Ink Financial Solutions | Specialist Finance

De-Arne

Negotiating without a broker

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Negotiating without a broker

A collage of different people's expressions of shocked or suprised

The Deloitte Australian Mortgage Report 2020 states that two-fifths of the people they surveyed with a mortgage had used a mortgage broker to apply for their mortgage loan. 

A mortgage broker is an intermediary between a financial institution and an individual. The broker works with both parties to get the individual an approved loan. Brokers collect and verify all the necessary paperwork that a lender needs, so an individual can be considered for a loan.

Isn’t it interesting, I have just read two articles about “negotiating without a broker“? I’m not sure the author really understands the value of a broker or the relationship that brokers and banks have as she states, “the banks don’t want to pay the brokers commission”, she also states that you can “shop around and get a better rate yourself”. 

So, a few myth-busters:

Myth 1 – “Banks don’t want to pay Brokers” 

Brokers and banks have great relationships! The bank does pay the broker just as they would pay their own staff to source loans. A bank’s home lender sources loans for the bank in the same way brokers do. Several of the larger banks only use brokers to secure their home loans.

Myth 2 – “Brokers only recommend lenders that pay them the highest commission”

All brokers are bound by the best interest duty act BID. This ensures the broker acts in their client’s best interest. This is the quintessential reason you have a broker on your team. Just like your accountant, solicitor or financial planner, your broker is qualified not only formally but with years of experience or if they are new to the market, they will have an industry mentor. Your broker then needs to achieve industry licensing, police checks, reference checks, insurance and ASIC licensing and most importantly are audited regularly to maintain compliance for both the licence holder and their accredited lending partners.

Lenders, generally pay the same remuneration. Remuneration is often the last consideration for a broker. Here are a few questions brokers ask first: 

  1. Does my client fit the lender’s policy? 
  2. Do they sit in the right postcode for security?
  3. How long have they been in their job? 
  4. What type of job do they have? 
  5. What type of security is being offered?
  6. How much deposit does my client have?
  7. What is my client’s credit rating? 
  8. What are my client’s lending patterns?
  9. What other financial commitments does my client have?

Myth 3 – “Shopping around to get the best rate”

There is nothing wrong with searching rates and understanding what rates are in the marketplace, but make sure you understand what the rate really means and how this affects your personal circumstance and strategy.

For example: In 2021 fixed rates were cheaper than variable rates, some as low as 1.89% for two years. Great! But the catch is you could only pay very little extra off your loan outside the monthly repayment. If you like to pay extra each week or have an offset the cheapest rate wasn’t going to work for you. If you decide to pay the loan out early, you’ll be generally hit with an exit fee. 

Having someone that understands your entire picture and works for you, allows them to offer you multiple solutions. The industry standard is that your broker will offer you between three and five different lending options before making a formal application. This document is generally known as the preliminary assessment.

You and your broker can then discuss the pros and cons of each lending opportunity from the multiple lenders. (Some people may not have as many options given their personal circumstances). If you choose to shop around on your own and make a formal application each time, whether the loan proceeds or not, it will put a mark on your credit file and this will affect your credit score. Also, ask yourself “How valuable is my time”?  Put a price on your time and work out how much it will cost you to go it alone.

Like all great relationships, you need to find a broker that suits your style and understands your dreams, goals and aspirations and where you have come from financially.

So my final thoughts on negotiating without a broker:

As your trusted advisor and broker, I can cast the net wider and tap into over 60 banks and lenders from the Big Four to boutique lenders, and access thousands of products, to find the right loan for you.

Not only can I provide more options than the banks, I will also do the legwork for you and help you navigate the complex home loan process from application through to settlement.

International Women’s Day – what does it mean to me?

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International Women’s Day – what does it mean to me?

Why celebrate? 

After a long two years of lockdowns and restrictions, it is a lovely thought to be able to finally catch up with others in person.  

Having the space to stop, recharge and connect with other women is always refreshing. Listening and learning from their stories, forging new connections, and bonding over the shared female experience, is what International Women’s Day is all about for me.

As 21st-century women, we are often juggling both our professional and home lives, with little time or space for ourselves. We pour our energy into everything and everyone around us, with no thought of any repercussions to our own physical, emotional, or mental health. It is not until we are faced with adversity, be it large or small, that truly makes us reconsider and reprioritise, the areas in our life that deserve our energy.

