Financial Hardship during COVID-19

In light of the current unprecedented global events as a result of COVID-19, we wanted to ensure you that we are here to support you for the long haul. It is becoming increasingly evident this is going to be a marathon, not a sprint and that we need to prepare for increasing unemployment, and reduced incomes. With this in mind, many of you may struggle to make your home loan repayments so we wanted to explore the options available to you.

Payment Deferrals
If you have recently lost your job or found your income substantially reduced you may be able to defer your home loan repayments for 3-6 months. All lenders have a hardship department that can assist with this process. A link of their contact details can be found here. We are aware that bank call centres are struggling to keep up with call volumes, and in many cases banks have now started to forward us forms for you to complete and lodge. Please call us first to see if we can assist.

If your income hasn’t been affected yet, and you are unable to access deferrals through hardship but you still want to minimise your cashflow expenditure by reducing your repayments there are other options available to you.

Redraw
If you have been paying over and above your minimum monthly home loan repayments you may have funds available in either redraw, or sitting in your offset account. If you reduce your loan repayments to the minimum amount you can then use these funds to make your future loan repayments.

Fixed Rates
With the recent RBA rate reductions many of the banks have dropped their interest rates, with some 1, 2 and 3 year rates in the low 2’s. For most people this is around 1% lower than they are currently paying. Locking in to one of these low rates, could reduce your monthly repayments by hundreds of dollars. Note: there are other factors to consider before fixing, such as break costs, so please ensure you call us first before proceeding with this option.

Superannuation
Legislation passed this week enables individuals to access up to $10,000 before 1 July 2020, and then $10,000 after July 2020 if their income has ceased or fallen by 20%. This is done via the ATO myGov website and will be available from mid-April 2020. More information regarding eligibility and the process can be found here.

PAYG withholding variation
If you have had your work hours reduced but you are not technically unemployed (so unable to access jobseeker payments) you can apply to the ATO to have the tax withheld from you pay for the rest of the year so you don’t have to wait to get a refund when you lodge your tax. More information regarding this can be found here.

Finally, know that you are not alone and you do have options. We are only a phone call or email away and happy to answer your queries. You need a broker now more than ever!

First meeting with a broker

If you’re looking for a home loan but have not dealt with a mortgage broker before, attending your first appointment with a broker can be a nervous experience. Getting a home loan, after all, can be quite complex for a first-timer and there is a lot to learn. But there are many steps you can take to be confident that your appointment will be a success.

A good starting point is to familiarise yourself with the expectations of the first appointment between one of our friendly brokers and yourself. Your broker is very likely to ask you about your medium and long-term financial goals, the amount you want to borrow, comparisons of your home loan options and your understanding of the fees, costs and conditions attached to home loans. Knowing the direction the appointment will likely take – lets you participate more actively in the conversation. This means you can better articulate your needs to your broker.

It’s also recommended that you give some consideration before the meeting to the types of questions you wish to ask your broker. Questions that can be of use include such things as loan types (such as term, repayment options and interest rate types), the types of ongoing fees attached to various loans (such as early exit, late payment, break and redraw fees) and the typical timeframe for a loan settlement.

These questions might pop into your head spontaneously during the meeting but preparing them in advance is a good way to refine them. By doing so, you are in a position to get more specific information from your broker.

It is common practice, too, for your broker to conduct a needs assessment prior to your face-to-face appointment – so you may be asked some pre-appointment questions. To assist in answering these, you’ll need to supply information about your employment history, assets and expenses.

At the appointment it will save you time and effort to prepare and then bring the required documentation with you. This can include ID, transaction histories, tax returns, rental income statements and borrowing documents such as “contract of sale” and proof that you have the deposit for a property. It’s mandatory for brokers to maintain the confidentiality of information that you provide to them and only pass on information necessary to enable them to lodge your loan application or where required by law.

All Venrock Finance brokers are accredited, therefore you can attend the meeting knowing your broker is appropriately educated, adheres to a strict and professional code of practice and is authorised to access a large range of products offered by a variety of lenders.

To book an obligation free appointment today please contact Venrock Finance on 08 9557 0500 or admin@venrockfinance.com.au.

