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

Posted on 13/05/202413/05/2024 by Nick

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.

How is Your Home Loan Interest Rate Calculated?

Posted on 18/04/202418/04/2024 by Nick

Buying a home or just refinancing one usually means a hefty financial commitment – and understanding interest rates is key to making sound choices.

We often get asked how the interest rate on your mortgage is calculated.

Let’s dive in!

Factors Influencing the Interest Rate of Your Mortgage

Your interest rate isn’t a random number. It’s determined by several factors:

Credit Score: A high credit score indicates you’re a reliable borrower, potentially earning you a lower interest rate. If you want to get a free credit score report reach out to us.
Loan-to-Value Ratio (LVR): LVR reflects how much you’re borrowing relative to the property’s value. Higher LVRs may mean higher interest rates especially as you pass 80% LVR and it really ramps up over 90%.
Loan Type: Different loan types (variable, fixed, line of credit, interest only, intro rates etc.) come with varying interest rates. The cheapest form of lending is usually principal and interest for owner-occupied purposes. The more expensive rates are interest-only investment purpose lending. If your loan is an SMSF (Self Managed Superannuation Fund) loan then the rates are higher again because they are limited recourse structures.
Economic Climate: Interest rates are a function of controlling inflation first and foremost. The effects of rapid rates of inflation have a very corrosive effect on people’s purchasing power and the overall stability of the greater economy. To curb inflation, central banks, like the RBA (Reserve Bank of Australia) raise the cash rate, the rate at which banks borrow money from each other. When the cash rate goes up, lenders typically raise their interest rates, and vice versa. This discourages borrowing and spending, which can help slow down inflation. Conversely, if the economy weakens and inflation falls, the cash rate may be lowered to stimulate borrowing and spending.
Funding Costs: Banks lend you money from various sources which include but are not limited to deposits held, bonds and other security instruments. Depending on a number of macro-level variables source funding costs can be more expensive at times which sees the cost passed onto you, the borrower.

Types of Interest Rates

Variable Rates: Fluctuate with the market, and will rise and fall during your loan term. Banks and lenders can also move rates outside of RBA if conditions determine so.
Fixed Rates: Stay the same for a set time, typically 1-5 years, offering predictable repayments.
Split Rates: A combination of variable and fixed rate portions within the same loan.
Introductory rates: Also called honeymoon rates are, as the name suggests, a cheaper starter rate that ramps up after a period of time usually six to twelve months. In the long run honeymoon rates are generally a more expensive product solution and are rarely recommended by us.

What’s the Outlook in 2024 for Interest Rates

Interest rates are constantly changing. The best way to get an accurate picture is by comparing lenders or appointing a broker who proactively does this for you during the life of your loan (like we do at AXTON Finance!). Look at their advertised rates primarily, but be cautious in relying just on the so-called comparison rate which is usually an inaccurate assessment for larger loan sizes of $750k. It’s worth considering that comparison rates only compare a standard $150,000 loan over a set 25-year term including all fees and charges. An experienced mortgage broker can help demonstrate the effects of what a new loan term may really cost you, especially when you factor into account the long-term effects of consolidating debts, like a car loan or credit card into your home loan. The costs can be nasty if you are blinded by the ‘lower’ monthly repayment on offer.

Tips to Save Interest on Your Home or Investment Loan

Larger Down Payment: Lowering your LVR means potentially lower interest rates.

Shorter Loan Term: Reduces the total interest paid, though repayments will be higher.

Consider an Offset Account: Offsets your savings balance against your loan balance, decreasing the amount you pay interest on each repayment cycle. When used right this structure combined with the above concepts can have an enormous compounding effect on the cost of your loan.

Refinance Regularly: Don’t stick with the same lender forever because ‘it’s OK’ or ‘you are too busy’. Shopping around and refinancing when better rates arise could save significant interest if you are comparing apples with apples and getting good advice from an experienced mortgage broker.

