Clinton Waters, Author at AXTON Finance

Why Income is Key to Getting Your Loan Approved?

Posted on 04/09/202424/09/2024 by Clinton Waters

When you’re applying for a home or investment loan, your income is one of the most important factors lenders consider. It helps them decide if you can afford the loan and how much they’re willing to lend you.

What is Borrowing Capacity and Why Does It Matter?

Borrowing capacity is simply how much a lender thinks you can afford to borrow based on both their rules and government affordability guidelines for regulated credit. This is based on all of your assessable income, current debts, and other financial commitments. Knowing your borrowing capacity is essential because it ensures that you’re taking on a loan you can manage without financial stress.

Why Your Income Matters Most

Your ability to make regular loan repayments—what lenders call “servicing income”—is crucial. Lenders look at different types of income to see if you can handle the loan, including:

Your Salary or Wages
Part-Time and Overtime Pay
Income from Casual Jobs (usually with a consistent income over 3-6 months)
Rental Income
Dividends from Investments
Income from a Trust
Business Profits
Some Government Pensions
Insurance Payments

For certain incomes, like bonuses, lenders might only count a portion (say 80%) to account for any variability.

Equity and Debt-to-Income Ratio: Why They Matter

While having equity (like owning a portion of your home) is important, your ability to make repayments is even more critical. Lenders also check your Debt-to-Income (DTI) ratio, which ideally should be less than six times your gross income. This ratio helps them ensure you’re not taking on more debt than you can handle.

The Buffer

Australian banks are required by APRA (The Australian Prudential Regulation Authority – the regulatory body in Australia that oversees the financial services industry to ensure the stability, safety, and soundness of financial institutions) to add a three (3) percent margin to the actual home loan rate to ensure that you home loan repayment is manageable should interest rates rise.

At the time of writing this article (September 2024) it is generally expected that we are at or near the height of the current rate increasing cycle that started in May 2022 when the RBA raised the official cash rate from the historically low level of 0.10% to 0.35%, marking the beginning of its efforts to tighten monetary policy in response to rising inflation.

So while we are near the absolute highest rates are likely to go the three percent buffer has reduced peoples borrowing capacity by a significant degree and in some cases it has even restricted people being able to refinance loan limits they already have even if it results in a cheaper repayment (there are exceptions to this rule so call us to learn more).

Credit Score and Reporting

Your credit score plays a significant role in loan approval. In Australia, VEDA and Illion are the main credit reporting agencies in Australia. A VEDA score below 500 can make it tough to get approved, while a score of 750 or above is ideal. Positive credit reporting gives lenders a clear view of your credit history with other financial institutions, so when looking to get pre approved for any form of finance it’s important to keep your repayments on time and avoid defaults.

Tips to Boost Your Borrowing Capacity

If you want to increase your borrowing capacity, here are some steps you can take:

Reduce or Close Credit Card Limits: High credit limits can reduce how much you can borrow.
Avoid Buy Now, Pay Later Services: Services like Afterpay and Zip Pay can indicate you’re stretching your budget to a potential lender
Limit Credit Applications: Too many applications can hurt your credit score.
Cut Down on Car Loan Repayments: These can eat into your ability to afford a new loan.
Stick to a Budget: Lenders will ask about your living expenses, so cutting back before applying for a mortgage can help show you’re ready to manage the repayments.

Take the Next Step

Curious about how much you can borrow? Find out with AXTON Finance expert mortgage broker in Sydney today by booking a quick 15-minute FREE discovery meeting here.

AXTON Finance Expands with Strategic Client Book Acquisition

Posted on 11/08/202411/08/2024 by Clinton Waters

At AXTON Finance, we are thrilled to share some significant and exciting news with our valued clients and partners. In a move that further strengthens our commitment to delivering exceptional mortgage broking services, we have recently acquired the client book of industry veteran Chris Angus from Badu Capital. This acquisition marks a major milestone in our journey and underscores our dedication to providing the highest quality of service to our growing client base.

Chris Angus, a well-respected figure in the mortgage industry, has transitioned to an executive role within one of Australia’s largest mortgage broking groups. As part of this transition, Chris made the carefully considered decision to transfer his client book to AXTON Finance. The key criterion for this transition was to ensure that the values and quality of service that clients have come to expect from Chris and Badu Capital would not only be maintained but elevated.

