Your current lender has probably updated their mortgage and home loan offerings in the last 12 months. A simple enquiry could save you thousands. Now is no time to be shy, call them, tell them you are thinking of re-mortgaging or refinancing.

Your mortgage broker will also be glad to hear from you, even if it just so they can talk to someone. (Loan numbers are down and so are enquiries.)

I use the guys from eChoice and they are always up for a chat.

Here is a typical scenario for a loyal Bank Mortgage Holder.

After depositing sufficient funds to a checking account to cover the monthly automatic mortgage payment with plenty of time to spare. You get a call from the bank asking for a payment to your mortgage. You reply that it is an auto debit from your checking account and that there was plenty in the account to cover their payment. They then accuse you of not paying on time and list a series of fees you are going to be slugged if you don’t pay up today. You are offended, but swallow hard and say you will fix it, but it is the banks problem not yours.

You contact the branch, they say your deposit was posted incorrectly and that they are sorry and will correct the problem immediatly with the mortgage area and that all fees and interest overcharge will be refunded. While not 100% happy, you let it go at this and trust the bank to do the right thing.

Big mistake! three days later you get a call from the bank’s mortgage collection department demanding payment immediately. You explain that you contacted the branch and that they said they would fix it. The mortgage department continue to demand payment, they say they have heard it all before.

You contact your branch manager and explain nicely that you are being harassed! “Didn’t they take care of it”. She explains! No you say, they have been leaving harassing calls on my answering machine. The branch manager then says she will call the dispute department and get it taken care of and that she would ring you back. She rings you back and you even get a letter of apology from the branch. So you rightly think you have put the matter to bed.

Wrong! Sure they may have refunded some of the fees, but what about the penalty interest rate? Sometimes they charge a penalty rate on your entire loan for they period, not just the missed payment amount. This can be $100′s of dollars, depending on the size of your loan.

So how do you get this overcharge corrected. Work out by hand and calculator how much you have been overcharged? This will take a long time and will probably not be accepted by the bank.

My advice is to use a statement checking program that has some credibility with the Federal Trade Commission or the Banking Ombudsman. The evidence produced by such a program will be undeniable and force the bank to cooperate with you.

Most online statement checking software providers will also help you prepare your case.

A little bit of homework before you commit to a home loan can save you hundreds of dollars per month on your mortgage payments. Using free home loan calculators like the Commonwealth Banks home loan calculator will help you get a quick understanding of your required budget and provide some evidence in case a bank tries to overcharge.

Playing around with the figures will also let you know the result of future interest rate rises.

There are other free calculators available including personal loan and debt consolidation all worth a look.

Another calculator that can save you money is the Mortgage Watchdog home loan statement checker. You can download a free trial and check your statements for errors very easily.

The article is quite lengthy, but worth reading to the end.

My mortgage broker and I both agree that your should consider property investment a business venture and as such approach it with a pragmatic business like manner. Consider the net result. The net result is where the numbers really need to stack up, taking into account negative gearing and investment property tax.

Also explore the benefits of an interest only investment home loan.

With the low interest rates over the last year or so, many home mortgage holders have paid more off their mortgage than they had been required by their lenders. Some would now like to access that over-payment amount. However, redrawing from your mortgage in times of need can be complicated, time consuming and costly. A better alternative to overpaying your mortgage is to attach a mortgage offset account to your home loan.

A mortgage offset account is simply a savings account linked to your loan account. An offset account works like a regular savings account, where you deposit your pay and other income and can draw out what you need when you need. The balance in your offset savings account is offset against the amount owing on the mortgage. With a full offset account the ‘notional’ interest on savings is the same rate as the linked mortgage. Unlike normal bank interest, there is no tax to be paid on the offset of interest. You have saved on both loan interest and tax.

Over time, savings in your offset account can help you to pay off your loan sooner or help you build up savings equity that you can draw on much more easily than redrawing from your mortgage. There are also other benefits of using an offset account.

How it works illustration:

Richard and Yolanda have a $400,000 mortgage and have saved $10,000 in their linked 100 per cent offset account.

* The principal on a $400,000 mortgage is reduced by the $10,000 offset account to $390,000.
* As a result interest accumulates only on the $390,000 balance of the mortgage.

If your current lender will not allow you to have a 100% mortgage offset account attached to your loan, refinance now. Your current lender is behind the times and trying to rip you off by offering a inferior product choice.

If you don’t have a broker try echoice.com.au They provide me with excellent ongoing service for one of my loans.

The following article sums things up:

Mortgage Watchdog.

From NMDDATA.COM.AU

“Housing supply deficit widens

“The fact of that of the national under-supply, half of it is in Sydney, it’s going to take a long time to turn this around. We expect housing shortage to get worse over the next five years and it’s an underpinning factor for price growth, which is going to be pretty strong,” said Braddick.”

Maybe it is time to add to your property investment portfolio. Speak to your mortgage broker and find out your borrowing capacity.

Australian’s that I come in contact with seem to have overcome their addiction to retail therapy.

If you are working in retail, you may find you will be doing more hours and being asked by your boss to do some unusual promotion.