Fortnightly Payments: Paying fortnightly instead of monthly means you make an extra month’s worth of repayments over a year, reducing interest faster. This can easily cut five years off a normal 30-year loan term.

Harness Credit Card Power: If disciplined, put all your expenses on a card with a long interest-free period (say 55 days) and pay it off IN FULL each cycle. In the meantime, your salary in your offset account reduces the loan’s interest-accruing balance.

Negotiate: Don’t be afraid to ask your lender for a better rate, particularly if you’ve got a good repayment history. Better still your broker should be regularly doing this for you as part of their ongoing service – if they aren’t you better speak to us.

How Axton Finance Can Help?

Navigating interest rates and loans can be overwhelming especially when there seems to be near limitless choice. That’s where we step in! As experienced mortgage brokers, we’re here to guide busy professionals like you through the complexities. We’ll compare lenders, help you secure pre-approvals tailored to your circumstances, and ensure you find the most competitive rates for your home or investment loan.

Let us help you make informed financial decisions – get in touch today!

Should You Be Loyal To Your Bank?

Posted on 21/12/202321/12/2023 by Clinton Waters

When it comes to your money, especially a significant commitment like a mortgage, loyalty to your bank might seem like a good idea. Many homeowners tend to stick with their original lender out of familiarity, a sense of loyalty or sometimes because they think it’s too hard to change. However, the mortgage landscape is constantly evolving, regardless if interest rates are increasing, decreasing or going sideways and sticking with your bank probably isn’t always in your best interest – not that they will tell you this…

Is maintaining allegiance to your bank when you have a mortgage crucial? Or does prudently exploring better deals that align with your interests make more financial sense?

The myth of loyalty

The notion of loyalty to your bank is deeply ingrained in many individuals. Often, people associate familiarity and a long-standing relationship with their bank as a form of security. However, while loyalty may have its merits in certain aspects of life, it might not always pay dividends in the realm of your home loan and your hard-earned dollars.

New to bank = a better deal

You would think that being loyal means you should get a better rate or a discount like you do with your insurance company, but this is often not the case. While you might get a slight improvement by haggling with your old bank the overall system is hugely hungry for ‘book growth’, meaning banks and lenders will usually trip over themselves to get new customers in the door and rely on their ‘loyal’ customers to stay put at higher rates – it’s just the way the system often works. Even when you get your current bank to tweak your rate, there will come the point when the ‘computer says no’ because the return on their loan isn’t worth it anymore for a host of technical reasons – you might think you got a better deal, but did you?

You don’t know what you don’t know

Mortgage rates fluctuate regularly. What might have been a competitive rate when you initially secured your mortgage a few years back could now pale in comparison to newer, more favourable deals available in the market. By limiting yourself to one lender, you could potentially miss out on a better interest rate or more favourable terms offered by other banks and lenders.

Why reviewing your mortgage regularly is crucial

One of the keys to ensuring you’re not missing out on a better deal is to review your mortgage at least every one to two years. This proactive approach allows you to assess if your current loan still aligns with your financial goals and if there are better options available. You are probably unsurprised that banks don’t prioritise this process, and they are not obliged to always act in your best interest – licensed mortgage brokers are, however! This means you may be unaware of a better rate available from your current lender or someone else in the market.

This is where the expert mortgage brokers at AXTON Finance can help save you a lot of time and money. AXTON Finance is committed to empowering homeowners by regularly reviewing their loans with automated repricing tools that needle your bank or lender to ensure you get the best rate for your scenario. After all, if we are not doing this on your behalf, we are certain you will and that you may leave us! One of our primary goals is to create a long-term relationship with you as your trusted mortgage broker. We do not treat you as a once-off transaction!

Our efficient digital systems ensure that your mortgage is reviewed at least annually, ensuring that you are getting the best possible rate and terms that suit your needs.

Why AXTON Finance are Melbourne’s leading Mortgage Brokers

Unlike dealing directly with banks and online lenders, AXTON Finance is dedicated to working in your best interest. Our team of experienced mortgage brokers navigates the complex mortgage market on your behalf, identifying tailored structures and negotiating to secure lower interest rates and favourable terms.

