Beneftis Of An Offset Account To Save You Money On Your Mortgage

I was speaking with a Doctor the other day that was struggling to make the decision on how to prioritise their finances. On one hand, they want to pay off their mortgage quicker, and on the other, they want to save money for holidays and retirement.

When you have a large loan like a mortgage, the main thing that people usually think about is how fast can it be paid off. Most of them go about speeding up their repayments, paying more than the minimum requirement, but there is another option. Using an offset account to reduce the time and money spent paying off the loan.

An offset account is a savings or transaction account that is linked to your home loan with the goal of saving you money on interest.

It works by reducing your mortgage’s interest by the same amount of money that is saved in the account. For example, if you have a $350,000 home loan balance and you have $25,000 saved in your offset account, you only have to pay interest on $325,000 of that balance.

There are two types of accounts that are commonly used for mortgages, partial and 100%.

A 100% account is considered the most effective type as 100% of the balance in the account is applied to the loan, reducing the amount of interest you have to pay. Partial accounts are still useful but are less beneficial when paying off loans quickly, as only the interest earnt from the account goes towards reducing the amount of payable interest on the loan.

Using an offset account can help you save thousands of dollars over the life of your loan, but there are a few things that you can do to help you save more. Here are our top 4 ways to use your offset account to save money on your mortgage.

Directly depositing into your offset account to build interest.

Your offset account has a higher interest rate than your regular savings account, this interest is usually compounded on a more regular basis than a normal savings account, and that interest is compounded daily, you can earn more.

Connecting your debit account to your offset account, effectively turning it into your daily transactional account, then having your salary deposited directly into it can help you earn more even if the balance fluctuates.

Using your offset account to pay off credit cards

If you are dedicated to saving money and are focused on building the amount of money in your account, the less likely you are to spend that money. To help build your savings, you can strategically defer expenses daily expenses to a credit card which has a decent interest free repayment period on purchases. When you make your monthly mortgage, repayment, you fully pay off your credit debt at the same time. This gives you more time to build interest and clears your credit debt for the month.

Make your savings work harder by putting them directly into your offset account

Most people have a separate savings account that they use to put money away for holidays, emergencies, etc., however, if you were using a high-interest savings account, the interest earned from that account would be automatically be classed as an earning and taxed. Offset accounts, however, aren’t subject to tax meaning that you could save more and pay less on your loan.

As a safety buffer

If something bad happens that changes your income drastically such as sickness, injury, unemployment, etc., or you need to make a large one-off payment to cover an emergency, the money you have saved in your offset account can be used to cover it.  Using your account like a safety net is a good way to ensure that you are covered if something goes wrong and your situation changes, while still paying off your mortgage at the same time.

In March of 2017, Australian Prudential Regulation Authority (APRA), the governing body responsible for overseeing the finance industry, found that 37% of all loans had some form of offset account attached to them, a 2% rise from the year before.

The use of offset accounts is on the rise in Australia, if you would like to know more about them and how having one could help you pay off your mortgage, contact your local mortgage broker.

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What Options Do Physiotherapists Have For Loans?

I was speaking with a Physiotherapist recently who was confused about his options for gaining finance. What he didn’t know is that as a Physiotherapist, he had additional options available to him.

Physiotherapists and medical professionals are seen as a safe investment for banks, so banks offer a range of special discounts, packages and offers on their loans.  There are multiple types of loans available in these offers, but here are the 5 most common types.

 

Home Loans 

Taking out a home loan as a Physiotherapist has 2 main advantages. One is being able to borrow more, as the maximum amount you can borrow will be higher than the amount that is offered to those in a different field. They offer a variety of discounts including an interest rate reduction, lenders mortgage insurance waiver, or others may be available, which can end up saving you thousands of dollars.

Investment Loans 

Investment loans can be taken out on a variety of different products and needs including construction of both private and office spaces. They also come with a number of advantages for allied health professionals including low rates and flexible terms.

Residential property investment loans also offer the benefits of a faster application and approval process for both building and buying property, a higher borrowing rate, and constructions loans, which are typically difficult for average buyers to obtain, are more easily available to allied health professionals.

