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Juggling several debts can be stressful. If you’re struggling to keep on top of your debts or you simply want to save money on interest, we can help you solve the problem and get some peace of mind. Here are 3 ways your mortgage and finance broker can help you deal with your debts so you remain in control.

1) We can help you consolidate your debt

With debt consolidation, the idea is you take out a new low-interest loan and use it to pay off all your high-interest debts. We usually recommend one of two debt consolidation options.

Option 1: Refinance your home loan

In this scenario, you would refinance your mortgage and access some of your equity to pay off your debts.

Pros

  • Home loan interest rates are lower than those for most other types of credit.
  • One convenient repayment that’s easier to manage.
  • You can spread your repayments out over time to make them more affordable.
  • You may be able to make extra repayments and pay off your debt quicker, thereby saving money on interest.

Cons

  • Home loan terms can be 25 or 30 years. If you’re not careful, you may end up paying much more interest on your debts, even though the home loan interest rate is lower. Ask us to crunch the numbers for you.
  • If you use the equity in your home to pay off your debts, you will have less money when you sell your home.
  • If you turn all your unsecured debts (like credit cards) into secured debt (like your home loan), in a worst case scenario, you could lose your home if you get into debt again and can’t meet the repayments.

Option 2: Take out a personal loan

You could consolidate by taking out a personal loan with a competitive interest rate and using it to pay off all your other debts.

Pros

  • Interest rates for personal loans are generally lower than those on credit cards.
  • One convenient repayment.
  • Spread the repayments out over time to make them more manageable.
  • At the end of the loan term, all your debt will be paid off.

Cons

  • Personal loans come with higher interest rates than home loans (you may be better off by refinancing your home loan – ask us to crunch the numbers for you).
  • If you are struggling financially, it may be more difficult to secure a competitive interest rate.

2) We can compare interest rates on any kind of loan

We can help you find competitive interest rates on other kinds of loans, besides your home loan. Want us to compare interest rates on your personal loan? Not a problem. How about your car loan? We can access a wide variety of lenders to help with that too.

To help you manage your debts, we may be able to refinance your existing loans to a more competitive interest rate, or a longer loan term that reduces the size of your repayments. Bottom line is you have nothing to lose and everything to gain by checking in with us.

3) We can help you create a budget and savings plan 

Having a solid understanding of your income and expenses will help you remain in control of your finances. We can help you set up a budget to pay off your debts and create a savings plan to reach your goals. We’ll also give you tips, like how eliminating credit cards could save you money, or how budgeting apps work.

The last thing you want is for your debt to spiral out of control. As your mortgage and finance broker, we can explain whether debt consolidation is financially worthwhile, compare the market to find you the most competitive interest rates and help you find ways to budget and save. Please get in touch with us at Element Finance today.

This month, we saw important changes come into effect that could impact your ability to take out a home loan – or make it easier, depending on your credit history. In this article, we explain the new credit reporting changes and how they may affect you.

But first, let’s start with the basics – what is a credit report and why is it important? Remember, if you have any questions, your mortgage and finance broker is a great source of information.

What is a credit report?

Credit providers like banks, utility companies and telecommunications carriers provide details about your credit habits to credit reporting bodies. These agencies use this information to compile your credit report.

Among other details, your credit report contains your credit rating. This is a numerical value between zero and 1200 that represents your creditworthiness and how reliable you are as a borrower. The higher the score, the better.

What is your credit report used for?

When you apply for a home loan or another type of loan like a car loan, the lender will use your credit report to help them decide whether to approve the loan. They’ll consider details like your repayment history when assessing your ability to repay. Only licensed credit providers can access the repayment history information contained in your credit report.

Recent changes

From July 1, Comprehensive Credit Reporting (CCR) became mandatory for the big four banks. In the past, banks may have only shared negative financial information about you with other lenders, but under the new CCR regime, they’ll have to pass on positive information about you as well. Technically CCR has been in place since 2014, but the Australian Government recently made it compulsory for the big four banks to participate in the program to use credit reporting information to assess lending risks.

Here are some examples of the type of information that may now be shared:

Negative financial information:

  • Payment defaults
  • Overdue payments
  • Declined credit applications
  • Bankruptcy situations

How will the changes affect you?

The new credit reporting system will give lenders a more complete picture of your credit position. What that means is that they’ll have access to a more comprehensive set of data when assessing loan applications, so it will be easier for them to assess if you can afford to take on more debt.

If you have a positive financial track record, it’s likely your credit score will improve following the changes. Consequently, it may be easier for you to be approved for a home loan. You may even be able to negotiate a better deal (or have us do it for you).

How to keep your credit report healthy

Here are some tips to keep your credit report in check:

  • Pay your bills and make loan repayments on time
  • Pay your credit card off in full each month
  • Lower your credit card limits
  • Consider consolidating debt (speak to us about this)
  • Limit your credit enquiries, as frequent applications can look bad on your credit report
  • Remove your name from utility bills if you move
  • Be cautious about identity theft.