We provide you with personalised attention, ensuring that your financial goals are understood and catered to effectively.

We build relationships – not transactions

While bank loyalty may have been a thing when 20th-century bank managers had authority, it’s now essential to recognise that in modern home and investment loans, blind loyalty to your bank might only sometimes serve your best interests. Regularly reviewing your mortgage and exploring better deals is indeed a smart financial move but getting experienced advice from the leading mortgage brokers at AXTON Finance will help ensure your best interests and not the banks are being served!

We know that your mortgage is not just a set-and-forget transaction but an evolving instrument that adapts to your changing financial needs. Don’t wait for your bank to offer you the best deal; take control of your financial future today. Contact AXTON Finance, Melbourne’s trusted mortgage brokers, and experience our personalised service, efficient systems, and dedicated team, who can help you secure a better mortgage approval.

Four Reasons Why You Need A Tailored Finance Pre-Approval

Posted on 12/12/202313/12/2023 by Clinton Waters

A critical key to unlocking your dream property often lies in securing a properly assessed pre-approval from a suitable bank or lender. With access to over 30 major banks and lenders, AXTON Finance understands the importance of this initial step, especially for busy time-poor professionals, probably just like you.

Here’s why getting your tailored mortgage pre-approval properly assessed is crucial before venturing into the market:

Confidence

Imagine this scenario – armed with a properly assessed pre-approval, vetted by experienced human professionals rather than relying on a flimsy computer-generated bank ‘pre-approval’ that comes with all sorts of conditional clauses. This assurance stems from a thorough assessment by the expert mortgage brokers at AXTON Finance, who have taken the time to understand and outline specific options available to you. It is worth highlighting that any offer made at an auction is unconditional, which means bidding without a proper pre-approval is risky and certainly not advisable.

With this in hand, you can confidently navigate the property market, knowing that your pre-approval isn’t just a computer-generated ‘yes’ loaded with escape clauses. This assurance lets you focus solely on properties within your approved budget range, minimising uncertainty and providing a strong foundation for your property search.

Strength

When it comes to making an offer, the terms you present matter significantly and its not just about price. Offers that are contingent on ‘subject to finance’, even in a weaker market or before an auction, will significantly weaken your position. However, a thoroughly assessed pre-approval equips you to negotiate from a position of strength. You can craft a compelling offer not only in terms of price but also with the consideration of settlement parameters, making you an attractive option compared to those relying on uncertain finance ‘what ifs’ and ‘maybes’.

Speed

Contrary to what you might think, obtaining a pre-approval isn’t a time-consuming process, especially with the advanced tech stack and human expertise at AXTON Finance. Having that dialled in pre-approval means you may be ahead of others who might not have their lending strategy sorted. This advantage empowers you to act swiftly, staying ahead of those who are dithering and unprepared to seize opportunities in the market.

Success

Of course you are probably reading this because you actually want to buy your next property. So above all, a properly assessed pre-approval sets the stage for success. Delaying or avoiding this crucial step might mean missed opportunities. Many individuals hesitate to seek pre-approvals due to uncertainty or lack of understanding about their options. But with professionals like AXTON Finance by your side, you are laid out with a clear pathway for your property aspirations. Avoid the disappointment of watching potential homes or investment opportunities slip away because you weren’t prepared – speak to one of the experienced brokers at AXTON Finance today.

A properly assessed pre-approval isn’t just a step; it’s your strategic advantage in the competitive real estate arena. At AXTON Finance, we know that securing your finance pre-approval is of immense value in guiding busy professionals like yourself by providing confidence, negotiation strength, speed, and a clear pathway to achieving your property goals.

Don’t let uncertainty hinder your progress; secure your tailored pre-approval with an experienced AXTON Finance mortgage broker and open the door to your desired property with confidence.

