Offering Multiple Offset Accounts

Several major Australian banks and lenders offer this functionality, providing borrowers with additional flexibility in managing their finances. Notable banks include Macquarie Bank with its comprehensive Offset Home Loan package (enables up to ten FREE 100% multiple offset accounts).

Other key providers of multi-offset account structures include;

– Commonwealth Bank
– Macquarie Bank
– Resimac Home Loans
– uBank
– AMP Bank
– Newcastle Permanent
– ME Bank
– Suncorp Bank
– St George Bank
– Great Southern Bank
– Quodos Bank
– BankWest
– Beyond Bank Australia
– Bank Australia

It’s essential to explore each bank’s specific features to find the best option for your financial needs as not all multiple offset account structures work exactly the same.

Benefits of having Multiple Offset Accounts

Offset accounts act like financial boxes, allowing you to allocate funds according to your needs—such as one account for daily expenses and another for significant purchases or investments. This setup helps you manage your cash flow effectively and monitor your spending.

Tips on Maximizing Offset Account Benefits

The more funds you maintain in your combined multi offset accounts, the less interest you pay on your mortgage. Depositing large or small sums of money not required for use into an offset account can significantly decrease interest charges over the medium to long term given the incredibly powerful effects of compounding interest.

The Mechanics of Offset Accounts

An offset account directly reduces the interest payable on your home loan by offsetting your loan balance with the account balance. This structure is especially beneficial for joint home loan holders, allowing individual financial management while benefiting from the shared reduction in home loan interest.

Enhancing Financial Security Through Offset Accounts

Multiple offset accounts can offer additional financial security. When unforeseen expenses or changes in your financial situation happen (and we all know they do!), these funds have been put into an offset account that you might nickname the ‘Mojo account’ (as the Barefoot Investor, Scott Pape, famously called such an account) can cover costs without resorting to high-interest credit options, or worse still not having any funds at all. This of course helps give you longer-term peace of mind and helps to improve your financial stability.

By understanding and implementing a multiple offset account structure effectively, you can create a more efficient way to take control of your mortgage, making your money work harder for you and moving you closer to owning your home outright.

While multiple offset accounts can offer significant benefits in the right scenario, they may not be suitable for everyone. Consult with a professional mortgage broker, like AXTON Finance to tailor the loan structure to your unique financial situation and goals. Book your 15 minute discovery meeting here.

How to minimise your mortgage with an Interest Free Credit Card and an Offset Home Loan

Posted on 13/05/202413/05/2024 by Nick

Offset accounts can significantly enhance the financial benefits of a mortgage loan, especially when used in tandem with simple tools like an interest-free credit card. This article explores how coupling offset accounts with the clever use of interest-free credit cards can create a powerful saving strategy, particularly for those with substantial mortgage balances and good household incomes.

Understanding Offset Accounts

An offset account is a bank account linked directly to your mortgage that has the usual functionality of an everyday account such as being able to have a debit card, Apple/Android Pay, branch withdrawals and deposits etc. The money held in this account is offset daily against the mortgage balance, and interest is charged only on the net balance. It is important to note that the offset account itself does not earn interest – it offsets it’s balance against your home loan. For instance, if you have a mortgage of $1,000,000 and an offset account balance of $50,000, you will only be charged interest on $950,000. This setup can lead to significant interest savings over time, reduce the term of your mortgage, and increase your equity. Offset accounts are particularly beneficial as they provide flexibility in accessing funds, unlike direct repayments into the mortgage which may be less frequent and require a higher level of discipline to action each month.

Multiple Offset Accounts

There are a handful of banks and lenders who offer multiple offset account structures that enable you to aggregate the combined account balances against a single mortgage account. This is great if you like better financial control and have funds put aside for large bills, your children’s education costs, taxation provisions, savings for a holiday or any other purpose you can really think of. Multiple offset account structures are a great tool for both saving on interest and maintaining purpospeful liquidity for day-to-day needs.

The Role of Interest-Free Credit Cards in Financial Management

Interest-free credit cards have been around for a long time now and of course offer a period during which no interest is charged on purchases, typically ranging from 30-55 days. When used wisely, these cards can manage cash flow without incurring extra costs, thus allowing any spare cash to sit in your offset account for as long as possible, further reducing the mortgage balance subject to interest. The key to maximizing the benefit from interest-free credit cards lies in responsible spending and consistent repayment within the interest-free period. This ensures that all your available cash can remain in the offset account, working to decrease your mortgage interest obligations, without accruing additional debt from credit card use.

Using Offset Accounts with Interest-Free Credit Cards

Utilizing both an offset account and an interest-free credit card together can significantly amplify your savings. Here’s how to synchronize these financial tools effectively:

Direct Income into an Offset Account: Route all of your income directly into your offset account. This increases your average daily balance, which reduces the interest on your mortgage each month – this can have a powerful compounding effect over time.
Use Credit Card for Expenses: Use your interest-free credit card for daily expenses. This approach keeps more money in your offset account for a longer period during the month, maximizing the interest savings on your mortgage. There is of course the added benefit that many credit card companies offer customers frequent flyer points affiliated with the major Australian Airlines Qantas and Virgin – you may be surprised at how quickly you will rack up those frequent flyer points for your next trip!
Pay Off Credit Card From your Offset Account: Before the end of the interest-free period on your credit card (typically 30-55 days), pay the balance using the funds from your offset account. This method ensures you avoid interest charges on your credit card while keeping your offset account balance high throughout the month. Many credit card companies enable you to have an automatic sweep of the monthly balance due to automate and streamline the efficiency of paying the card bill on the very last day its due. This maximizes the benefit of the money in your control and minimizes the manual effort required to administer the money smart procedure.