How to access your credit report

You can access a copy of your credit report for free once a year from credit reporting bodies. The main ones are Equifax, Dun and Bradstreet, Experian and Tasmanian Collection Service. Simply visit the ASIC MoneySmart website to find out more here.

Like to know more?

Your mortgage broker will be happy to explain how the changes to credit reporting may affect your eligibility for a home loan. Remember, for a lot of borrowers, mandatory CCR is likely to be a good thing, as it may improve your chances of being approved for a loan. It’s also expected to increase competition between lenders in future, which is a win for borrowers. Whatever your finance needs, we at Element Finance can assist, so please get in touch today.

Last year, important changes to tax deductions for property investors were announced. For some investors, the changes may have a significant impact on the annual deductions you can claim on your rental properties. As your mortgage broker, we like to keep you up to date. Here’s what you need to know about the changes when doing your tax this year.

Travel expense deduction scrapped

As of July 1, 2017, property investors can no longer claim a tax deduction for travel to maintain, inspect or collect rent for their rental property. Likewise, you can no longer claim travel expenses for preparing the property for new tenants, or for visiting a real estate agent to discuss your property.

Investors who own property interstate will probably be the most affected by this change. If these changes do affect you, perhaps consider employing a property manager to perform some of these tasks for you, as their costs are usually still tax deductible. Talk to your accountant to find out more.

Depreciation deductions tightened

Depreciation is the decline in value of an asset with a limited life expectancy. Depreciating assets include carpets, furniture and appliances like water heaters and cookers (also known as plant and equipment).

Residential property investors can now only claim depreciation deductions for plant and equipment expenses if they purchased them. Previously, investors could claim plant and equipment depreciation on assets that were installed by a previous owner.

This “integrity measure”, introduced in last year’s Budget, was intended to prevent multiple property owners from depreciating the same assets, exceeding their actual value. The changes apply to second-hand plant and equipment acquired after last year’s Budget night (May 9, 2017). You also can’t claim a deduction for plant and equipment installed on or after July 1, 2017 if you have ever used it for private purposes.

If you owned or entered into a contract to buy your investment property before May 9, 2017, you will not be affected by these changes. You can still claim deductions for depreciating plant and equipment assets that were in the rental property before that date.

Further reading

You can find more information about the expenses you can claim for residential rental properties on the ATO website, available here. You’ll find details about expenses that are deductible immediately, such as management, maintenance and interest; and expenses that are deductible over several years, such as capital works and borrowing costs.

Your tax time checklist

Here are some tips to prepare for tax time:

  • Update your Depreciation Schedule. You can find a Guide to depreciating assets 2018 here. If you’re confused, seek advice from your accountant. If it’s a new property investment, you may need to have a quantity surveyor prepare a Depreciation Schedule report.
  • Understand what you can claim (refer to the ATO website for clarification).
  • Get your documents together and organise your receipts.
  • Tally up your deductions. It’s a good idea to create a spreadsheet with all your income and expenses listed. That way, you can save on accounting fees (rather than giving them a shoe box of receipts to go through).
  • Book in with your accountant (they are flat out at tax time, so the sooner the better).

As your mortgage and finance broker, we’re happy to work with your accountant or financial planner on your investment property finance. And if you need a recommendation for a good accountant, we can help with that too. Good luck with your tax, and if we can assist in any way, please don’t hesitate to get in touch with us at Element Finance!

To rent or buy? For some, renting makes good financial sense. For others, it’s just money down the drain. For you it may be a question of short-term convenience versus long-term financial growth, which can make it a difficult decision to make. In this article, we break down the pros and cons of renting and buying, putting it into simple terms. We also let you in on a little secret – how to get the best of both worlds! Remember, your mortgage broker is a great source of support and information – if you need help to decide which option is right for you, then please get in touch with us at Element Finance.

Pros of renting

  • You can live wherever you want

    Career and lifestyle are important considerations, whether you’re single or a family. Renting a place in a suburb or location that is close to your work, friends and ideal lifestyle amenities (like schools or shopping) can often be much more affordable than buying there.

  • Flexibility
    If your work or lifestyle require you to be ready to up stumps and move at short notice, then renting gives you greater flexibility and mobility. Or if your situation changes and you find you need less expensive digs, you can quickly find a rental that fits your new budget.
  • Lower costs and less hassle
    Renting is usually cheaper than buying and you won’t have to worry about ongoing expenses like rates, body corporate fees, maintenance, repairs and building insurance.