What Self Employed Borrowers Need To Know

Posted on 05/05/202313/12/2023 by Clinton Waters

When it comes to applying for a low or alt doc home loan in Australia, it’s important to understand what lenders are looking for. While these types of loans can be a great option for those who don’t have completed self-employed tax returns or traditional income, the application process can be more rigorous than for a standard home loan. However, with the right preparation and understanding of what lenders are looking for, you can increase your chances of being approved.

Firstly, it’s important to understand what a low or alt doc home loan is. These types of loans are designed for borrowers who may not have the traditional income documentation required for a standard home loan, such as payslips or tax returns. They may be self-employed, have irregular income streams, or have a poor credit history. As a result, low doc loans typically require less documentation and have more flexible lending criteria than standard loans.

However, this flexibility does come with some additional requirements from the lender. Here are some of the key factors that Australian banks and lenders will consider when assessing your low or alt doc home loan application:

1. Income and assets
  While low doc loans don’t require the same level of income documentation as standard loans, lenders will still want to see evidence of your income and assets. This can include bank statements, tax returns, profit and loss statements, and any other documentation that shows your financial situation. Lenders will also consider any assets you have, such as property, shares, or savings, as this can help demonstrate your ability to repay the loan.
2. Credit history
  Your credit history will also be taken into account when applying for a low doc loan. Lenders will look at your credit report to assess your creditworthiness, including any missed or late payments, defaults, or bankruptcies. While a poor credit history won’t necessarily rule you out of a low doc loan, it may affect the interest rate you’re offered.
3. Loan-to-value ratio (LVR)
  The loan-to-value ratio (LVR) is the amount you want to borrow compared to the value of the property you’re purchasing. For low doc loans, lenders will typically require a lower LVR than for standard loans, as this helps mitigate the risk of lending to borrowers with less traditional income documentation. Most lenders will require an LVR of no more than 80%, which means you’ll need a deposit of at least 20%.
4. Loan purpose
  Lenders will also consider the purpose of your loan when assessing your application. While low doc loans can be used for a range of purposes, such as purchasing a home, refinancing an existing loan, or investing in property, lenders may have different lending criteria depending on the purpose of the loan. For example, if you’re using the loan to purchase an investment property, you may need to provide evidence of rental income or projected rental income to show that the property is a viable investment.
5. Security
  Finally, lenders will consider the security you’re offering for the loan. For low doc loans, the property you’re purchasing or refinancing will typically be used as security for the loan. Lenders will assess the value of the property and consider the location, condition, and any other factors that may affect its value. This helps ensure that the property is sufficient security for the loan, and that the lender can recover their money if you default on the loan.

Overall, applying for a low or alt doc home loan in Australia can be a more complex process than for a standard payg employee. However, by understanding what lenders are looking for, and ensuring you have all the necessary documentation, have a quality submission prepared by your broker and have evidence to support your application, you can increase your chances of being approved.

Speak to us today about your scenario and we will gladly tailor a solution that meets your exact needs.

Is Your Cheap Fixed Rate Mortgage Expiring?

Posted on 23/03/202302/05/2023 by Clinton Waters

The pandemic saw a torrent of ultra-low fixed interest rates set up for Australian homeowners and investors alike. However, many of these fixed loans are set to expire, and borrowers will face a sharp increase in their interest rates, which has been dubbed somewhat ominously by the Australian media as the “mortgage cliff.”

The expiry of these fixed rates over the coming months and years could cause significant financial stress for borrowers who are unprepared for the sudden increase in their mortgage payments. In some cases, monthly mortgage payments could double, putting a significant strain on an already elevated household budget.

Thankfully, there are some sound options available for those with fixed rates to mitigate the impact of the so-called cliff!

