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Haven Newsletter August 2013
hello adamWelcome to the spring edition of Haven.

Spring is in the air and we hope you can relax a moment in a spot of sunshine to read our latest edition of Haven

Are you still waiting for the opportunity to buy your first home? Our lead article considers the planning and preparation involved in what will likely be your biggest investment. If you are thinking about jumping from the rental roundabout into first home ownership, be sure to have a read.

You might recall our Loan Lingo article in an edition of Haven earlier this year. This time we look more closely at one of the loan types mentioned – offset accounts. For savvy borrowers an offset account can reduce the life of the loan and help slash interest paid. Offsets aren’t for everyone, but take a look to see if it could be the right fit for you.

We live in a food and fat obsessed culture, with new diet fads popping up daily. Our book review and recipe is from an Australian author and cook who believes that we have the wrong idea about what is bad for us. Wholefood advocate Jude Blereau celebrates both sweetness and nutrient rich ingredients in her new baking book and shares with us her recipe for a delicious sweet and sour dark chocolate buttermilk cake. Yum!

I hope you enjoy reading this edition of Haven and if you have any questions about your home loan situation please pick up the phone and give me a call.

Kind regards, Ross Deans Elite Loans

59 Lehunte St Wayville SA 5034 Mob: 0414 685 996 | Fax: 08 8373 0584 Email: rossdeans@eliteloans.com.au Australian Credit License: 384671

In this edition
•  Haven Money The key to your first home
•  Haven Money Mortgage Freedom
•  Haven Likes
•  Haven Review
•  Haven Win $1000 up for grabs
•  Haven Apps Apps we like
•  Haven Money Are you financially fit?
•  Haven Answers Granny’s household hints and tricks
•  Haven Food

A wise person once said: failing to plan is a plan to fail. As probably the most significant purchase of your life, saving for a home definitely takes prior preparation and planning! We’re part of a group that has teamed up with the Federal Government’s MoneySmart program to help you plan for success and save for your home.

How much can I afford?You may have a dream home in mind but you first need to work out if you can afford it. There are many factors that feed into our decision around what to buy and where – proximity to work and family and our stage of life are just a few – but the single biggest decider is nearly always what we can afford.

It’s really a case of looking at the big picture and working your way back from there. Consider your household income and what you realistically can afford in loan repayments, taking into account all of your expenses.

As a guide a mortgage calculator can be a great place to start, but it won’t take into account all of your personal circumstances or eligibility for a loan so talk to your broker to get your plan underway.

https://www.moneysmart.gov.au/tools-and-resources/calculators-and-tools/mortgage-calculator

How much do I need for a deposit?

Ideally, you should start with a 20% deposit to avoid paying lenders mortgage insurance (LMI). This is a one-off insurance payment charged by lenders to those borrowers who are considered a higher financial risk. Your risk is determined by your loan to value ratio (LVR), which is the amount you wish to borrow divided by the lender’s valuation of the property you wish to buy. Lenders generally like to have at least a 20% buffer so if you have to default on the loan, they stand a good chance of recouping the loan amount through the sale of your property.

Although LMI can add several thousand dollars to property purchase costs, many borrowers consider it a worthy investment to help secure a loan with a lower deposit. The critical factor is whether your income can support the higher loan repayments. Ask your broker for an LMI estimate based on your financial situation before deciding how much you need for your deposit.

 

Saving for a depositWorking out how much you need for a deposit can be fairly easy compared to actually saving for it. Sacrifices are generally in order!

Budget cuts

The best place to start is a budget. Review all of your expenses, including day-to-day costs like lunches, coffees and transport, and your bigger bills, such as rent and electricity. Don’t forget to also include any annual bills such as car insurance and registration, which can sabotage your savings. Then it’s times to get a little ruthless and look for ways to cut back on costs.

Here are just a few ideas:

  • Make your lunches.
  • Dine in, not out, with friends.
  • Ditch the gym membership and start exercising outdoors.
  • Make a list for your groceries and stick to it.
  • Save, don’t spend, your tax return and/or salary bonus.