Case Study: $1,000,000 Mortgage with an Offset Account

Consider a hypothetical scenario: a homeowner with a $1,000,000 mortgage at a 6.0% annual interest rate over a 30-year term. Suppose this homeowner maintains an average of $50,000 in their offset account and spends $3,000 monthly using an interest-free credit card, which they pay off at the end of each month from the offset account.

Calculation: Without the offset account, the monthly interest would be calculated as $5,000 initially ($1,000,000 x 6% / 12 months). With $50,000 in the offset account, the interest reduces to about $4,750 monthly ($950,000 x 6% / 12 months), saving $250 per month or $3,000 annually. Over the life of the loan, this strategy alone could save approximately $90,000 in interest.

So as you can see having a basic understanding of how offset accounts work and how they can help save your thousands in interest. Not all offsets are created equaly though as many lenders limit customers to only one offset (not multiple) or ‘partial offset’ arrangements rather than 100% offset so it pays to get qualified advice.

Offset home loans are typically marginally more expensive because of a slight loading on the interest rate charged or the fees payable so if you have limited monthly cashflows there maybe diminishing returns for having an offset account. Some loans in certain entities like trusts or companies or for expat / overseas borrowers are not always allowed to have offset accounts linked.

Overall offset home loans are a fantastic feature that may be able to help you pay off your loan sooner. Why not book a time with us today to discuss your needs and to determine if an offset home loan is suitable for you. We have over 30 major banks and non bank lenders that we can compare for you today.

How to Refinance Your Home Loan for a Better Deal

Posted on 18/04/202403/05/2024 by Nick

Unlocking New Opportunities: Why and How to Refinance Your Home Loan

Refinancing your home loan can seem like navigating through a maze of rates and terms, but it’s often worth the journey. By replacing your existing mortgage with a new one, you typically aim for a better interest rate, lower monthly payments, or a different loan term. This strategic move can free up cash, consolidate debt, or accelerate your path to paying off your home sooner – as long as it is done the right way!

Definition and Benefits of Refinancing

Refinancing involves taking out a new mortgage to replace your current one. This switch can offer several advantages:

Reduced Interest Rates: Lock in a lower rate to decrease your monthly payments.
Debt Consolidation: Combine multiple debts into a single, manageable loan.
Equity Access: Free up cash from your home equity for renovations or other significant expenses.
Term Adjustments: Modify the length of your mortgage to fit your financial scenario better.

Current Interest Rates and Opportunities in 2024

In the wake of the rate shocks of 2022 and 2023, many homeowners are keenly observing interest rate trends. Most economists predict a softening of the cash rate towards the end of this year, although this adjustment might be postponed to early 2024 if inflation remains high. In light of these forecasts, Proptrack produced this simple graph that outlines the major fours outlook on when they expect the RBA to commence their rate-cutting cycle and by what degree – crystal balling of course!

Evaluating Your Current Home Loan

Before you leap into refinancing, assess your current mortgage. Consider these factors:

Interest Rate: How does your rate compare to the new rates available? Is there a significant benefit to you to refinance? Can you stay with your current lender if they improved their rate?
Fees: Are there early repayment penalties or high ongoing fees?
Loan Features: Does your loan include features like an offset account or redraw facility, and do you use them?
Repayment Flexibility: Are you able to make extra payments without penalties?
Internet banking: Given the lack of branches these days it is important to know what their digital solutions are like. Still, in 2024 there remain enormous differences between the banks and lenders in regard to their customer Internet banking solutions – you would be surprised to know.

The Refinancing Process Explained

Refinancing can be broken down into several straightforward steps:

Goal Setting: Define what you hope to achieve with refinancing.
Financial Review: Assess your financial health and creditworthiness with an experienced mortgage broker.
Loan Shopping: get assistance to compare suitable loan products that meet your needs and not the banks.
Application: Submit your application and required documentation with expert assistance from your helpful mortgage broker at every step.
Settlement: Once approved, the new loan will pay off your existing mortgage.
Post-settlement: This is an important one. A great mortgage broker, like the ones at Axton Finance, will keep in touch with you and automate the review process to ensure you are never ripped off by your new lender. It’s in our interests to ensure you remain on a great rate, not your banks.

Conducting Market Research

Understanding the broader market context is crucial. Research recent trends in home loan rates, consider economic forecasts and review mortgage brokers and lender reputations and reviews (at the time of publishing we have almost 300+ five-star Google reviews). This information will guide you in choosing the right loan product and lender.

How We Can Help

At Axton Finance we specialize in helping homeowners like you navigate the complex world of mortgage refinancing. Our team of experts will guide you through evaluating your current loan, choosing the best new loan, and handling all the paperwork. Let us help you secure the best deal possible and achieve your financial goals. Contact us today to get started!