Car Loans 

Cars are essential for both business and private usage in the allied health industry. Utilising a broker to choose your loan may allow access to the  discounts such as low car loans for those that operate their own practice, lease agreements, lower interest rates and easy qualification terms.

Other Asset Loans 

Other Asset loans include luxury items such as boats and bikes. In nearly all cases, physiotherapists can qualify for these types of investment purchases without complex paperwork or a long process. Allied health professionals can expect these loans to offer easier income qualification requirements (there’s less work to prove your income), higher borrowing limits, low-interest rates and easy repayment terms.

Refinancing 

Like the general public, Physiotherapists are likely to have other loans in various places. Refinancing through a broker means that it is possible to secure a new loan to replace nearly any type of existing loan with relative ease, providing the opportunity choose between better/ discounted interest rates and waived lenders mortgage insurance.

These refinanced loans are less expensive than what may have been paid previously and have the potential to save thousands of dollars over the lifetime of the loan.

There are many more different loan types available for those in the allied health professional to choose from and many possible savings to be made if you decide to get your new loan via a broker.

Some options are only available through brokers, so to get the best deal, speak to your local broker as they are also able to find a loan that is tailored to fit you and your business’s needs at the best possible price.

Sarcia is a Medical Lending Specialist at MediPro Capital. She provides lending solutions tailored to medical professionals.

To see if and how Sarcia can help call 0432 344 311 or email her at sarcia@mediprocapital.com.au.

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Are Interest Only Loans Right For Doctors?

I was speaking with a doctor the other day. This particular doctor was telling me he wanted to pay less in terms of repayments on his loan. He wanted to use the extra money to pay off other business loan.

I suggested an interest only loan. This type of loan is becoming increasingly popular in the Australian market.

An interest only loan is different from a regular loan because as the name suggests, the repayments you make only cover the interest on the loan you take out. It’s a unique type of loan because for the agreed upon period (usually up to 5 years) the borrower only has to pay the interest on the loan they took out. At the end of the period, it falls back to the traditional repayments of both the principal amount and the interest together.

In 2015 $153.8 billion dollars’ worth of interest only loans were taken out, making it one of Australian’s fastest growing loan types. However, like its traditional counterpart, it has both advantages and disadvantages to it.

In terms of advantages there are three major ones:

1. Smaller Repayments: Your repayments are smaller at first, which is a plus for those with other high-interest loans to pay off, or those who are looking to buy an investment property or business space.
2. Maximised Tax Deductions: It can help maximise tax deductions on investment properties. Interest paid on home loans can be tax deductible, by paying interest only on the property it maximises the deduction for the investor.
3. More cash for other things: It can free up cash to put towards other expenses. For businesses, this means that the money that would be spent on paying back the principal amount could be funnelled into operating costs for the business or upgrades on equipment or facilities.

There are also 3 main disadvantages to interest only loans. These are:

1. The principal amount doesn’t decrease: So, while you are still making repayments on the property, your debt doesn’t reduce. Many investors who take out interest only loans rely on the value of the property increasing during the loan period and then selling the property off at the end of it to repay the principal amount borrowed. The risk in this strategy is that if the property value doesn’t increase or decreases the mortgage you could be left paying would be worth more than the property itself.
2. Overspending: While only paying, interest frees up cash flow it could end up tempting you to spend more than you can afford at the time. Using the extra cash to cover day to day and run of the mill costs instead of paying down other debt could be wasting money and spending more than you can afford.
3. More expensive in the long run: Interest only loans can end up more expensive in the long run as you end up making more payments on the loan as a result of the 5-year buffer. This extends the life of the loan taking more time and payments to pay it off.

Interest only loans are an invaluable resource for certain people like investors, but they are also considered one of the riskier type of loans. If you are considering one, ask yourself if the short-term benefits outweigh the long-term ones, and if you will be able to afford the larger payments once the interest-only period ends. If you are unsure, ask your broker for advice and see what they can do for you.

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How To Effectively Utilise An Offset Account With Your Mortagage To Attract Greater Savings

A mortgage offset account is a combination of a transaction account or a savings account used in conjunction with your home loan. The balance in the account is offset on a daily basis against the loan balance. The lender acknowledges that you have paid extra savings to your loan, with the lender charging you less in interests because they are not charging you interest on the full remaining balance. The actual offset account can be associated with your variable rate loan or a fixed rate loan.