A predominant trait of many successful women is their ability to pursue a goal despite obstacles or ‘FAILURES’. They don’t see their failures as dead ends or signs to give up, but rather as a First Attempt In Learning, and they continue to show up each day and kept working away at their dream. One step forward, 3 steps back, then one day they just get ‘lucky’ and that dream starts paying some bills, giving them hope and making them feel proud for all the days they showed up and failed.

It is this tenacity, that those women who have gone before we have displayed, that has afforded us the opportunities we have today, and it is our tenacity that drives an even more expansive future for the women that follow. 

So for me, International Women’s Day is about connecting, reflecting, being grateful, and enjoying a beautiful space and a meal while being inspired to keep showing up every day! 

PS – I wrote this BLOG the week before IWD and I did not get to make it to my chosen event, in fact, many events were cancelled or postponed due to flooding. My contribution this year was to source and create our beautiful flowers. I am still flooded in, but I have the pleasure of enjoying all these beautiful creations. I am grateful that I am safe and dry with my family.

2022 and the Interest Rates

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2022 and the Interest Rates

What are the economists really saying? 

There has been a lot of talk and countless opinions in the media around interest rate movements for 2022.

At times ‘the economists seem to be speaking a foreign language when all we really want to know is “What does this mean for me?”. Unfortunately, nobody seems to have a crystal ball, so for the past few weeks, I’ve listened to addresses from Westpac senior economists and the head economist from the Bank of QLD.  My key takeaways are:

1. Interest rates are going to rise; and
2. Borrowing money will become tighter.

Ok. This seems logical.

My first thoughts as someone who is not an economist kicked off with, “I need to check the current rates on my home loan!”  This was soon followed by a visit to my mortgage calculator so I could consider the impact of a potential rate rise of 1.5% to 2% over the next two years.

With predicted interest rate increases, it is more important than ever to be aware of your current options and those moving forward.

Here are some questions I considered, and then I looked at the pros and cons for my specific circumstances:

  1. Should I fix a portion of my home loan? 
  2. Should I leave it variable and pay off more on my loan?
  3. Would a mix of fixed and variable be a better choice? 

Once any concerns about my home loan were squared, it was time to look at any other loans and debts I might have. Rinse and repeat. I’ll confirm my current interest rates for each, and then see what I can do to improve my situation. 

 Some options to consider are:

  • Debt consolidation; or 
  • Make extra payments 
  • Pay your smallest loans first, this can be a quick win and then that extra money can be moved to your next loan.

That takes care of anything we might currently owe. Now it’s time to think about any future lending we might want. For example, is 2022 the year I set up a home, car or business loan?

As mentioned, borrowing is likely to become harder as interest rates increase. Lenders will want to see how you conduct your financial matters, which means it is time to review your credit rating.  

Your credit rating is one of the tools a lender will use to decide whether you are a safety risk. If you haven’t looked up your credit rating before, there are a few options online such as Equifax.

Once you have your report, check for any defaults and late payments. Did you know late payments show up on your credit file and can be seen for two years, even if your account is closed?

Don’t forget to check your savings habits. Can you show a regular savings plan? Consistency is the key! Putting something aside each week is another tick for many lenders.

No matter what the economists are predicting, it is important that you are in the driver’s seat of your financial position. 

Take responsibility for your money. Pay on time – set up BPay. 

Have a budget and stick to it. A budget is a road map to tell your money where to go. Understanding where your finances are currently at and taking a little action often, will assist in your overall financial health and well-being.

Festive financial hangover

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Festive financial hangover

Are bills starting to land in your inbox from your Christmas spending?

Don’t panic. Now is the time to take stock of your finances and put actions in place to:

  1. Pay off your Christmas splurge hangover, and,
  2. Set realistic 2022 financial resolutions to break the debt cycle and get ahead.

The festive season is a time when budgets can go out the window. The next minute, your savings are depleted, your credit limits are maxed and your debt is sky-high.

