Is your interest-only loan about to end?

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It’s the end of the road for 900,000 borrowers on interest-only loans, as they’ll be automatically switched to principal and interest loans this year. Now’s the time to check whether or not you should start considering other options.

Back in 2014-15 – at the height of the property boom – some 900,000 interest-only loans were taken out, according to reports quoting an analysis by Finder.

Once the five year period on these loans is up (which is imminent for some borrowers) these loans will automatically jump to principal and interest loans.

The analysis finds that this will add an extra $400 a month to a borrower’s repayments if they have a loan of $316,000 – that’s almost $5000 a year.

Additionally, while many economists now predict the RBA will keep rates on hold throughout 2019 – just like they did last year – that doesn’t mean the banks will follow suit.

In fact, every single one of the Big 4 Banks increased interest rates in 2018 and could do so again this year, which could hit mortgage holders even harder.

The smaller players are also moving on rates. Bank of Queensland announced an increase of rates by up to 18 basis points on more than 20 home loan products, while HomeState Finance – a South Australian government-backed statutory authority – is also raising rates on their new seniors equity loan rate by 15 basis points to 6.09%.

So what are my options?

Ok, so if you took out an interest-only loan during this period, first and foremost you should check when it’s due to end.

Now if it is, the obvious option you have at your disposal is to cut back on some other expenses in your life to make ends meet.

However, that’s not necessarily your best option.

Here are three other options available to you that won’t result in you having to make so many compromises elsewhere in life (HINT: we can help you with all three!):

Extend it: Sure, the 5 year period might be ending, but we can always speak to your lender about extending the interest-only period for you.

Negotiate it: If the lender insists on you moving over to principal and interest, it never hurts to ask for their lowest rate possible (which they don’t always advertise).

Switch it: If your lender won’t budge, or you simply want to change things up, we can help you find a principal and interest rate with a lender that’s offering a more competitive deal. You may still have to pay more each month, but your repayments should be lower than those you face when your current loan switches over to principle and interest.

Final word

As they say, forewarned is forearmed.

So if your interest-only loan is rolling over to principal and interest soon, don’t just accept it. Act now.

Get in touch with us and we’ll be more than happy to run through your options with you and help you switch to a more competitive alternative.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

7 school holiday ideas that won’t break the bank

We’re midway through January and you’ve managed to stay sane. Well, we hope so anyway! Here are seven budget-friendly ideas that’ll help keep the kids off their screens throughout the last two weeks of school holidays.

If you’re increasingly tempted to preserve your sanity by caving in and allowing your kids more screen time, then fret not!

Here are seven outdoor and indoor activities the whole family can enjoy together – and save you a pretty penny in the process!

1. Build a herb garden

This is quicker, easier and cheaper than you’d ever think! The best bit is it can actually save you money over the long run.

You can buy dirt cheap (excuse the pun!) seeds online here, or ready-to-plant herbs down at Bunnings for a few bucks each. Or you could do both if you want to mix a little instant gratification with showing your kids how plants grow.

While you’re down at Bunnings, buy a few bags of $5 potting mix – depending on how big you want your garden.

The garden bed itself doesn’t have to be fancy. You can use large rocks, old planks of wood, spare bricks or besser blocks – whatever you or your neighbours have lying around that will keep the soil in place.

2. Make a home movie

Instead of fighting over how much screen time the kids are getting, try and put their bad habits to good use.

You’ve already most likely got everything you need – a camera phone to record, and a computer to edit (some phones even have video editing software on them).

The best bit is you can stretch this activity over three days. One day to write the script, one day to act out the movie, and one day for editing!

3. Create a family book club

Before the end of the holidays pencil into the calendar an event where you all sit down as a family and hold your own book club.

You don’t all have to read the same book, or feature article, either.

The youngest can read a picture or kids book, the teenager can read a young adult novel, and you can read a full length novel or feature article.