Buy Now Pay Later – the hidden danger potentially stopping you from owning your own home

The Buy Now Pay Later sector is winning-over consumers with the promise of instant gratification, but the mortgage industry is warning that with every sugar-high comes the risk of a corresponding low.

‘Buy Now Pay Later’ providers such as AfterPay and Zip Pay have experienced massive growth in popularity, with the number of users jumping from 400,000 to approximately 2 million between 2015 and 2018.

Driven by a simple proposition whereby the Buy Now Pay Later provider pays the merchant on behalf of the customer, allowing the customer to obtain the goods or receive a service immediately while subsequently paying off the debt generally through instalments, Buy Now Pay Later presents a tempting offering.

But as the sector’s breakneck growth continues, Venrock is warning users, to be mindful of overdoing it as this could risk effecting their chances of securing a home loan further down the track.

This service is the layby of our day but in reverse. It’s your forward credit for an item. In theory, it makes sense. You get the item or service and pay it off over instalments, so you’re actually putting forward your liability. This might be ok for someone that manages their money well, if they pay off the item on time and use their mortgage offset account correctly. This way they’re delaying expenses and offsetting more of their savings against their home loan.

Utilising this payment method may potentially send the wrong message to a bank. If a lender sees a ‘buy now pay later’ provider frequently on a client’s bank statements, that can trigger more questions about their spending behaviours and ultimately may mean they choose to decline the application.

If you are concerned about your level of expenditure or your ability to secure a home loan, a conversation with one of our friendly brokers could set you on the right path.

It’s important to appropriately manage your expenses well in advance of applying for a home loan, that way you can show the bank that you can save and afford to service a mortgage when the time comes.

Financial Focus: Instant Asset Write Off

Thinking of purchasing assets for your business?

Well in April the Federal Government unveiled the 2019-2020 federal budget, where they announced that the instant asset write-off has increased from $25,000 to $30,000. Previously the write-off was only available to small businesses with a turnover less than $10 million however this turnover threshold has also increased to $50 million.

This initiative allows businesses to write-off up to $30,000 of their asset expenditure (for new or second hand assets) against tax instantly rather than claiming the deductions over several years. You may purchase and claim a deduction for multiple assets provided each asset is under the relevant threshold.

This scheme has previously had a big impact on small businesses and with this extension more businesses will be able to claim the write-off.

Contact one of our friendly brokers today, who can help organise the finance for your asset purchase and we even have access to no financials lending products, which can make securing finance a lot easier.

Going Green

Venrock Finance is always looking for ways to improve our involvement within the community. Therefore, we are proud to announce our latest initiative where for every loan settled we will be donating trees through a partnership with the Carbon Neutral Charitable Fund. This is a local non-for profit organisation which works with the community to reduce and offset carbon emissions through various projects.

In addition to the above initiative, in 2016, Venrock took a major step forward in reducing the amount of paper we use in the office by changing from paper files to digital document management via our CRM system. Due to the current requirements of lenders, Venrock cannot be completely paperless; however, we are committed to continuing to evolve our internal systems.

If you are considering purchasing a new car or energy efficient equipment, please touch base with Venrock first as we have access to various loans for energy efficient products and services. Not only can we offer discounted loan rates for environmentally friendly vehicles, trucks, electric heavy machinery, agricultural equipment – we can also organise commercial finance for solar panels.

Please remember that Venrock is here to provide obligation free mortgage health checks, organise the finance for your new car, caravan or boat so you can get out and enjoy what our beautiful country has to offer.

Let’s work together to help build a better and sustainable future for the generations to come.

Financial Focus: Understanding Living Expenses

Applying for a new mortgage or looking to purchase a new car is an exciting time, however with the need for comprehensive credit reporting and tightening lending practices, it is imperative that consumers understand how their spending habits can impact on their capacity to access finance.

With more and more expenses being paid electronically, the banks have greater transparency on what exactly people are spending their money on and how much they are spending. Banks use this information to determine what surplus you have left to pay for the proposed finance. Additionally, the expenses that may be a luxury or a one off can also paint a picture on the desirability of you gaining an approval.

