Archive for year: 2019

There has been a lot of commentary lately about Home Loan rates being as low as 2.99% and with the Reserve Bank to soon meet again, there may be more reductions on the way.

Many Mortgage Owners are contemplating ‘fixing’ their loan rates, so it’s important to understand the differences between fixed and variable home loans:

What is a fixed rate home loan?

A fixed interest rate home loan is a loan with the option to lock in (or ‘fix’) your interest rate for a set period (usually between one and five years). One of the main advantages of this is cash-flow certainty. By knowing exactly what your repayments will be, you’ll be able to plan ahead and budget for the future. This factor often makes fixed rate home loans very popular for investors over the first 2-3 years they own a property.

A fixed rate loan may be a good option in a rising loan market as any interest rate rises won’t affect the amount of interest you are required to pay. However, if interest rates drop, you might be paying more than someone who has a variable rate home loan.

It’s important to note there may be a number of restrictions associated with fixed rate loans. Often additional repayments are not permitted with fixed-rate loans (or you may be charged a fee). As there is a restriction on extra repayments, the ability to redraw is also frequently not offered on a fixed rate loans, effectively reducing the flexibility of the loan.

What is a variable rate home loan?

A variable rate home loan is a loan where your interest rate will move (or ‘vary’) with changes to the market. This means your interest rate can rise or fall over the term of your loan. Variable home loans may have appealing features like the ability to make extra repayments, often at no extra cost to help you pay down your loan sooner, saving you interest. Variable rate loans may also include unlimited redraws, allowing you ‘draw’ back any extra repayments you have made.

Variable rate loans are more uncertain than fixed interest loans. This can make budgeting for your interest payments more difficult as you need to take into account potential rate rises. If you aren’t prepared, you could have trouble keeping up with repayments.

It is common practice for the banks to not pass on rate cuts to existing and established customers and with interest rates being at record lows and the possibility of further reductions, it is a good time to consider what you should do with your current loan. If it has been 2 years or more since you have had your loan reviewed, then now is the perfect time to call our Mortgage Broker – Warren Richards on ph: 9851 0300 to arrange an appointment.

When is the best time to refinance your home loan?

As a home owner with a mortgage, chances are you’ve heard of the term ‘refinancing’. Refinancing involves reviewing your current mortgage, and potentially swapping your loan to another lender who can better meet your current needs, wants and circumstances.

Refinancing can also allow you to consolidate your debts or pay down your mortgage more quickly.

Another common reason borrowers look to refinance is so that they can access equity – the amount you’d get from selling your home after settling any associated loans, such as a mortgage on that property, and any other costs associated with the property. Depending on that amount, you may be able to access equity in the property without having to sell it, for example, to make home renovations or to buy an investment property.

However, refinancing is not suited to everyone. There are many different factors you will need to consider when thinking about refinancing a loan. Before you initiate an application to refinance, your broker will need to assess your needs and objectives as well as your current financial situation.

So how will you know that refinancing is the right option for you?

The first step is to speak to a professional, such as a mortgage broker, about your needs and whether you can afford a different loan structure or other change to your mortgage, particularly if you have more than one property.

Are you looking to pay less interest?

Some people are savvy researchers and will want to take advantage of a lower interest rate from another lender should that be available to reduce repayments. If you aim for a lower interest rate, this could potentially save you a lot of money in the long term.

While saving money is often one of the biggest benefits of refinancing, it may not be as straightforward as that and careful consideration is required.

At this point, the broker will need to find out about your existing loan, repayments and current loan structure.

Your mortgage broker will also need to find out more about your current financial situation, including your income, any other current debts and about any assets you own.

The current value of the property is also taken into consideration, so your broker will have access to current data that will indicate what your property is likely to be worth.

The broker will then review the various loan options and figure out whether it’s worth it for you to refinance. Sometimes it’s not worth it if it’s only going to save a couple of hundred dollars a year, particularly when you take into consideration the exit and application fees involved. But if it’s going to save upward of $1,000 a year, refinancing might be a sensible approach.

In some cases, the mortgage broker can tell you if getting a lower interest rate from your current lender can be achieved without refinancing.

Do you want to change your loan type?

One of the risks of refinancing your home loan is that you may need to pay Lender’s Mortgage Insurance (LMI)* to your new lender. If switching your loan means you will need to pay LMI again, it may not be worth refinancing.

If you do decide to go down the refinancing path, working with a broker rather than going straight to a lender has advantages. Broker’s generally have access to loan options from a range of different lenders (on average 34 lenders), and if there’s a better opportunity for you, they’re usually able to access it.

It is important to consider that when you take up a new home loan, it can incur exit fees and may not have all the features your existing home loan has.