We are honored to be entrusted with this responsibility and are fully committed to ensuring a seamless transition for all clients involved. At AXTON Finance, our team is led by Clinton Waters, an industry veteran with over 20 years of experience. Clinton’s leadership is complemented by a team of seven highly experienced mortgage brokers, each of whom brings a wealth of knowledge and expertise to the table. Together, we have earned over 300 five-star Google reviews, a testament to our unwavering commitment to client satisfaction.

Our team is renowned for its streamlined systems and client-focused approach. We pride ourselves on our ability to help clients optimize their mortgage lending structures and navigate the complexities of credit advice with confidence. With this acquisition, we are excited to extend these benefits to our new clients, ensuring that they continue to receive the exceptional service they deserve.

It’s important to note that while Chris Angus has taken on a new role, Badu Capital remains actively trading in Brisbane under the leadership of Mick Angus and we are proud to carry forward the legacy of excellence that Chris established with his predominately Melbourne based clients.

We understand that change can bring questions, and our team is here to support you every step of the way. Whether you are a new client joining us through this acquisition or a long-standing member of the AXTON Finance family, we are always available to address any questions or concerns you may have.

If you would like to discuss your current mortgage scenario or explore new opportunities with a member of the AXTON Finance team, we invite you to book an obligation-free consultation with us. We are here to help you achieve your financial goals and look forward to continuing to serve you with the excellence that defines AXTON Finance.

We are excited about this new chapter and are committed to making this transition as smooth and beneficial as possible for all our clients.

Unlocking Exclusive Mortgage Benefits for Doctors, Lawyers, Accountants & Emerging Wealth / High-Net-Worth Professionals

Posted on 04/07/202414/07/2024 by Clinton Waters

At AXTON Finance, we specialise in crafting tailored mortgage broking solutions for high-net-worth and emerging wealth professionals, including doctors, surgeons, medical specialists, lawyers, judges, accountants (both CA and CPA accountants) and certain industry specialists.

Besides having over 300 five-star Google reviews you can consider us like your private bankers who know a lot more about lending than just one bank. You will have direct access to your experienced mortgage broker, who will usually have at least 10+ years of industry experience to manage your ongoing client relationship – we aim for this not to be a once-off transaction with you (you will not find any inexperienced rookies at AXTON Finance)

Why do professionals choose AXTON Finance?

LMI Waivers for $500K up to $10m+ mortgages

Lenders’ Mortgage Insurance (LMI) can represent a significant expense or an outright blocker when purchasing a new home or investment property. However, certain professionals—broadly speaking, doctors, lawyers, accountants, and even individuals buying luxury homes in bluechip-defined postcodes—can qualify for LMI waivers on loans up to 90-95% of a property’s value without the additional eye-watering LMI costs. This can result in substantial savings exceeding tens of thousands of dollars, particularly for properties valued in the multi-million-dollar range.

Who can access Lenders’ Mortgage Insurance Waivers?
- Doctors, surgeons and selected medical professionals* (must be registered Australian Health Practitioner Regulation Agency (AHPRA))
- Accounting Tax and finance professional^
- Lawyers, Solicitors, Barristers, Judges, and other Judicial and legal professionals
- Engineering/IT professionals
- Veterinarians
- Buyers of luxury high-end properties in limited bluechip metropolitan suburbs
Tailored Solutions That Understand Your Needs

Our licensed mortgage brokers at AXTON Finance are adept at more than just securing loans. They understand the intricacies of your profession and are equipped to offer tailored advice that aligns with your long-term property aspirations. Whether it’s negotiating better terms or exploring unique lending avenues, we ensure your mortgage supports your broader financial landscape.
Stability and Expertise

Unlike transient bank staff and call centre ‘brokers,’ our professional brokers have a deep-rooted understanding of the mortgage industry’s ever-changing lending policies, rules, and products. Our team’s extensive experience ensures that your mortgage lending decisions are grounded in expert knowledge and lived experience.
Seamless and Efficient Processes

We streamline the mortgage process to leverage digital efficiencies, but we maximise the personal touch (no offshore call centres here at AXTON), making it as efficient and hassle-free as possible. From initial consultation to final approval and beyond settlement, our team works diligently to ensure a smooth approval process, allowing you to focus more on your professional and personal life without worrying about the status of your mortgage approval. Because we live and breathe mortgage approvals we get you to ‘approved’ sooner.