One of the most effective solutions is to pick up the phone and call your current lender to needle them to improve your rate. It is a well-known fact in the banking industry that it is cheaper to keep a current borrower than to seek out a new one so you might be surprised by what they may be able to offer you. Once you have done this you can compare the market yourself or use the services of a mortgage broker to assist you in comparing like-for-like options.
Failing a decent response from your current bank or lender, you can seek to refinance your home loan. This is best done by a professional mortgage broker, who will be experienced in comparing like-for-like products, policies and structures. Since interest rates started to rise in 2022 lenders have slowly increased the assessment criteria that may result in you being unable to refinance your current loan based on the revised stress-tested rates even though you are making repayments at a higher rate today! Further compounding this complexity is the fact that borrowers with higher LVR’s (Loan to Valuation Ratios) may have experienced a reduction in the value of their property which can make refinancing uneconomical. An experienced broker will help you clearly navigate the benefits and costs early on before you commit to any decision.
Switch your loan to interest only and/or extend the term. This really should be a last resort option because while your monthly repayments may drop considerably, the true long-term cost can add tens of thousands of dollars to the total cost over the life of your mortgage. Extreme caution needs to be applied when looking at this option and getting a professional broker in your corner to model out the effects is highly advisable.

By working with an experienced mortgage broker, like the team at AXTON Finance, we can help you understand the terms of your current loan, including any hidden fees or penalties that could impact the refinancing process. Will will have a high degree of confidence that your decision will be an informed one that one helps you avoid any costly mistakes.

The mortgage cliff is a looming challenge for borrowers with expiring ultra-cheap fixed home and investment loans. However, there are some simple solutions available, such as refinancing, that can help mitigate the impact of rising interest rates.

How To Get Approved When Refinancing Your Home Loan

Posted on 06/03/202322/04/2024 by Clinton Waters

With the rapid increase in interest rates in Australia and many people coming off ultra low interest rates there has been a cause for concern for many people looking to refinance their mortgages. With the onset of higher interest rates, lenders are substantially more cautious and selective when it comes to approving mortgage applications. We are even seeing many examples where people cannot refinance to a better rate because various lenders are applying higher assessment hurdles to a loan they are already servicing which is locking people into their home loans. However this may not need to be the case, there are a few clever but very simple ways to increase your chances of getting your refinance mortgage application approved. Here are some tips to help you get started:

Review your credit score

A higher credit score can increase your chances of getting approved for a mortgage, even if interest rates have risen. Review your credit report and make sure there are no errors that could negatively impact your score. If you have a lower score, consider working to improve it before applying for a mortgage. Being late on loan repayments, making too many credit applications, moving address regularly or having numerous consumer debts can all negatively affect your credit score.
Demonstrate a stable income

Lenders want to see that you have a stable income that can support your mortgage payments. This is especially important if interest rates have risen since you first took out your mortgage. Provide documentation of your income, including pay stubs, tax returns, and bank statements. Bonus income can also be used in many circumstances but policies vary considerably from lender to lender – best to speak to us about your option first.
Reduce your debts

Lenders look at your debt-to-income ratio, which is the amount of debt you have compared to your income. If you have a high debt-to-income ratio, it could be a red flag to lenders. Consider reducing your credit card limits or paying off some debts before applying for a mortgage. Reducing your credit card limit by just a few thousand dollars can have a fairly substantial effect on your loan. As of the time of publishing, most lenders want to see your debt-to-income ratio less than six times.
Shop around for lenders

Different lenders have different requirements and criteria for mortgage approvals. Shop around and compare rates and terms from multiple lenders to find the best fit for your financial situation. Of course the best way to do this is through the professional services offered by the team of experienced mortgage brokers at AXTON Finance.
Be prepared to provide additional documentation

Currently, banks and lenders are requesting additional documentation or information during the application process. Be prepared to provide this information in a timely manner to keep the process moving forward which will reduce the time it takes to ‘yes’ and for you to enjoy your lower rate.
Extend your loan term

This one can make your borrowing capacity higher but can make your mortgage ultimately a lot more expensive. So while you may be able to get a loan term of 35 or 40 years this can be very costly if you are already 10 years into a 30 year mortgage – tread with caution on this one but an experienced mortgage broker will be able to model out the pros and cons for you.

In summary, getting your refinance mortgage application approved despite rising interest rates requires some simple planning and preparation. With these tips in mind, you can increase your chances of getting approved for the refinance of your home or investment loan and secure a better interest rate.