Typically, the home owner will not earn any interest in their offset account. The balance in this account is to displace the interest charges to your linked home loan. In these scenarios, it is best to be illustrative to showcase how offset accounts can be connected with your home loan and how they can help offset interest rates.

For example, if you had a loan for $450,000 and you have already repaid $100,000 of that balance, you would be paying interest on the remaining $350,000. However, if you have an offset account to pay that $100,000, you will only be paying the interest on $250,000 of the remaining balance. The more money that you have in your mortgage offset accounts, the less interest you will pay during the life of your home loan. Many homeowners may prefer earning interest from a savings account over saving interest on the mortgage. However, saving interest on your mortgage is better for these reasons:

The interest rate is actually higher. The interest rate charged on the loan is going to be greater than the rate the bank pays out on a savings account. Simply put, a mortgage offset account will save you more money than a savings account will ever earn you.

Offset mortgages mitigate risk. Mortgage offset accounts and a savings account are categorised as cash accounts. Utilising an offset account will provide room for you to increase returns without increasing your risks.

You will save on taxes. Interest earned on a savings account will be taxed. There is no tax on the interest you will save on your mortgage offset account.

Using an Offset Account With Your Mortgage Effectively

Direct deposit into your offset account. You can connect your debit card to your offset account and use it as your transaction account, then tell your employer to make direct deposits into your offset account. Interest is accumulated on a daily basis on the offset account, so even if the balance changes on a regular basis, you’ll still be able to save on interest.

Offset account and credit card payments. The more money that is in your offset account, the more you will save in the long run as long as it is relatively untouched. If you are disciplined, you can use a credit card to defer expenses by strategically using their interest-free payment period. It is important that the balance is paid in full when due since you do not want to incur interest charges on the credit card.

Savings go directly into your offset account. Extra savings will work harder for you in a offset account. The interest rate on your home loan will most likely be higher than the rate on your savings account, allowing you to pay income tax on the interest earned and allocating additional funds into the offset account.

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3 Reasons Why Banks Want To Loan To Doctors

I was speaking with a client the other day who was looking to take out a new loan for her home. She was looking at full price loans with a high-interest rate before she mentioned she was a doctor at a local GP clinic. What she didn’t know is that brokers can offer what has been dubbed a Medico pack that offers special deals and discounts to those in the medical profession as long as they meet certain criteria including their annual salary and their membership status of professional organisations. In many cases no minimum salary required for to receive these added benefits.

Medico packages are available through brokers and can be applied to multiple different types of loans including capital equipment loans, home loans, investment loans, car loans, and various other asset loans for both personal and professional purchases. But why does your profession affect your finance options? For those in the medical field, there are three key things that contribute to the bank’s decision to offer discounts to medical practitioners.

1. The fact that medical careers are in demand – In the past few years, deals have been offered to lawyers and accountants, but due to their demand in the number of positions needed going down these deals were scrapped. However, there is always going to be a demand for medical professionals. Currently, Australia is in the middle of a medical professional shortage. There simply aren’t enough doctors and nurses to meet the demands of the ageing population. By providing discounted rates to medical professionals, lenders are trying to raise competition for loans in one of the most stable professional groups.

2. Medical Professionals earn more than the average borrower – One of the conditions that lenders have put on these discounts is that the recipient needs to be earning over earning over $150,000 annually. With an average salary of between $150,000 and $350,000 a year the average GP easily reaches this condition. Medical professionals are also seen as a safe loan as while a doctor’s career progresses, their salary will rise to match their level of experience meaning that they are able to both borrow and pay back more with certainty.

3. They tend to be responsible and pay back their debts on time – As a professional, doctors are expected to be responsible and level-headed people, this includes when it comes to matters of finance. As a group doctors are less likely to default on loans or make payments late making them the perfect customer for banks.

These three factors contribute to how the banks see their borrowers. They want to loan to people who have a high income but are at a low risk of failing to repay their debts on time. Because those in the medical industry fit the description lenders are more willing to offer low-interest rates and easier terms to help them secure loans.

If you are in the medical profession in Australia, options exist that could help you secure the loan you want for significantly less than you would pay otherwise. Whether you hope to buy your first home or refinance your existing home, it’s essential to know each one of your options.