The AXTON Advantage

Investing in a service that offers more than just basic loan facilitation is crucial. At AXTON Finance, you’ll benefit from:

Expert Insights: Access to experienced mortgage brokers who specialise in specialist income and high-net-worth lending.
Exclusive Offers: Opportunities to save on LMI and gain access to competitive interest rates not available to the general public.
Long-Term Support: Ongoing advice and support as your lending needs evolve over time.

Choosing AXTON means you have chosen a team that prioritises your lending needs. We don’t just pitch a product; we build client relationships that last. Let us help you navigate your mortgage options to find the best possible solution that complements your affluent lifestyle and high standards.

Call us today for an obligation-free discussion. If you have to leave a message, we will get back to you within five minutes.

^*Full list of approved medico specialists are (but not completely limited to) Anaesthetist, Cardiothoracic Surgeon, Clinical Pharmacologist, Cosmetic Surgeon, Dentist, Dermatologist, Ear and Throat Surgeon, Emergency Surgeon, Endocrinologist, Gastrointestinal Surgeon, Gastroenterologist, General Practitioner (also known as a GP or Medical Practitioner), Gynaecologist, Haematologist, Hepatologist, Immunologist, Nephrologist, Neurosurgeon, Neurologist, Obstetrician, Oncologist, Ophthalmologist, Optometrist, Oral and Maxillofacial Surgeon, Orthopaedic Consultant, Orthodontist, Otolaryngologist, Paediatric Surgeon (Neonatal and Perinatal), Pathologist, Physiotherapist, Plastic Surgeon, Podiatrist, Psychiatrist, Radiologist (Note: this usually does not include Radiographers – call us to confirm), Reconstructive Surgeon, Respiratory or Thoracic Surgeon, Urologist, Vascular Surgeon.

^{^}Accountant, Actuary, Auditor, Chief Financial Officer CFO, Director, Finance Director, Finance Manager, Financial Controller, Partner. Minor variations to these titles, such as ‘Tax Accountant’ or ‘Internal Auditor’, are also acceptable. Most lenders usually require CA (Chartered Accountant) or CPA (Certified Public Accountant) registration.

Can you borrow money for an investment property under a company name?

Posted on 24/06/202424/06/2024 by Clinton Waters

At AXTON Finance, we are well-versed in the intricacies of property investment through a company structure. This investment approach, while potentially beneficial in terms of asset protection, tax management, and credit policy assessment, requires a thorough understanding of the specific lending criteria that apply to corporate entities. Our team, with its specialized knowledge and experience, is adept at facilitating these unique transactions, ensuring you secure approval with terms tailored to your investment goals.

Investors considering this route can access up to 95% financing for conventional investment properties or 80% for company low doc (reduced documentation) loans, with commercial properties evaluated individually but usually at slightly lower LVRs (loan to valuation ratios) again. Each lender has distinct policies and loan limits, making our expert guidance crucial.

Investing in property through a company structure presents unique challenges. Not all banks are equipped to handle loans under company names, due to specific processing requirements or policy gaps in their teams. These challenges may include restrictions on professional package discounts or the use of additional financial products like offset accounts and credit cards under a company name. Some lenders may even require all shareholders to guarantee the loan. This underscores the importance of selecting the right lender—one that combines competitive rates with the capability to manage corporate structures effectively. Our team at AXTON Finance is well-versed in these challenges and can guide you through the process.

For instance, if John and Jane Smith, directors of ABC Pty Ltd, decide to purchase an investment property, the setup would typically involve ABC Pty Ltd both as the borrower and property owner, with John and Jane as the guarantors.

Furthermore, companies acting as corporate trustees for trusts have specific borrowing capacities and structures, which our team can also manage by ensuring all legal documentation, like company constitutions and trust deeds, meet target lender requirements.

It’s important to understand that directors might still be liable if a company fails to meet its loan obligations. Banks often require personal guarantees from directors, especially if the company is a shell business or SPV (Special Purpose Vehicle) that does not earn significant income or has been set up solely for the purpose of purchasing the property. This underscores the importance of expert guidance when structuring company loans. At AXTON Finance, we can help you navigate these potential risks and responsibilities.