Get in touch with one of the experienced team at AXTON Finance today to refinance to a better rate.

Call us today on 1300 706 540 or book a quick obligation-free mortgage review online here.

What Are The Benefits Of Having Multiple Offset Accounts?

Posted on 16/02/202322/04/2024 by Clinton Waters

When it comes to managing your home loan, one strategy that has gained popularity in recent years is the use of multiple offset accounts. While this approach may not be suitable for everyone, and not every lender offers this feature, it offers some significant benefits to homeowners who are looking to gain better control of their finances, pay off their mortgage faster and save money in the long run. In this article, we will explore the advantages of using a multiple offset account structure against your home loan.

First, let’s define what an offset account is. An offset account is a transaction account that is linked to your home loan. The balance in the account is used to offset the balance of your mortgage, reducing the interest charged on your loan. By reducing the amount of interest paid on your loan, you can save money and pay off your mortgage faster.

Now, let’s look at the benefits of using a multiple offset account structure:

Increased flexibility and control

With a multiple offset account structure, you can divide your mortgage into different portions and use an offset account for each portion. This allows you to have greater control over your finances, as you can allocate your money as you see fit. For example, you may choose to have one offset account for your regular living expenses and another for large purchases or investments. By having multiple accounts, you can better manage your cash flow and track your spending.

Maximising your offset benefits

The more money you have in your offset account, the greater the benefit to you in terms of reducing the interest charged on your mortgage. With multiple offset accounts, you can maximise this benefit by distributing your funds across different accounts. For example, if you have a lump sum of cash that you don’t need to use immediately, you can deposit it into an offset account to reduce the interest charged on your loan. By having multiple offset accounts, you can maximise the amount of money you save on interest.

Reducing your interest payments

One of the primary benefits of using an offset account is that it can significantly reduce the interest charged on your home loan. By having multiple offset accounts, you can reduce your interest payments even further. For example, if you have a large lump sum of cash that you don’t need to use immediately, you can deposit it into an offset account to reduce the amount of interest charged on your loan. By having multiple offset accounts, you can reduce your interest payments and pay off your mortgage faster.

Improving your financial security

By using a multiple offset account structure, you can improve your financial security. If you have a sudden expense or a change in circumstances, you can use the funds in your offset accounts to cover the costs. This can help you avoid having to take out a loan or use high-interest credit cards to cover the expense, which can be expensive and increase your debt. By having multiple offset accounts, you can have greater financial security and peace of mind.

In conclusion, using a multiple offset account structure against your home loan can offer significant benefits. By increasing your flexibility and control, maximising your offset benefits, reducing your interest payments, and improving your financial security, you can save money, pay off your mortgage faster, and have greater peace of mind. While this strategy may not be suitable for everyone, it is worth considering if you are looking for ways to better manage your finances and pay off your mortgage faster.

Contact the team today to discuss a tailored mortgage solution for your home loan today on 1300 706 540 or book an obligation-free meeting online with one of our experienced Melbourne mortgage brokers.

Five Reasons To Refinance Your Home Loan

Posted on 08/02/202302/05/2023 by Clinton Waters

With interest rates set to continue to increase in early 2023 it has been in the news everywhere that you should be looking at ways to save money in your daily budget and one of the biggest savings that can often be had will be looking at your current mortgage rate. While you should always call and haggle with your current lender we often see customers paralyse themselves with choice and end up comparing apples with cantaloupes which can end up with a borrower making a poor decision.

Take a look at these five reasons to refinance your home loan and reach out to us to discuss your options or book a free mortgage review meeting with one of our professional team online here – most meetings usually takes only 15 minutes to provide you with some tailored advice.