John Paynter is a medical lending specialist and the founder of Medipro capital finance. He partners with medical professionals to maximise their opportunities. To find out more email him at john@mediprocapital.com.au or telephone 0400 915 522.

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3 Reasons Why Medical Professionals Benefit From Using A Financial Broker

I was recently at a networking event in Brisbane where I was speaking to a medical professional. He was not happy with his bank. He felt they just treated him like a number and didn’t listen to him. I asked him if he had considered a broker to which he replied, “Aren’t you finance people all the same?”

Like businesses finance brokers come in many different shapes and sizes, there is no one size fits all in business so why would you use someone who doesn’t know your industry for finance. For the medical field, banks feel that there is a lower rate of defaulting on loans which can gain them exclusive deals and savings. Some lenders are also open to loaning out up to 90% of the purchase price as a loan, without paying thousands for Lenders Mortgage Insurance.

However, most medical professionals don’t know that they can get these deals because it’s too tricky to find them hidden amongst the bank’s paperwork. By introducing a third party speciality finance broker into the mix, the mess becomes clearer as they help cut through the red tape. Not can brokers help clarify the mess, but they offer a variety of other services to help your business get the best loan possible, like:

1. Offering a range of products and services. Unlike a bank, a broker can offer products and services from a variety of different locations and assist you in finding the best one for you. As a bonus, by choosing a broker, you have a single person that specialises in your industry, to speak to; so no getting shuffled from person to person like dealing with banks.

2. Settling sooner and saving more. If you’re seeking finance on your own, getting lost in trying to find the right loan, negotiate with the banks, paperwork, and various other tricky hurdles are all par for the course, and in the end; you may end up with a plan that is an ill fit for you. When going through a broker, they will do this for you, saving you the hassle. They can also explain the different scenarios and better ways to set up your loan for to maximise your benefits and savings.

3. More convenience without cost. Working full time and trying to balance comparing loans and times to meet with banks is a nightmare. A quality broker can meet where ever and whenever it suits you, relieving some of the stress. An added bonus is that you don’t have to pay a cent for using brokerage services as all their fees are covered by the lender you choose, who pays them a commission once the loans settled.

In 2016 brokers originated $188.5 billion worth of new home loans, which is 50% of all loans in Australia. By utilising this rapidly growing industry when searching for your next professional loan, you could end up saving thousands of dollars, as well as gaining access to a multitude of exclusive deals and rates that are only available to medical practitioners.

Find out more about Medipro Capital can help you by contacting us today.

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Top 3 Thing To Ask When Choosing A Mortgage Broker

We recently worked with a doctor who had been looking to take out a loan for her medical practice but had no idea what to look for in a broker. She had looked at dozens of brokers, but she just wasn’t sure what she needed. Eventually, it had gotten so confusing for them that they had just given up and gone through a bank instead.

Choosing the right broker for you when you are just starting out can be tricky. With thousands of different brokers to choose from, it’s hard to figure out what is reputable in a broker and what to look for. Here are 3 things to ask when choosing a mortgage broker.

• What experience do you have and are you licensed? It’s important to check a broker’s credentials and qualifications before using them. How long a broker has been in the industry is a good indication of their skill level and reliability but always ask for testimonials from past clients. The majority of Australia’s major lenders require brokers to hold at least a Certificate IV in Financial services, or an Australian credit license, or be authorised under a licensed loans lender. Look for lenders that are members of either the Finance Brokers of Australia (FBAA) or the Mortgage and Finance Association of Australia (MFAA).
• What range of lenders do you have access to? To get you the best loan, your broker should be able to offer you products from a wide variety of different lenders. Remember to ask how many lenders they have access to as well as a full list.
• How do you determine the best loan and lender for me? A broker’s primary job is to source the best loans for your needs as well as what loan structure makes the most sense for A good broker will assess your requirement and then present you with a variety of different options that suit your needs, all with the research and ratings to back up their selections. Some of the factors they should consider include where the lowest interest rates are, whether you would better suit a fixed or variable interest rate, or whether splitting the interest rate between the two is a better fit.

Choosing a mortgage broker for your company can be a daunting task, remember to ask questions and check the credentials of any perspective brokers.

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