Any time that you may be considering a loan in a company name you must seek qualified accounting and legal advice to ensure the appropriateness of the proposed structure and that no unintended consequences occur.

At AXTON Finance, we pride ourselves on our expertise in setting up and managing home loans for companies, from simple setups with a couple of directors to more complex joint ventures utilising unit or discretionary trusts. Our extensive experience and deep understanding of lender criteria allow us to identify the best possible rates and terms for your situation.

To explore how we can assist you with your company property investment or to get a tailored assessment, contact us today. Our specialists are ready to provide you with the personalised advice and support you need to navigate this complex area efficiently.

How to Choose a great mortgage broker?

Posted on 03/06/202409/09/2024 by Clinton Waters

If you are trawling the internet to find a great mortgage broker then these seven tips are what you should be looking for;

Minimum Five Years Broker Experience: Ensure your broker has substantial experience handling various scenarios and providing you with experienced advice earned over years, not months. Newer brokers will be desperate to originate your loan application at all costs and will often lack the experience to prepare a high-quality mortgage application submission that may result in your loan taking longer to be approved or even declined.
Strong Online Google Reviews: Check for positive reviews and testimonials from previous clients to gauge their reputation and service quality. Be wary of lots of short reviews that appear in a condensed period, as they are less likely to be legitimate. Instead, look for someone like AXTON Finance, who has hundreds of excellent reviews over many years. A simple independent search of the company name plus the word ‘reviews’ will help you determine if they pass your sense check.
Fully Licensed: Verify that your broker holds all necessary licenses and certifications required by regulatory authorities. As a minimum your licensed mortgage broker should have a Certificate IV in mortgage lending but preferably a Diploma in Mortgage and Finance Broking. Licensed mortgage brokers should be members of the MFAA (Mortgage Finance Association of Australia) and/or the FBAA (Finance Brokers Association of Australia). You can check their credit license status via the government’s ASIC (Australian Investment & Securities Commission) website here. Mortgage Brokers are also required to be members of the government’s Australian Financial Complaints Authority (AFCA) should there ever be the need to lodge a complaint that cannot be resolved.
Comprehensive Product Knowledge: Look for a broker who is well-versed in various mortgage products and scenarios and can offer you tailored options that fit your needs. Not all mortgage brokers are experienced enough to handle your application if you have any unique or complex variables about your situation especially if you are self-employed, have complex income streams, are an expat and/or a high net worth individual.
Transparent Fee Structure: Ensure that your broker provides clear and transparent information about their fees and commissions to avoid any hidden surprises. All licensed mortgage brokers are required by law to disclose their remuneration earned on all regulated loan applications lodged to help comply with best interest duties that champion your interests first.
Excellent Communication Skills: A good mortgage broker should maintain open lines of communication, keeping you informed throughout the process and promptly addressing any concerns. Ideally, your trusted mortgage broker will be updating you through efficient systems of communication instead of your chasing them up seeking an update.
Proactive and Personalized Service: Choose a broker who takes the time to understand your financial situation, goals, concerns and preferences, offering proactive and customized advice rather than a one-size-fits-all approach.

This checklist will help you find a mortgage broker who can provide valuable guidance and support, ensuring a smoother and more beneficial mortgage experience.

As shameless self-promotion, we are confident we will pass all seven points summarised above, so why not save yourself the time and risk and call us for an obligation-free chat today?

Is Your Mortgage Broker an Advisor or an Order Taker?

Posted on 03/06/202403/06/2024 by Clinton Waters

Recently I had an existing long-term client that I worked with for about six weeks who needed a significant equity release to help leverage his investment property portfolio. It was a complex scenario that had a narrow path to an approval but one that I had confidently solved. However in the space of a weekend he pivoted to another broker based on a quick conversation solely about rate. It didn’t end well for them and they came back to us rather sheepishly and proceeded with our tailored solution.

This got me thinking.

We all want a great rate but we need that rate to suitably match the scenario that will also result in the approval!

The role of a mortgage broker can vary significantly depending who you entrust with this important service. Some brokers act as mere order takers for a product, while others function as true advisors. Understanding the difference can have a substantial impact on your mortgage application experience and financial outcomes. What is the difference, you might ask? Well, let’s explore!