Five reasons to consider refinancing your home loan;

Lower Interest Rates: Of course one of the main reasons to refinance your home loan is to take advantage of lower interest rates. If interest rates have dropped since you first obtained your mortgage, refinancing to a lower rate can result in significant savings on your monthly payments and overall interest paid on the loan.
Cash Back Offers: Many banks and lenders in Australia are currently offering cash-back incentives for refinancing your mortgage. These cash back offers can be significant up to $5,000 and can provide a welcome injection that can be used to pay off high-interest debt, make home improvements or even to go on a well-deserved holiday. It’s important to check with different lenders to compare the cash-back offers and weigh them against the potential savings of refinancing.
Consolidate Debt: Refinancing can also be used to consolidate high-interest debt such as credit card balances or personal loans. By rolling these debts into your mortgage, you can often lower your interest rate and simplify your monthly payments. There are some catches with doing this which can extend the total cost of your lending structure so it pays to get some professional advice before you do this.
Switching to a Different Type of Loan: There are many different types of home loans available in Australia, such as fixed-rate, variable-rate, and interest-only mortgages. Refinancing allows you to switch to a different type of loan that may better suit your current financial situation or goals.
Accessing Equity: Finally, refinancing can also be used to access the equity in your home. This can be done by either increasing the size of your mortgage or by taking out a separate home equity loan or line of credit. This can provide you with the funds you need for home renovations, investments, education fees, or other expenses.

It’s important to note that refinancing a home loan is a big decision and should not be taken lightly. It’s important to consider the costs associated with refinancing, such as application fees, legal fees, and lender’s mortgage insurance, and weigh them against the potential savings. It’s also important to shop around and compare rates, cash back offers and fees from different lenders before making a decision.

Why not book a time with one of the experienced team at AXTON Finance today – you have nothing to lose other than maybe years off your mortgage.

Book an online meeting here with one of our professional brokers.

How Does Bridging Finance Works?

Posted on 06/09/202222/04/2024 by Clinton Waters

Bridging finance is a term often thrown around in client meetings but not many people really understand how this policy works. So lets start at the top and work our way down.

Imagine that you have seen your dream home come up for sale and you haven’t sold your current property yet or even considered selling it yet – then you might need bridging finance.

In its simplest definition, bridging finance is a type of loan that enables you to buy a property and settle it before you sell your current one. So you can buy before you sell!

Bridging finance enables you to fund the purchase price of a ‘to be purchased’ property, usually in its full entirety plus closing costs (ie stamp duty and legal costs) and allows you to keep your current property and sell it within a reasonably short time frame (less than six months ideally). The lender charges you interest on the bridging loan and adds it to the balance each month until you pay it down with the sale proceeds of your existing property (less any existing debts/costs).

Let’s look at a simple example. Say you own your current home worth $1.0m and you owe $500k to the bank already (a 50% LVR / Loan to Valuation Ratio), you haven’t sold it and you might not even have it on the market yet, and you want to buy an amazing new home that you have seen for $1.5m – you might need bridging finance.

The purchase price can be funded with a new loan of say $1.6m to say cover stamp duty. At peak, you will owe $500k (existing) plus the $1.6m so call it $2.1m owing. If you have any cash deposit you could use it to reduce the total loan size required.

This $2.1m loan does not usually need you to make monthly repayments on the bridging component (ie the $1.6m loan) but you do need to keep repayments up to date on your current home loan. Interest however does accrue daily on the bridging loan component and is added monthly to the balance. This can get pretty expensive if you are in a bridging position for too long.

Of course, the main pro of this structure is you might be able to buy a property before you sell and minimise the risk of having to move twice if you sell first and can’t find your next home before the settlement of your current home. Furthermore, lenders will give you a loan size (in the short term) much larger than what your income might otherwise support to hold both properties for a period of time.

So what are the cons – well to be honest there can be a few and this list is by no means totally exhaustive so lets go through them;

Market Risks

Without doubt, the biggest risk of using bridging finance is mainly around factoring in that you may not sell your current property in time or be forced into a situation that makes you accept a lower price than you might have otherwise been happy to accept. A falling market can be a risky place to be in a bridging finance position so being realistic in what you would sell for is an absolute must.