Have your circumstances changed?

If you had a recent major life change such as a because of a loss of income or a change in marital status, you might be looking to refinance.

If you want to refinance to lower lending costs to help you manage your monthly repayments, speak to your mortgage broker who can negotiate with your current lender for a rate suitable to your current situation.

Your broker can also help you look at alternate options to consolidate your personal loans and credit cards into the one loan. This could help you in lowering your monthly repayments, or help you keep your repayments on time and even save you interest in the long-term.

If you would like to talk to one of our lending specialists to determine if you have the most suitable loan for you, then simply call the office on 9851 0300.

*LMI protects the lender against potential loss. 

One of the simplest yet most effective investment scams is the ponzi scheme. The promoter promises investors a return on investment and says it is secure, but there is no real ‘investment’.

The promoter convinces people to invest with their scheme. They then use the money deposited by early investors to pay the first ‘dividend’ until investors feel comfortable and decide to invest more. Some investors then encourage their family and friends to join. Eventually the scheme falls apart because the promoter starts to spend the money too quickly or the pool of investors dries up.

Here are tips on how to pick a ponzi scheme from a real investment.

• Warning signs of a ponzi scheme
• Where do ponzi schemes operate?
• How long can the scheme last?
• How ponzi schemes work
• What to do if you have invested in a ponzi scheme

Warning signs of a ponzi scheme

• The rate of return is sometimes suspiciously high (maybe as high as 10% per month or 120% per year)  – but it can also be just the usual rate of return
• The person who tries to recruit you is someone you think is trustworthy, like a neighbour or someone in your church or community group
• The recruiter may have already invested in the scheme and received great dividends

Read ASIC’s media releases about the conviction of ponzi operator Chartwell Enterprises, and a penalty and ban issued to ponzi ‘mastermind’ David Hobbs.

Where do ponzi schemes operate?

Operators of unlawful investment schemes sometimes target community groups, like churches, to find victims. In some cases, members of the community group innocently encourage others to put money into the illegal scheme.

This means that when the scheme collapses, not only do the investors lose their money, but relationships break down between friends, neighbours or community group members.

How long can the scheme last?

If the promoter of the scheme is disciplined about how much money is left in the account to pay ‘dividends’, the scam can go on for many years. Ponzi schemes only require a few people in their early stages to be successful.

How ponzi schemes work

An example of how a ponzi scheme works is shown in the table below. In January, the promoter convinces Katie to invest $100,000 in his scheme. The promoter then pays Katie $10,000 each month using Katie’s own money.

As Katie receives $10,000 each month she doesn’t suspect anything is wrong, and happily recruits friends and work colleagues to invest, too. After 3 months, Katie’s neighbour Adam decides to invest $100,000 after hearing about Katie’s great returns.

After both Katie and Adam have invested their savings, the returns continue to come in April. But in May they don’t hear anything from the promoter. They try to contact him but his number has been disconnected.

The promoter has taken off leaving two devastated people in his wake. Katie lost $70,000 and Adam lost $90,000. The promoter got $160,000 out of the scheme.

This is example has only two victims but in reality these schemes can have dozens or even hundreds of victims.

Katie and Adam invest in a ponzi scheme

What to do if you have invested in a ponzi scheme

1. Stop investing any more money
2. Check if the company is on our list of companies you should not deal with
3. Check the company’s licence number on ASIC Connect’s Professional Registers.
4. Report the scam to ASIC

ASIC may be able to prosecute the ponzi scheme operators if they are operating in Australia. ASIC may also be able to issue an alert about the scheme. You should also warn your family and friends, to stop them from becoming victims.

The biggest telltale sign of a ponzi scheme is the suspiciously high rate of return. That old saying applies here: if it sounds too good to be true, it probably is.

Before you invest in any scheme, do independent checks to see how the returns are really going to be made. Don’t just trust the word of the person selling you the scheme.

Reprodued from ASIC Moneysmart website

Many parents approach the topic of money differently, but could your way of doing things influence your kids’ success?

The majority of Aussie mums and dads recognise that they’re accountable when it comes to shaping their children’s perspective around money matters.

A recent report published by the Financial Planning Association of Australia (FPA), revealed parents listed themselves (95%), followed by grandparents (63%) and teachers or coaches (59%) as the top three biggest influencers when it came to instilling money values in their kids¹.

What money conversations are parents having?

As part of the research, parents said they mainly concentrated on day-to-day issues when talking money with their children, admitting that more contemporary issues, such as making transactions digitally, were sometimes overlooked².