Here are our top tips for paying off that seasonal spending splurge:

  • Gather all your statements and bills – bank statements, loan statements, credit cards, AfterPay bills etc. Once you have them all, make a list of all your outstanding amounts.
  • Become friends with your debt. You can’t hide from these bills, so, for each bill make a note of the outstanding amount, due date and interest rates.
  • New debt = time for new budgets. Create a 2022 budget. Calculate your income and expenses. Remember to also include the likes of annual fees on credit cards and bank account fees etc. All these ‘incidental’ amounts make a difference to your budget – and potential saving options.
  • Map your financial picture: what you own, what you owe, how much you earn and what you spend.
  • Now that you have a solid budget, look at potential ways of reducing debt sooner – can you consolidate your debts into one lower-rate loan? Which debt has the highest interest rate? Consider making extra payments on this debt to pay it off sooner.
  • Set up BPAY through your Internet banking to ensure debts are paid before the due dates to avoid unnecessary late fees.
  • Be patient – paying off debt can take some time. Constantly chipping away at it pays dividends in the long run.
  • Avoid taking on any more debt (if possible) until your existing debt is reduced or manageable.

Now that you have a budget and plan in place for paying off your debt, here are some 2022 finance resolutions for you to work towards to help save money. Write down your 2022 financial goals – saving for a car, home loan, business improvements or starting a new business?

Next, how can you achieve these goals?

  • Reduce debt (which if you have taken our advice above, you already are working towards this – yay, go you good thing!)
  • Build your passive income. Side hustle or second employment perhaps?
  • Set up a rainy day and/or emergency saving account and contribute each pay cycle.
  • Insurances. We all have them, but are we getting our money’s worth? Shop around, compare and if there is a better deal elsewhere, change providers.
  • Have you checked in on your superannuation lately? Do you know how it’s performing, or is it underperforming? 2022 could be your year to rekindle the spark with your super. 
  • Join some like-minded Facebook pages such as – the Australian Debt Free Community.
  • Have you got a will? If not, get one. If you do have a will, check to make sure it is updated for your current life situations – you might have upgraded your home, and have accrued more super since you last looked at your will. It’s important your intentions and financial credentials are sorted in your will. 

The above is a snapshot of some of the ways you can work towards financial freedom in 2022.

How to avoid the gift of financial debt this festive season

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How to avoid the gift of financial debt this festive season

Christmas is the season for giving. 

But, you should also be reminded not to gift yourself a debt as a result of the season. It can be very tempting to overspend on gifts and groceries during this time. 

We’ve put together some handy financial tips to make sure you see out the holidays on the nice list, not the naughty one. 

Firstly, there is always helpful, supportive financial counselling available if you are, or, find yourself in debt worry. Financial counselling is free and offered by not-for-profit organisations such as The Salvation Army.
Here at Ink Financial Solutions, we pride ourselves on offering non-judgemental financial support and advice to all our clients, regardless of their financial journey. 

Christmas loans 

Don’t get trapped into thinking a Christmas loan is a special loan with special interest rates – they are not. Bank and lender marketing gimmicks aside, put simply, a ‘Christmas loan’ is a personal loan and works the same way as a regular personal loan – with interest rates, fees and terms and conditions. So beware and always read agreements. 

Before taking out a Christmas loan consider the following: 

  • Budget and plan – how much income do you have left after regular expenses? This should be your maximum amount to spend.
  • Make a list of presents that you would like to purchase and compare prices online and in-store – there can be large savings to be made, simply by shopping around. Buying online might save the temptation of impulse buying too.
  • Get creative with Christmas gifts and wrapping – look for local gifts, create an experience, and make it yourself.
  • Work out the repayments before you apply for a loan and ask yourself, ‘Can I afford the loan repayments?’
  • If you already have debt, why worsen your financial situation with another loan?

If after working through all of the above, you decide additional funds for Christmas are required, the following is a list of lending options with pros and cons to consider. This is general advice only and you should consider your own financial position and other factors before deciding what is best for you.

Payday loan
Can be a quick and easy option for small amounts – up to $2000. Usually, no interest fees apply, however, there will be ridiculously high fees. Be aware of loan terms as well, which can range from as short as 16 days up to one year.  

Standard personal loan
Flexible lending and a wide range of terms and repayment timeframes (from three months to seven years). Beware of high-interest rates, large lending limits – don’t borrow more than you need, even if approved for a larger amount than you apply for – and possible early exit fees.

Credit cards
Should not be treated any differently than any other time of year. If applying for a new credit card at Christmas you may be able to take advantage of a zero per cent introductory interest period – conditions will apply, so read the fine print first. If you have existing credit cards, investigate if you have any cashback or rewards accrued throughout the year you can use to cover costs at Christmas. 