The Order Taker

An order taker in the mortgage industry is exactly what it sounds like: someone who processes requests without offering substantial guidance or advice. These brokers typically follow a straightforward, transactional approach usually based on a ‘best interest rate’ discussion as the focus. They gather your financial information, compare some suitable options, and present you with the ‘best rate’ that comes back. Their primary goal is to complete the transaction as quickly as possible and move on to the next client.

This approach does have its benefits. Order takers can be quick and give you what you want, which might be appealing if you are confident in your understanding of mortgage products. However, it can be costly as they do not take the time to understand your true intentions and ensure that what you are doing currently aligns with your long-term goals. This lack of personalized advice is a significant drawback.

If you’re not well-versed in the nuances of mortgage structuring, you might miss out on better deals or fail to understand the long-term implications of your mortgage choice. An order taker won’t typically take the time to understand your true intentions and will look to execute the short-term goal at the cost of future plans to get a fast turnaround and a quick commission.

The Advisor: A Proactive Approach

In contrast, a good mortgage broker who acts as an advisor takes a much more engaged and consultative approach. Advisors invest time in understanding your overall financial situation, future plans, and risk tolerance. They don’t just process paperwork; they provide tailored recommendations that align with your specific needs to ensure they are putting you on the path to achieving your long-term goals.

Advisors will often educate you about different mortgage products, explaining the pros and cons of each option in the context of your personal circumstances. For instance, they might suggest a fixed-rate mortgage if you value stability and predictability in a rising rate market, or a variable-rate mortgage if you can tolerate some risk for potentially lower rates. They may also delay an application that does not fit with your goals, taking the longer route to ensure you are getting the correct advice and assistance, rather than just the quick result.

Moreover, an advisor can help you think strategically about your mortgage. They might advise you on how to structure your mortgage to pay it off faster with a multiple offset account, how to leverage your mortgage for investment purposes, or how to use refinancing options to manage debt. This level of service often results in a more favorable mortgage experience and can save you money in the long run.

Determining Your Broker’s Role

To determine whether your mortgage broker is an advisor or an order taker, consider the following questions:

How much time do they spend understanding your financial situation? Advisors will take the time to understand your broader financial picture and goals.
Do they educate you about different mortgage options? Advisors will explain the nuances of different products, while order takers may just present the options.
Are they proactive in their communication? Advisors typically maintain open lines of communication, providing updates and advice throughout the process.
Do they offer personalized recommendations? Advisors tailor their suggestions to your specific needs, whereas order takers might provide a one-size-fits-all solution.

Choosing a mortgage broker who acts as an advisor rather than an order taker can significantly enhance your mortgage experience and financial outcomes. While order takers can process transactions efficiently, so can advisors. Advisors offer the personalized guidance that can help you make informed decisions and achieve your financial goals while also being efficient. When selecting a mortgage broker, look for one who prioritizes understanding your needs and providing tailored advice—your future self will thank you.

Don’t Get Rejected – How to Get Your Loan Approved the First Time

Posted on 27/05/202427/05/2024 by Clinton Waters

Understanding Loan Rejection Rates

Did you know that 40% of home loans are being declined? [Home Loan Rejection Rate Hits 40%] This alarming statistic highlights the challenges many face in securing a loan. Whether you’re a first-time homebuyer or a seasoned property investor, getting your loan approved can feel like navigating a minefield.

Why Are Loans Getting Rejected?

Unless you’ve been living under a rock, you’re probably aware that getting a home or investment loan approved has become more challenging. Successive interest rate increases from the RBA (Reserve Bank of Australia) Government-imposed speed limits on lending and the aftermath of the Royal Commission into banking and financial services have tightened lending criteria significantly. While we’ve seen similar conditions before, the current environment is exceptionally stringent.

Tips to Ensure Your Loan Gets Approved

Full Disclosure Is Key
Non-disclosure of debts, whether intentional or not, can have serious repercussions. Failing to disclose all your financial obligations can require a lot more explaining to the proposed lender and a pretty high chance that your loan will be declined. This includes not only major debts but also smaller commitments like store cards or buy now, pay later arrangements like Afterpay. Remember, attempting to hide any debt is considered fraud and will be found out during the application process due to positive credit reporting in place with almost all Australian banks and credit providers.