What parents said they discussed³:

• 52% – how to spend and save
• 43% – how to earn money
• 32% – how household budgeting works
• 24% – how much people earn
• 19% – making online purchases
• 13% – in-game app purchases
• 5% – buy now, pay later services, such as Afterpay.

What approach do you take with your kids?

The research undertaken indicated that there were four prominent personalities parents assumed when discussing money with their children, with some parents initiating conversations more frequently, while others were sometimes a little more hesitant⁴.

The four distinct personalities that came out of the research included⁵:

The engaging parent

Common traits:

• You have the most conversations around money with your kids and feel comfortable doing so
• You tend to have a higher household income
• You’re more likely to use money to encourage good behaviour in your children
• Due to high engagement, your kids are often more financially prepared than other kids
• Your kids have a greater interest in learning about all types of money matters.

The side-stepping parent

Common traits:

• You are less comfortable talking to your kids about money so have fewer conversations
• You may have less money coming in as a household
• You’re less transparent about what you earn and money matters in general
• You tend to provide the least amount of pocket money and as a result your children may be less interested in learning about money and how to make transactions.

The relaxed parent

Common traits:

• You’re comfortable talking to your kids about money but don’t do so too often
• You take a relaxed approach to money matters and are transparent about money issues
• There is little financial stress in your home
• Your relaxed nature may lead to your children missing out on opportunities to learn about money, which means your kids may need to explore money matters on their own.

The do-it-anyway parent

Common traits:

• You’re not always comfortable talking about money but still have frequent conversations
• You’re mainly concerned your child will worry about money if you talk about it
• Despite your discomfort, your perseverance generally pays off
• Your teenage children are more likely to have a job than the average child.

What approach is best according to the research?

Engaging parents were more likely to report that their children were more curious, confident, and financially literate than they were at their age⁶.

According to parents who fell into this category, their children were the most equipped to understand and transact in today’s digital world and their teenagers were the most likely to have a job and make online purchases for themselves or their family⁷.

In addition, the research found children with a paid job outside of the family home were more financially prepared to engage with money⁸.

They were also used to transacting digitally and showed greater interest in learning about paying taxes and superannuation than those who didn’t have a job⁹.

Gift cards are increasingly the payment method of choice for scammers. Scamwatch reports show more than $5 million was lost in 2018, a 38 per cent increase compared with 2017.

iTunes cards accounted for $3.1 million in losses — a 156 per cent increase from the $1.23 million reported in 2017. However Scamwatch has also seen an increase in reports involving other gift cards such as Google Play, Amazon, and Steam cards, and Australia Post Load & Go prepaid debit cards.

Losses to scams where non-iTunes gift cards were used as payment increased by 530 per cent in 2018 to around $1 million.

“Scammers like to get gift cards as payment as it’s easy for them to quickly sell them on secondary markets and pocket the cash,” ACCC Deputy Chair Delia Rickard said.

“It’s concerning that the scammers are now demanding payment in other forms of gift cards. This is likely in response to scam warnings about using iTunes cards for paying scammers that are in stores like supermarkets and on the cards themselves.”

“It’s clear the scammers are diversifying their payments to try get around these warnings, so it’s vital people are aware that no legitimate company or government agency will ever ask you to make a payment with any sort of gift card,” Ms Rickard said.

There are several common types of scams involving gift cards:

ATO impersonation scams

• The scammer pretends to be from the Australian Taxation Office and claims there is a warrant for their victim’s arrest. The scammer asks the victim to pay an immediate ‘fine’ using gift cards or bitcoin, and claims police will come and arrest them if not.

Catch-a-hacker scam

• The scammer calls and pretends to be from a law-enforcement agency or internet provider and convinces the victim they are trying to trace the location of a hacker who has compromised the victim’s computer. They claim they can do this by sending money from the victim’s bank account or via gift card serial numbers.

Victims are also tricked into giving up personal details with the promise of gift cards. Scammers entice victims to participate in surveys by promising gift cards as a prize, however the surveys extract personal information such as your name, date of birth, address details and even financial details like your credit card or bank numbers.

“If anyone asks for payment using a gift card, it is a scam, simple as that,” Ms Rickard said.

“If you paid a scammer with a gift card, report it as soon as possible. Call the company that issued the gift card and tell them the gift card was used in a scam. It’s very difficult to get your money back but the sooner you report it, the better your chances.”

Businesses that sell iTunes, Google Wallet and similar gift cards are encouraged to inform their staff about these scams so that they can help warn customers.

“If staff are informed they can identify the warning signs of a scam when they notice a customer spending large amounts of money on gift cards,” Ms Rickard said.

Further information is available online about where to get help. People can also follow @scamwatch_gov on Twitter and subscribe to Scamwatch radar alerts.