Buy now, pay later services
A short-term financing option where you take the item home now and pay for it over regular instalments – as short as six weeks. Many in-store financial options usually seen at large retailers (such as Harvey Norman) also align with buy now, pay later services and have special zero per cent promotions for big-ticket items, especially at Christmas. Keep in mind with these options, that while interest is not charged, you will be charged fees. A lot of buy now, pay later services make their money on late fees.

Centrelink cash advance
If you receive a Centrelink benefit, you can request an advance payment which is interest and fee-free. As you are accessing your own money, this is a safer option than searching for loans if you’re unemployed. However, keep in mind you will have less disposable income in your next pay or pay.

Money milestones – how to talk to teenagers about money

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Money milestones – how to talk to teenagers about money

Just like life milestones as we grow up – first steps, the first day of school, first high school crush – we also have money milestones. The gold coin in the bottom of the glass from the tooth fairy, pocket money for household chores, that first pay packet from a casual job. There are many money milestones we experience as we grow up, meaning it is never too early to start learning about money and finances. 

The Financial Planning Association (FPA) of Australia says talking to children about money better prepares them for the future, however, through the FPA’s ‘Share the Dream’ report from 2018 some two-thirds of Australian parents are reluctant to chat with their kids about money for fear they will worry.  

Normalising regular conversations with children about money, budgeting and spending can help alleviate these worries.  

We’ve put together some handy tips on how parents can talk to their children, especially employed teenagers, about finances and savings, as well, as some great ideas that could help prevent bad spending habits into adulthood.   

  1. Create a budget 
    A budget is a clear road map for your money – it tells you where your incoming finances need to go and what money you have left for other spending. 
    A budget doesn’t need to be anything fancy, something simple such as an Excel spreadsheet showing ‘Money In’ (how much money you have coming in) and ‘Money Out’ (what you are going to spend your money on) is sufficient. 
    Budgeting can start at any age, with FPA’s ‘Share the Dream report showing that Australian children can be exposed to pocket money from as young as four years of age. According to the report young Australian children, aged four to eight years, receive on average $10 or less pocket money per week. This increases to $20 for tweens, and up to, and more than, $40 a week for 14 to 18-year-olds.
  2. It’s their money, not yours 
    Encourage the first steps to financial independence by having positive conversations about money with your children. Remember, it’s their money, not yours. Chat to kids about what they would like to do with their money, versus what mum and dad want to happen with the money. After having these conversations work together on setting some mini goals for them. It’s always best to allow for some splurge money, as well as some money that will reach a long-term goal. 
  3. Account set up 
    Include your children in the bank account set-up process, this helps with making money and finances real. Ensure that the bank account set up has zero fees attached – and talk to your children about the significance of this, it all helps with shaping their long-term views and values towards banking and finances. 
    Once the account is set up, encourage your children to have different accounts, which can help with short and long-term money goals. A good starting point is to have a ‘splurge’, ‘savings’ and ‘everyday’ account.
  4. Don’t spend money you don’t have 
    Don’t encourage Afterpay, Zip or pay-later accounts. The rise of the modern-day layby through shop now and pay later businesses can be tempting for anyone. However, encouraging children to spend only the money they have is the safest way to ensure healthy and positive spending habits as they get older. As mentioned previously, having a tangible budget spreadsheet and separating bank accounts into ‘savings’ and ‘spending’ accounts will help show children exactly how much money they have, how much they can spend today and how close they are to reaching savings goals. Saving up and buying something outright is a much more responsible and rewarding process than having something today and falling into debt tomorrow.  
  5. Follow the leader  
    As the parent, set a good example with money and banking habits. If you don’t want your child to use Afterpay, don’t then buy that KitchenAid you have been wanting on Afterpay. Openly tell your children every time you forgo something and put money in savings for that big-ticket item you are saving for – “I am not going to buy that chocolate bar at the register today, instead I am going to save that money for the KitchenAid I really want”. Also, talk to your children about how you have saved for things in the past – how did you get your first car? How long did it take to save for your mortgage? Even consider saving for something together. 
  6. More helpful hints 
    Some great resources to help both parents and teens with money, budgeting, finances and savings are: 

Books 

I Will Teach You To Be Rich by Ramit Sethi
The Early Investor by Michael W Zisa
I Want More Pizza by Steve Burkholder
Rich Dad Poor Dad for Teenagers by Robert T Kiyosaki

Web  

ABC: Teaching kids and teens about money management skills 
ABC: Teens take control of the family budget for a month 
Government: How to budget and save

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