The SmartMoney program has set up a First Home Saver Calculator to help you get started.

https://www.moneysmart.gov.au/tools-and-resources/calculators-and-tools/first-home-saver-calculator

 

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Australia has once again become a nation of savers. No longer is debt de rigeur. In this post-GFC era we prefer to play it safe with lower levels of debt and are looking for ways to be debt-free faster.Savvy savers are making the most of low interest rates and their savings by maximising offset accounts. An offset account is essentially a savings account that is linked to a loan account. Instead of earning interest on your savings deposit, the funds are used to offset the loan account.

Your loan repayment remains the same, but more of it is used to pay off the principal, reducing the life of your loan and slashing the amount of interest paid.

How offset accounts work

Lenders generally offer two types of offset accounts: full offset or partial offset.

A full offset account offers you the same interest rate on your savings as what is charged on your home loan. For example, if you have a $100,000 home loan with interest charged at 6%, plus $10,000 in an offset account earning 6%, the lender will offset your loan balance with your offset account balance and only calculate interest on $90,000.

 

 

A partial offset account only offers you a standard savings rate, which is lower than the interest charged on your home loan, so one does not completely offset the other. Using the same example as above, a partial offset account might charge the same 6% on the loan but only offer 4% on the savings. Instead of one lot of interest completely offsetting the other, you would pay a reduced interest rate of 2% (the difference between 6% and 4%) on $10,000 of your loan.Many borrowers opt for a 100% offset account to take full advantage of this feature, but speak to your broker for more information about this type of account.

Benefits

An offset account still allows you to make extra payments on the loan. However, instead of paying more into your actual mortgage, you maintain as high a balance as possible in your savings. This reduces the interest and life span on your loan but gives you all the access and flexibility of a regular savings account, should you need it.

Some lenders even allow you to set up an offset account with a fixed rate loan, giving you certainty around your payments plus the opportunity to get ahead of the debt.

There is also the added benefit of a tax incentive. Because the interest is essentially not earned, you don’t have to include it in your taxable income.

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Haven August 2013 - LikesCircular saw your pepperoni pizza with precision. Built from engineering-grade plastic and a stainless steel blade, you won’t find a more blokey pizza cutter! Haven August 2013 - FoodAustralian wholefood cooking doyenne Jude Blereau brings us her fourth cookbook, a collection of wholesome, nourishing and delicious sweet recipes. Haven August 2013 - AnswersWith spring in the air and summer just around the corner, here at Haven we’re daydreaming of summer holidays. Haven August 2013 - WinFrom racy to rude to the light hearted and charming, from the hip and happening language of city-slickers to the dry wit of the true laconic bushy, this app has it all.
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Just like our health, our finances can do with a little check-up from time to time. Circumstances change – new job, new home, a partner or children – or we get caught up in the hurly-burly of life and lose touch with our finances.Thankfully, the Federal Government’s MoneySmart program has created a handy online tool for all of us in need of a fiscal pulse check.

The Money Health Check helps you get back to basics by looking at your circumstances and financial goals and helping you with strategies to reach them. The questions are straight forward and will prompt you to consider some of the financial red flags you may not be aware of, or perhaps prefer to ignore!

The Money Health Check will help you take a global view of your finances – from regular budgeting to debt reduction, retirement and estate planning. It also highlights the value of protecting your assets once you have them.

Consider this your money GP, where you can get an overall check-up, identify any issues and get the information you need for further action, if required. The aim is to help Australians be more financially resilient for the long haul.

Don’t put it off – get your Money Health Check today at https://www.moneysmart.gov.au/tools-and-resources/calculators-and-tools/money-health-check

 

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Haven August 2013 - Review Haven answers
Thank you to everyone who entered our competition about the best household hint handed down through the generations. The influx of ideas was marvellous and as always, it was difficult to narrow the field.read more
Haven August 2013 - Review Sweet and sour dark chocolate buttermilk cake
Thanks to the buttermilk, this is a lovely light cake – but it’s the icing that really seals the deal. Dark, sweet and sour, with a very definite edge, it’s an irresistible combination.read more

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