From the media releases › 2010 › Statement by Glenn Stevens, RBA Governor: Monetary Policy Decision:

“With the risk of serious economic contraction in Australia having passed some time ago, the Board has been adjusting the cash rate towards levels that would be consistent with interest rates to borrowers being close to the average experience over the past decade or more. The Board expects that, as a result of today’s decision, rates for most borrowers will be around average levels. This represents a significant adjustment from the very expansionary settings reached a year ago.

The Board will continue to assess prospects for demand and inflation, and set monetary policy as needed to achieve an average inflation rate of 2–3 per cent over time.”]

The message is mixed, but my gut feeling is the board think the economy is in a boom/bust wave. The RBA understands that “Mining” is not a sustainable industry. It produces very few real jobs and uses massive amounts of public sponsored infrastructure. When the ore runs out or a new product replaces the old “made from iron”, the mining executives will probably go back to banking and the workers on the dole. Property price’s will adjust and a new cycle will start.

As home buyer’s and a property investor’s we can only deal with our own micro economies. We have to talk to our mortgage brokers and bankers and get the best deal we can for our circumstances.

Oh! And please check your loan statements for errors. I recently got charged twice for a line fee on one of my loans. It took three weeks to get it refunded. Interest rate increases are a prime time for lenders to make errors.

Reputable Mortgage Broker.

Please watch the video, if you have not seen it, you will be shocked!!

I highly recommend this software. Go to the website and check it out for yourself and try it for free.

Free trial, no catches.

Click here to view the embedded video.

Mortgage Watchdog.com.au

Thanks for coming to my blog.

Line Of Credit or Mortgage Offset Account?

“Column by Noel Whittaker”
“Last week I talked about tax deductibility of interest. Today we will take it a step further and think about strategies for borrowers who are using line of credit loans.

There is confusion about home loan accounts with a redraw facility and offset accounts. It’s worth taking the time to understand them because they are vastly different animals and getting it wrong can be very costly.

An offset account is simply a savings account with the interest being deducted from your loan interest instead of being paid to you as taxable income. At any stage, funds can be withdrawn from the offset account without tax implications.

In contrast, every time you make a withdrawal from a line of credit account, you are establishing a new loan.

Suppose a couple have a $400,000 loan on their home and have the goal of eventually upgrading to another home and renting the original out. Over the years they have accumulated $350,000 in their offset account, which means they effectively owe only $50,000 on their property. When they make the move they simply withdraw the $350,000 from the offset account and use that as a deposit on the new home. This leaves them with a $400,000 debt on the now tenanted original property and they can claim all the interest on it as a tax deduction.

Their neighbours once had a $400,000 loan but have worked hard to reduce the debt to $50,000. If they move out, the debt on the now rented property will be stuck at $50,000. Certainly they could redraw funds from the original loan to buy their dream home but the interest will not be tax deductible. They will have a huge non-deductible debt on their new residence, and will be paying tax on the rents from the original property.

An investment line of credit loan can be a particular trap if the borrowers do not keep their business and private expenses strictly separate. Unfortunately far too many borrowers deposit their salary into the investment loan account and then withdraw funds each month for normal living expenses. They do not realise that the deposit of the salary is treated by the tax office as a permanent reduction of the debt, and each redraw is a new loan. Because the redraws are used for a private purpose such as paying for groceries, the loan very quickly loses its tax deductibility. The lesson in all this is that you should keep your investment and private borrowings separate and always use an offset account if you intend to rent out a property that is presently used as your own residence.”
The author Noel Whittaker is a director of Whittaker Macnaught, a division of St Andrew’s Australia. This advice is general in nature and Readers should seek their own expert advice before making financial decisions. Noel’s e-mail address is noelwhit@gmail.com

Echoice home loans describe a Mortgage Offset Account as follows:

“if you want to pay off your mortgage sooner, a home loan with an offset facility can be a quick and simple option.

How it works

A mortgage offset account is simply a savings account linked to your loan account. Unlike an all-in-one loan that combines your credit card with your transaction accounts, an offset account works like a regular savings account. The big difference is that the balance in the savings account is offset against that owing on the mortgage. Any ‘notional’ interest on savings is earned at the same rate as the linked loan.

Over time, savings in your offset account can help to reduce the loan principal, allowing you to pay off your loan sooner or build up equity.
Types of offset accounts

There are two different types of offset accounts – a 100 per cent offset and a partial offset account. As the benefits of offset accounts have become more widely understood, most lenders and borrowers opt for a 100 per cent offset facility.

Example:

John and Betty have a $100,000 mortgage and $10,000 in a linked 100 per cent offset account.

* The principal on a $100,000 loan is reduced by the $10,000 offset account to $90,000.
* As a result interest only accumulates on the $90,000 balance of the loan.
* Repayments continue to be made on the entire $100,000 principal and applicable interest.
* While savings in the offset account are actively working to reduce the loan, repayments are working more effectively to reduce both the principal and interest it attracts
* Over a number of years, both the principal and interest on your loan are repaid faster.”

This advert from a bank also helps with the explanation.

Click here to view the embedded video.

Echoice: A place where you can get a homeloan with 100% Mortgage Offset Savings Account.

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