Having a good credit score
Lenders rely heavily on your credit history when making lending decisions. Some may even approve a loan based on your credit score alone, especially if your loan repayments are consistently on time and your credit report is clean – no statements necessary!To maintain a good credit score, avoid applying for multiple home loans simultaneously or ‘shopping’ your mortgage around too much. This can lead to multiple lending applications appearing on your credit file, which can reduce your score in the medium term. Additionally, be cautious with other credit applications such as credit card requests, credit increases, car loans, and personal loans, as these can also impact your credit score negatively.There are a few credit reporting agencies in Australia with the two most common being VEDA and Illion. Each reporting agency is different but a VEDA credit scors above 700 is deemed best practice – anything under 500 would be challenging to get support from a major lender in many cases. You can get a free copy of your credit report through us here at AXTON Finance to see what your report look like – just reach out via the contact us tab.

Get an Accurate Valuation
When we ask the question ‘what do you think your property is worth’ we usually get the standard response of ‘well the house down the road sold for X’. It’s a great start but many lenders now allow brokers or bankers to order upfront valuations usually at nil cost to you. This can seriously mitigate the risk of your loan application being rejected, especially if your Loan to loan-to-valuation ratio (LVR) is close to the threshold that might cause a significant rate increase or add thousands in lenders mortgage insurance (LMI) fees. Keep in mind that valuations can vary significantly, it’s not uncommon that we see variances by over 10%, between different valuers so it pays not to lock yourself in with just one bank if this happens.

Work with a Trusted Broker
Finding an experienced broker (10+ years experience ideally) or banker you trust is crucial. An experienced broker brings years of expertise and knowledge of market policies, which can be invaluable for different scenarios. Going directly to a bank is like asking for the best car at a Ford dealership – they can only offer their product. With lending criteria changing daily, the DIY approach to loan applications is increasingly difficult and risky. A licensed mortgage broker can navigate these complexities and give you the best chance of success – first time.

Have Your Documents in Order
Ensure all your support documents are organized and complete. This includes proof of income, employment history, credit history, and any other financial obligations. Having everything ready can streamline the application process and reduce the likelihood of delays or rejection.

Be Prepared for More Questions
These days, pretty much every lender is asking more questions. Be prepared to provide detailed information about your financial situation and be ready for follow-up queries. Transparency and prompt responses can help keep your application on track. Securing a loan in today’s market can be a little more challenging, especially if you choose to go it alone, but with the right preparation and support, you can improve your chances of getting approved and without the stress of a sloppy application. At AXTON Finance, we specialize in navigating these complexities and helping you achieve your financial goals. Contact us today to find out how we can assist you in securing your next loan.

Which Banks Offer Multi Offset Home Loans

Posted on 22/05/202427/05/2024 by Clinton Waters

What are the Benefits of Multiple Offset Accounts

Unlock the potential of your home loan by utilizing multiple offset accounts. This guide highlights how strategically using multiple offset accounts can enhance your financial control, save money, and accelerate the elimination of your mortgage.

What is a Multiple Offset Account loan

An offset account is a banking account linked to your home loan that reduces the balance on which interest is calculated. Most lenders only allow you to have one offset account per mortgage account which is great but does limit the control of your finances. By using a lender who offers multiple offset accounts, you can strategically distribute your funds, gaining flexibility and enhanced effectiveness over your finances.

Banks & Lenders Offering Multiple Offset Accounts

Several major Australian banks and lenders offer this functionality, providing borrowers with additional flexibility in managing their finances. Notable banks include Macquarie Bank with its comprehensive Offset Home Loan package (enables up to ten FREE 100% multiple offset accounts).

Other key providers of multi-offset account structures include;

– Commonwealth Bank
– Macquarie Bank
– Resimac Home Loans
– uBank
– AMP Bank
– Newcastle Permanent
– ME Bank
– Suncorp Bank
– St George Bank
– Great Southern Bank
– Quodos Bank
– BankWest
– Beyond Bank Australia
– Bank Australia

It’s essential to explore each bank’s specific features to find the best option for your financial needs as not all multiple offset account structures work exactly the same.