Cons of renting

  • The ‘dead money’ argument
    Have you ever heard the phrase ‘rent money is dead money’? Many argue it’s much better to pay off your own home loan than someone else’s. It’s certainly true that capital gains on a property can potentially grow your wealth, and you can look forward to living ‘mortgage free’ within 25 – 30 years.
  • Restrictions
    Common complaints from renters include living with the landlord’s décor, not being able to put hooks in walls, restrictions on pets, or even the number of people who live with you.
  • Uncertainty
    Rental properties don’t offer long-term certainty. Moving can be expensive and you’re vulnerable whenever the lease ends or the landlord decides to renovate or move back in.
  • Inspections
    Most rental properties require you to submit to inspections by the landlord or agent every six months. These can be stressful and inconvenient.
What the statistics say
* Based on the 2016 census
Percentage of Australians renting30.9%
Percentage of Australians who own their home outright31%
Percentage of Australians paying off their home34.5%

Pros of buying

  • Freedom to do what you like with the property
    Buying your own property means you have the freedom to do whatever you want with it. You can decorate any way you like, and add value by renovating.
  • Capital gains and wealth-building opportunities
    You’ll own an asset eventually, and while you’re paying it off the property could potentially increase in value. What’s more, you may be able to use the equity in your home to build wealth through property or other investments.
  • Certainty 
    You’ll have the security and certainty of knowing where you’ll be living for years to come. You’ll also obtain a degree of financial certainty – because you’ll own a substantial asset.

Cons of buying

  • Affordability constraints and costs
    High housing prices and low wages growth have made buying difficult for some people. However, there are incentives available like the First Home Owner Grant to help you get started. Ask us if you’d like to know more.
  • Added responsibility
    Becoming a home owner means you’ll have new financial responsibilities (such as paying your mortgage repayments and bills in a timely manner).
  • You may not be able to afford to buy where you want to live
    As a home buyer, you may have to compromise on location or property type to find a property that suits your budget at first. However, once you get a foot on the property ladder, the potential capital gains could help to make your next property purchase more ideal.

Have you considered rentvesting?

Just because you want to live close to the action doesn’t mean you have to forfeit your dream of owning property. Rentvesting is a strategy that allows you to live where you want and buy an affordable investment property elsewhere! You could potentially get a foot on the property ladder now, enjoy the benefits of capital growth and having a tenant to help you to pay the mortgage, but still live wherever you like.

Talk to us about what’s right for you

Whether to rent or buy comes down to your personal situation and goals. If you’ re considering buying, then talk to us and we’ll help you decide what’s right for you. Keep in mind that even if you don’t have a 20% deposit saved, there may be other ways to get you over the finish line to buy a home or kick off your rentvesting strategy. We’re happy to explain everything you need to know, so please get in touch with us at Element Finance today!

Co-housing is a way of living that offers many benefits, especially for seniors. If the concept is unfamiliar, you may be conjuring up images of a 1970s hippy commune, but rest assured you won’t have to wear tie dye t-shirts or become a vegan to be accepted! In this article, we explain what co-housing is, where it originated, and provide an example of a co-housing community in action in Tasmania. Remember, if you’re considering downsizing or making living arrangements for your retirement, we’re here to help you find the right finance for your needs.

What is co-housing?

Co-housing is defined as “an intentional community” of private homes built around shared facilities. These common spaces may include a common house with a shared kitchen and dining area where residents can cook and eat together.

There may be community gardens, playgrounds and recreational spaces. Some co-housing developments may even include communal swimming pools and movie rooms for residents to enjoy.

Each household in the community is independent and fully equipped with its own amenities, including private kitchens and baths. However, the idea behind co-housing is for neighbours to be part of a collaborative community.

Co-housing differs from regular retirement villages in that the community is owned and managed by the residents who live there.

The key benefits of a co-housing community are that residents may have the opportunity to collaborate over how it is set up, what amenities it includes and how much it costs.

Where did the idea originate?

The idea of co-housing started in Denmark in the 1960s. From Scandinavia, the concept spread to other parts of Europe, on to North America, and over to New Zealand and Australia.

Co-housing initiatives are now popping up in many parts of Australia, reinvigorating the concept of community. Seniors’ co-housing has been suggested as an alternative to aged care or retirement villages for those wishing to age in place.

What are the benefits?

Enthusiasts believe co-housing offers the following advantages:

  • More meaningful relationships with neighbours.
  • A feeling of belonging, in that you’re part of a community.
  • Reduces loneliness and isolation by connecting you with others.
  • A collaborative culture of sharing and caring.
  • Maintenance tasks are divided among the community.
  • Decisions affecting the community are based on the consensus.
  • You still have privacy, as well as the support of your neighbours as needed.
  • Reduces household bills, as expenses for shared space are divided between residents.
  • Depending on your community, it may be less expensive than other housing options.
  • Reduces your environmental impact thanks to a “greener” approach to living.

An example of a co-housing community in action

Cascade Cohousing in South Hobart is a great example of a thriving co-housing community. Established in 1991, there are currently 22 adults, ranging in age from young families to retirees, and six children living in 15 privately-owned properties (on strata title).

There’s a central common house with a shared kitchen, dining area, lounge, laundry, workshop and TV room. Three nights a week, the residents get together for a meal, and once a month they hold body corporate meetings and working bees for maintenance. There are fun activities on offer like film nights, games evenings and gardening.

You can find examples of other established and emerging co-housing communities on the Cohousing Australia website.

If you’re entering the next phase of life, co-housing may be the way to go. As your mortgage broker, we can help you secure the finance you need to start your exciting new chapter in an existing co-housing community, or even work with you and your chosen ‘community group’ to set one up. Please talk to us at Element Finance about your retirement lifestyle plans and goals today!


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