With all of this you need to be very mindful on what you are spending and ensure repayments are met on time. So when seeking a mortgage or car finance, work with a Venrock Finance broker who will gain an understanding of your discretionary spending and living expenses. As each bank has different policies our role is to navigate through the policies and find the bank that will say yes to your particular scenario, as while one bank may say no, the other lender may have a policy that includes a realistic understanding of your living expenses.

To discuss your requirements further please contact one of our friendly brokers today.

Financial Focus: Offset versus Redraw

As Finance Brokers a common question that we are regularly asked is “What is the difference between an offset and redraw facilities?” While both are common home loan features, they can cause some confusion to the client when considering the best type of features for their prospective home loan. And with more and more lenders offering either an offset account or a redraw facility consumers need to gain a better understanding of these features.

An offset account is a transaction account which is linked to your home loan and which has normal transaction account functionality. The benefit is that the money in your account is offset daily against your home loan balance, and this will reduce the mortgage interest charged accordingly.  While a redraw facility is a feature which enables borrowers to contribute extra payments onto their mortgage and then allows them to access to their banked additional funds. So while you are saving you are also reducing the interest you pay on your home loan.

In many ways, redraw and offset facilities are quite similar. The main difference is that the money sitting in an offset account remains at call and easily accessible, whereas the money in a redraw facility, while accessible, isn’t available for same day, at call withdrawal.

While diligent savers will benefit from either kind of loan feature, it’s important to note that redraw facilities and mortgage offset accounts are better suited for different kinds of mortgage holders. You have to decide for yourself if you want to do one of two things:

  1. Reduce the interest on your loan while maintaining day-to-day access of your cash. A mortgage offset account offsets the interest owing on your account, but enables you to have day-to-day access to the cash. A mortgage offset account can be used in a transactional way, so is ideally suited for home owners who want to minimise the interest owing on their repayments, without necessarily paying extra off their principal. Many lenders are now offering multiple offset accounts which enables you to separate your savings such as to long term bills, holidays, education or however you like to separate your money for budgeting purposes.
  2.  Pay off the loan itself (known as the principal). By paying the money directly into the loan, a redraw facility allows you to make payments towards paying off the principal, rather than simply reducing interest in the short-term interest. This is better suited for those who have a focus on paying off their mortgage earlier. Though the amount you can redraw will be assessed each year to ensure that you still pay off your home loan within the loan term.

In summary offset accounts are like everyday transaction accounts, giving you easy access to your money, while redraw facilities let you access extra repayments that you have made on your home loan. Both facilities can help reduce the amount of interest you pay on your home loan, however it is important to consider how you wish to manage your finances.

Financial Focus : Home Loans & Self Employment

There are many perks to working for yourself, but when it comes to applying for a home loan, it seems being your own boss sends up a red flag to banks and other lenders. Why? A salaried employee has a regular, steady income and is less likely to experience the cash flow volatility of a small business owner, contract, entrepreneur, trades person or freelancer.

 Yet by being proactive and accessing specialist advice,  self-employed applicants can also enjoy a successful and hassle-free road to securing a home loan. These are some essential steps.

SEEK EXPERT ADVICE

Trying to navigate the home loan landscape solo may not produce the outcome you desire. There are many experts who can help self-employed people access a home loan, and an independent broker is a good first port of call. At Venrock we are able to provide you with an up-to-date overview of which lenders on our panel are most comfortable lending to the self-employed, and also explain what sorts of loan products are available. We can also provide valuable advice around the sort of documentation you will need to have ready before we submit your application. Venrock will act for you and be on your side throughout this process.

GET YOUR AFFAIRS IN ORDER FOR A FULL DOC APPLICATION

Many lenders will lend to self-employed borrowers who provide their full business financials. This generally includes your personal and business tax returns for the past two years. If you have these documents on hand – and they reveal a fairly consistent income – applying for a loan should be relatively straightforward. However, the hectic schedule that comes with running your own business means many self-employed borrowers’ tax returns are not up to date. If you have time on your side, consider working with your tax advisor to lodge your outstanding returns. If you’re in a hurry, you may wish to explore the option of applying for a low doc loan.