Benefits of having Multiple Offset Accounts

Offset accounts act like financial boxes, allowing you to allocate funds according to your needs—such as one account for daily expenses and another for significant purchases or investments. This setup helps you manage your cash flow effectively and monitor your spending.

Tips on Maximizing Offset Account Benefits

The more funds you maintain in your combined multi offset accounts, the less interest you pay on your mortgage. Depositing large or small sums of money not required for use into an offset account can significantly decrease interest charges over the medium to long term given the incredibly powerful effects of compounding interest.

The Mechanics of Offset Accounts

An offset account directly reduces the interest payable on your home loan by offsetting your loan balance with the account balance. This structure is especially beneficial for joint home loan holders, allowing individual financial management while benefiting from the shared reduction in home loan interest.

Enhancing Financial Security Through Offset Accounts

Multiple offset accounts can offer additional financial security. When unforeseen expenses or changes in your financial situation happen (and we all know they do!), these funds have been put into an offset account that you might nickname the ‘Mojo account’ (as the Barefoot Investor, Scott Pape, famously called such an account) can cover costs without resorting to high-interest credit options, or worse still not having any funds at all. This of course helps give you longer-term peace of mind and helps to improve your financial stability.

By understanding and implementing a multiple offset account structure effectively, you can create a more efficient way to take control of your mortgage, making your money work harder for you and moving you closer to owning your home outright.

While multiple offset accounts can offer significant benefits in the right scenario, they may not be suitable for everyone. Consult with a professional mortgage broker, like AXTON Finance to tailor the loan structure to your unique financial situation and goals. Book your 15 minute discovery meeting here.

How to minimise your mortgage with an Interest Free Credit Card and an Offset Home Loan

Posted on 13/05/202413/05/2024 by Clinton Waters

Offset accounts can significantly enhance the financial benefits of a mortgage loan, especially when used in tandem with simple tools like an interest-free credit card. This article explores how coupling offset accounts with the clever use of interest-free credit cards can create a powerful saving strategy, particularly for those with substantial mortgage balances and good household incomes.

Understanding Offset Accounts

An offset account is a bank account linked directly to your mortgage that has the usual functionality of an everyday account such as being able to have a debit card, Apple/Android Pay, branch withdrawals and deposits etc. The money held in this account is offset daily against the mortgage balance, and interest is charged only on the net balance. It is important to note that the offset account itself does not earn interest – it offsets it’s balance against your home loan. For instance, if you have a mortgage of $1,000,000 and an offset account balance of $50,000, you will only be charged interest on $950,000. This setup can lead to significant interest savings over time, reduce the term of your mortgage, and increase your equity. Offset accounts are particularly beneficial as they provide flexibility in accessing funds, unlike direct repayments into the mortgage which may be less frequent and require a higher level of discipline to action each month.

Multiple Offset Accounts

There are a handful of banks and lenders who offer multiple offset account structures that enable you to aggregate the combined account balances against a single mortgage account. This is great if you like better financial control and have funds put aside for large bills, your children’s education costs, taxation provisions, savings for a holiday or any other purpose you can really think of. Multiple offset account structures are a great tool for both saving on interest and maintaining purpospeful liquidity for day-to-day needs.

The Role of Interest-Free Credit Cards in Financial Management

Interest-free credit cards have been around for a long time now and of course offer a period during which no interest is charged on purchases, typically ranging from 30-55 days. When used wisely, these cards can manage cash flow without incurring extra costs, thus allowing any spare cash to sit in your offset account for as long as possible, further reducing the mortgage balance subject to interest. The key to maximizing the benefit from interest-free credit cards lies in responsible spending and consistent repayment within the interest-free period. This ensures that all your available cash can remain in the offset account, working to decrease your mortgage interest obligations, without accruing additional debt from credit card use.