Costs

Like any mortgage interest is calculated daily and charged monthly. With a bridging loan is the same but a little different. You must keep repayments up to your existing loan balance (or a calculator whereby the lender works out what the approximate loan balance will be at the end of the bridging period). The bridging loan interest is still calculated daily (usually at a higher rate) and the interest is added to the loan balance each month and paid out with the sale proceeds at the end of the transaction.

Timing

Most lenders will want you to be in a bridging finance position for not more than six months and in some limited cases up to 12 months. But remember a bridging loan is usually a very large sum of money that you have borrowed and while you may not need to make monthly repayments the interest accruing could be adding up quite quickly.

The good news is that if you can negotiate a longer settlement on the property you have just purchased you might not need bridging finance for a very long time frame or at all. This is because bridging finance only kicks in from the settlement date of the purchase property. We can help inform you of what sort of solutions and purchase negotiations might work as an alternative to bridging finance that could help save you a lot of money and stress.

Market conditions

Bridging finance favour certain market conditions better than others. As a general rule, a declining property market could be risky if you are using bridging finance and you have purchased before you sell. If the sale of your property takes longer than you anticipated and you are unable to meet market conditions the sale price you might be able to secure as the weeks and months roll on could be accelerating down to your detriment. Conversely, in a rising market, the opposite can be true – you bought a nice new expensive home before prices take off and you are selling your old home in an environment that favours you as a vendor. There is a degree of luck to this so it might not be for the faint-hearted unless you go into a structure with your eyes completely open.

Deposit

So we have identified that bridging finance might be an option but you need a cash deposit to secure your new home on the auction day! This is often an overlooked consideration by many buyers – but doesn’t the bank just give it to you I hear you ask? Not quite – you need to have finance approved to release equity against your current property first to release the deposit required (if you don’t have sufficient cash) or utilise redraw or offset funds to pay the required deposit. Increasingly we are seeing vendors accepting deposits less than the standard ten per cent deposit with five per cent becoming more common especially to bring more bidders to an auction or to accommodate a buyer like yourself who may be interested in trading up to a new property using bridging finance.

There are also options outside of using a cash deposit that we can discuss with you like using a deposit bond (basically an insurance bond issued by a reputable insurance company), a bank guarantee (increasingly rare these days), as well as a few other options that we can discuss with you.

Servicing requirements

This is just mortgage jargon for ‘can you afford the loan’. Lenders have a myriad of metrics that they assess your capacity to meet repayments when interest rates rise. With bridging finance there are a few extra variables to consider which can stress your ability to ‘afford’ the end debt loan amount once you have sold your current property. These variables relate to lenders applying a discount of usually about 15% of the current valuation of your home to ensure that in a forced event you could actually sell and settle your property which would in this worst case result in a sale proceed being reduced and thus the ultimate loan you require increasing. Furthermore, the lender will add up to twelve months of interest on the bridging loan amount (in addition to the sale price discount) to ensure that the larger loan at the end of an extended period could be closed out and still be affordable. The lender of course will only charge you for interest that you used which is why it pays to minimise a bridging loan time frame. We can help you navigate the ins and outs of how lenders assess this risk and apply it to your personal scenario.

Complexity

Not all lenders in the Australian mortgage market are prepared to offer bridging finance and pretty much each lender who does has a different process and assessment policy on how they interpret your structure before they will approve you – lucky for you we are experts at navigating this on your behalf. Many lenders make it a requirement that you are an existing borrower of their institution before they are happy to extend a bridging finance product to you. Because the funding and legal documentation required to be in place for bridging finance is only usually for a short period of time (under six months usually and often just a few weeks) the interest rate charged on the bridging loan component is often not discounted and will likely be at a much higher amount than what your ‘end debt’ loan will be one you have sold your current home. While this might be fine to achieve the property purchase you want, the cost and stress of bridging finance could add up to be a very expensive solution without the right advice.

Please feel free to contact us on 1300 706 540 and ask for Clint or one of the team to help you out. We a sure you will love speaking to an experienced person and not a call centre!