Australian Mortgage and Loan Information

Mortgage holders need an up to date Will.

Ever heard of the term “died intestate”? Roughly it means dying without a valid will. The consequence is that your estate including any property you own, will be divided according to the law, regardless of your wishes. The result is often not what you intended for your family. Residential or Investment Property that you wish to keep in the family or provide to specific individuals may effected or have to be sold. Even the family home may have to be sold in extreme circumstances.

A “Last Will and Testament” drafted professionally, is an essential risk management tool for property owners, especially mortgage holders. Properly drafted, it should not only determine various parties’ property rights, but also appoint an administrator to follow your instructions and ensure your estate is distributed in accordance with your wishes.

Lawyers preach that pro forma wills should be avoided as they are supposedly inaccurate and frequently challenged. However, something is better than nothing. I believe in this instance that you get what you pay for so the cheapest pro forma will may not be the best. Shop around for a product that suits you best. Your mortgage broker will know a reputable source for a DIY Will.

Your will should be reviewed every 12 months and be updated when your circumstances change, for example:

• Home purchase or mortgage refinance• Retirement
• Marriage or remarriage, divorce or separation
• The birth of children and grandchildren and their change of marital status
• Financial commitments

Powers of Attorney are other useful risk management tools for property owners and should be considered as essential as a will.

Organise a will today, it is good risk management. A will is a sure way to “speak from the grave” and have your plans carried out. It is as important as your mortgage interest rate.

So you have, or are about to sack the land lord.

One of the most important aspects of a persons well being is taking care of their financial affairs. There have been numerous studies that have indicated that poor physical health is linked to poor financial health, therefore successfully managing the risks of being a home owner/mortgage holder may well lead to a long healthy and happy life.

So what are the risks and how do we effectively manage them?

1) Physical Risk:
Your house may burn down as a result of a fire, a tree may fall through the roof as a result of a storm etc. The best way to manage this risk is to simply have adequate loss insurance on your building and contents. Any of the major insurance companies should be able to accommodate you. Please make sure you take cover for both home building and contents including public liability cover. If you think your property may be at risk of flood, get some flood damage cover if you can. If you find the cover is more expensive than you would like, shop around and consider a higher excess. Finally have the cover auto renew from a credit card or your everyday account. Some mortgage providers will even deduct the premiums for the cover with your mortgage repayments. An expired policy is generally worthless, so manage this risk well.

2) Financial Risk:
Well this is the big one. If you can’t pay for it you will loose it! Job loss, disablement, sickness, interest rate rise and marriage break down are some of the risks you face. Banks and other major lenders can be particularly ruthless when it comes to foreclosure for non-payment of mortgage loans. Why, because when took out your loan you signed a legally binding contract promising to pay off your loan at a certain rate for a certain time. You fail to meet your end of the deal they invoke the nasty clause’s. Remember, property in most areas is a fairly liquid asset so house’s can usually be sold quickly for a knock down price enabling the bank to recover all or most of its money.

My number one method to manage this risk is to stick to a strict household budget, that involves meeting all your bills and saving at least 10% of total household income each pay to a mortgage offset account or similar. Initially it will mean less chocolate bars, making your own lunch, going out less etc, but eventually it will mean, financial security and the ability to ride out periods of unemployment etc. I also encourage you to seek out some Income Protection or Sickness and Accident cover as it is also known to cover you in these circumstances. The premiums are tax deductible and can usually be paid monthly. You never know when you might get sick!

My number two strategy is to recommend that you do not become too attached to your property. If for whatever reason you have not been able to make your mortgage payments and the bank is threatening to sell you up, you must beat them to the punch. Don’t let pride get in the way of managing your risk. If you sell it, you will almost definitely get more for your property than if the bank sells it. You may even have enough to start again.

My number three strategy is to become friendly with your Mortgage Broker, make them your friend and get them to keep you up to date with all the new types of loans available like the new Equity Finance Mortgage. With their help and some knowledge gathered from sites like this, you could consider refinancing your loan over a longer period, hopefully making payments more affordable at the present. Refinance, of your mortgage should not be a frivolous event. You need to get it right, as it can be very costly and time consuming. Consolidating credit and store card debt to your home loan should also be considered, but only if you are prepared to cancel and cut up your card for good. Consolidate to home loan, can the credit card and show some loansense is the motto.

By now I hope you are formulating your own risk management strategies for your home mortgage. Say this phrase out load: “If it’s going to be, its up to me.”

You can apply the wisdom of the phrase to everything in your life.

Speaking of wisdom: get some credible loan statement checking software, it is a great risk management tool.