Using Offset Accounts with Interest-Free Credit Cards

Utilizing both an offset account and an interest-free credit card together can significantly amplify your savings. Here’s how to synchronize these financial tools effectively:

Direct Income into an Offset Account: Route all of your income directly into your offset account. This increases your average daily balance, which reduces the interest on your mortgage each month – this can have a powerful compounding effect over time.
Use Credit Card for Expenses: Use your interest-free credit card for daily expenses. This approach keeps more money in your offset account for a longer period during the month, maximizing the interest savings on your mortgage. There is of course the added benefit that many credit card companies offer customers frequent flyer points affiliated with the major Australian Airlines Qantas and Virgin – you may be surprised at how quickly you will rack up those frequent flyer points for your next trip!
Pay Off Credit Card From your Offset Account: Before the end of the interest-free period on your credit card (typically 30-55 days), pay the balance using the funds from your offset account. This method ensures you avoid interest charges on your credit card while keeping your offset account balance high throughout the month. Many credit card companies enable you to have an automatic sweep of the monthly balance due to automate and streamline the efficiency of paying the card bill on the very last day its due. This maximizes the benefit of the money in your control and minimizes the manual effort required to administer the money smart procedure.

Case Study: $1,000,000 Mortgage with an Offset Account

Consider a hypothetical scenario: a homeowner with a $1,000,000 mortgage at a 6.0% annual interest rate over a 30-year term. Suppose this homeowner maintains an average of $50,000 in their offset account and spends $3,000 monthly using an interest-free credit card, which they pay off at the end of each month from the offset account.

Calculation: Without the offset account, the monthly interest would be calculated as $5,000 initially ($1,000,000 x 6% / 12 months). With $50,000 in the offset account, the interest reduces to about $4,750 monthly ($950,000 x 6% / 12 months), saving $250 per month or $3,000 annually. Over the life of the loan, this strategy alone could save approximately $90,000 in interest.

So as you can see having a basic understanding of how offset accounts work and how they can help save your thousands in interest. Not all offsets are created equaly though as many lenders limit customers to only one offset (not multiple) or ‘partial offset’ arrangements rather than 100% offset so it pays to get qualified advice.

Offset home loans are typically marginally more expensive because of a slight loading on the interest rate charged or the fees payable so if you have limited monthly cashflows there maybe diminishing returns for having an offset account. Some loans in certain entities like trusts or companies or for expat / overseas borrowers are not always allowed to have offset accounts linked.

Overall offset home loans are a fantastic feature that may be able to help you pay off your loan sooner. Why not book a time with us today to discuss your needs and to determine if an offset home loan is suitable for you. We have over 30 major banks and non bank lenders that we can compare for you today.

Unlock Financial Security in Retirement with a Reverse Mortgage

Posted on 24/04/202424/04/2024 by Clinton Waters

As Australians enter their senior years, achieving financial security becomes increasingly critical. Unfortunately, even well-laid plans can falter, leaving many retirees facing stress and anxiety about their financial futures, especially as living costs continue to rise.

At AXTON Finance, we often encounter adult children concerned about their parents’ financial well-being. They turn to us for professional mortgage brokering advice to explore options for assisting their parents, including ways to unlock equity from their homes.

While some adult children are in a position to provide financial support, this isn’t always a viable long-term solution. It can also lead to uncomfortable feelings of dependency for parents, potentially exacerbating their stress.

A growing number of seniors and retirees are now considering a Reverse Mortgage as a viable solution. This straightforward financial tool can, subject to eligibility, provide a lump sum to release home equity as cash, settle existing debts, or fund home improvements. This enables seniors to comfortably remain in their own homes longer. Importantly, a Reverse Mortgage does not require income assessment and offers options for periodic monthly payments to supplement the retiree’s income.

There are no mandatory repayments with a Reverse Mortgage until the home is sold, and voluntary repayments can be made at any time, whether in regular installments or as a lump sum.

Like any significant financial decision, consulting with a solicitor or financial planner is crucial before proceeding with a Reverse Mortgage. Most plans include a “No Negative Equity” guarantee, ensuring that borrowers will not be forced to sell their homes unexpectedly.

Pensioners considering a Reverse Mortgage should also consult with Centrelink to ensure that their benefits remain unaffected. In most cases, this type of income does not impact pension entitlements, as it is derived from an owner-occupied residence rather than employment or investment income.

At AXTON Finance, we are dedicated to finding solutions that enhance the quality of life for our clients. In today’s economic climate, it might be time for your home to start working for you. If you’re considering a Reverse Mortgage or need more information about how it might benefit your situation, please contact us at AXTON Finance. Let us help you secure a more comfortable and stable financial future.