CONSIDER A LOW DOC LOAN

Low doc loans are offered by a wide range of lenders and, as the name suggests, require 23 months of business activity statements instead of full financials, for example. A downside of some low doc loans is that they may only be available at a lower loan to property value ratio (LVR), which means you may need a larger deposit. Venrock can summarize your options quickly.

DO YOUR HOMEWORK

Checking your credit history is a good step for anyone applying for a home loan. If you’re self-employed, its definitely worth taking the time to make sure your credit history doesn’t include any defaults or errors – these can hold up your loan application if they are not rectified in advance. Taking the time to work out exactly how much you’d like to borrow is also a good idea. Venrock will show you how, without the inquiry showing on your file.

OUTSIDE THE SQUARE

It may be possible to apply for a home loan using a Certificate of Income Declaration – a document that verifies your income and is signed by your accountant. It’s wise to consult us before applying for a loan in this way, so we can advise which lenders will accept an income declaration. It should be noted, however, that applying for a loan using such a documents may mean that the required LVR (the portion of the property value you can borrow) may be lower, so you may need a larger deposit. While it’s a little more complicated for self employed borrowers, getting ah home loan can be easier than you’d imagine with Venrock Finance.

To Fix or Not?

A well-known industry comparison website “Canstar” has suggested that borrowers should consider switching their arrangements to fixed rate options, as the market has in all probability, reached record lows. (This recommendation was issued in late July 2018).

This recommendation also co -incides with a time when several banks have started offering fixed rate mortgages which are cheaper than their standard variable rate loans. Both Macquarie and Aussie Home Loans have recently dropped their fixed mortgage rates by 10 basis points, while increasing their variable rates by 5-10 basis points.

Whilst this option has various pro and cons, and is definitely not for everybody, Venrock believes all borrowers should undertake a review to see if this option suits the borrowers circumstances.

If a fixed rate option is something that you would like to consider, talk to one of our brokers for a free review or a Mortgage Health Check.

Financial Focus : Purchasing your first home

Planning to take your first step into the world of property? The entire industry can be extremely complex and confusing for newcomers – and being such a big commitment, it pays to get it right the first time. To help you get started in buying your first property, here are the resources and processes you will need to purchase your first home in Western Australia.

HOW MUCH CAN YOU AFFORD

Before you go off looking for a home, you need to find out how much you can borrow first. This will differ from lender to lender, and will be influenced by your personal circumstances – from your income to how much you can put down on a deposit.  Typically, you’ll need around 10 to 20 per cent of the value of your home for use as a deposit. A lower deposit might mean that you have to take out lender’s mortgage insurance, designed to protect the lender. To determine how much you can borrow contact Venrock and one of our friendly brokers can prepare a borrowing capacity for your individual circumstances.

WA FIRST HOME OWNERS GRANT

As a first home buyer, you are in a unique position in the property market, as you have access to a number of assistance programmes. Firstly, there is the WA first home owner grant (FHOG), which provides up to $10,000 to eligible people purchasing a new home. A ‘new’ home is a property that has never been lived in before by any other party, or sold to another party prior to you. To be eligible for the FHOG, you must be an Australian citizen or permanent resident, and above the age of 18. Additionally, you cannot have owned a home prior to to the 1 July, 2000. The total value of the new home must not exceed the cap amount. The cap amount is $750,000 if the property is located south of the 26th parallel (south of Shark Bay)  and $1,000,000 if the property located north of the 26th parallel.

STAMP DUTY IN WA

Stamp duty is a tax levied by the Western Australia government, based on the value of the house or land that you are buying. However, as a first home owner, you could be entitled for a reduced rate of transfer duty, especially if you qualify for the FHOG. In summary

  • If the new or established house purchase price is under $430,000 there is no stamp duty applicable.
  • If the value of the vacant land does not exceed $300,000 there is no stamp duty applicable.

HOME BUYERS ASSISTANCE

First home buyers looking to purchase an established property can still apply for the Home Buyers Assistance Account. This provides up to $2,000 for incidental costs associated with buying a property, such as inspection fees, mortgage insurance premiums, and so on. It is available from the Department of Commerce and Venrock Finance can assist in applying for this grant.