Not only will you get everyone’s eyes away from the screen, but you’ll get to share with each other what lessons you took away from it all. If you all enjoy the concept, there’s no reason why you can’t hold one each month throughout the year.

4. Visit the beach or local swimming spot

There’s nothing quite like cooling off at your local swimming spot over summer. However, if you don’t show up prepared with ideas, the kids can get bored or restless quite quickly.

Tried and tested activities that will tire them out include a sand castle making competition, an old school ironman beach flag race, and learning to surf (which can give them a fun, healthy and low cost activity for life!).

While you’re down by the water, consider catching the night’s dinner by going fishing.

5. Go fish! (aka card games)

Dust off the old deck of cards for hours of entertainment.

Games that can last for over an hour include Rummy games such as Canasta, Conquian and Gin Rummy.

Once your kids are getting tired of that, have them build a card tower to see who can go the highest!

6. Camp somewhere nearby

Camping doesn’t need to be a tedious and rough affair. You can do it in a nearby designated camping area for a night or two, or even in the backyard.

Teaching your children basic camping skills means they’ll have more confidence to explore this beautiful continent on the cheap when they get a bit older themselves.

If they’re old enough, show them how to safely build a fire and then you can all toast marshmallows together!

7. Cooking or baking class

Teaching your kids to cook and/or bake is a skill that will set them up for life. Especially as these days more and more young adults are over-reliant on take-away and delivery services such as UberEats.

Here’s an additional tip – get them to cook something you can freeze and defrost so they can take it to school during their first week back and show it off to their friends (and spare you a day or two of odious lunchbox duties!)

Final word

We’ve tried to make the above tips cheap and cheerful to highlight to the younger generations that you don’t have to spend money to have a good time.

It’s also important to remember that the same applies to you – experiences and long term financial goals are what matter most, not necessarily the latest must-have new gadget.

So here’s to living in the moment and smashing your budgeting goals in 2019!

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

Ensure your travel insurance isn’t voided these holidays

Tipsy topples, scooter smashes, sporting sprains and medical mishaps – before you go jet-setting overseas these holidays we’ll explore the most common ways travel insurance policies are voided.

Travel insurance is a critical consideration for any overseas holiday.

But all too often we forget to read the fine print of our travel insurance product disclosure statements (PDS) before adopting a carefree, caution-to-the-wind holiday attitude.

In fact, of all the Australians who take out travel insurance policies, less than half (42%) are properly insured throughout their trip.

And when you consider that falling ill or getting injured overseas can leave you as much as $223,255 out of pocket (about half the average Australian mortgage!), then there are a lot of travellers out there rolling the dice.

Let’s take a look at some of the most commonly overlooked exclusions.

1. Drinking alcohol

This is bit of a murky one – about as murky as that last big night out you might have had.

But it’s an ace up the sleeve of insurers that they like to pull out every now and then to avoid paying a claim.

For instance, a man attending a wedding in Phuket fell down some stairs at a hotel, breaking his leg and several ribs.

Because he’d been celebrating with a few alcoholic drinks, his insurer refused his claim for medical expenses, citing his intoxication at the time, a DFAT-commissioned report states.

The incident cost him $10,300 in medical expenses, which had to be paid in full before he could leave hospital. He was also unable to work for the next six weeks, causing further financial strain.

With that in mind, let’s take a look a quick look at the policy wordings of some insurers that Aussies commonly use:

TID (Lloyds): “We will not pay for any claim arising from or relating to the following: If you, your close relative or a member of your travelling party: is under the influence of, or is addicted to, intoxicating liquor.”

Good2Go (AIG): “Your Policy does not provide for losses, liability or expenses that are for, related to or as a result of: You or Your Travelling Companion … being affected by alcohol.”

The government’s Smartraveller website probably puts it best: “Take it easy on the grog – if your alcohol or drug intake is the cause of, or a factor in, an adverse event, it won’t be covered by your policy”.

2. Scooter crashes

Riding around on a moped, quad bike or motorcycle and exploring the back alleys or coastal roads might feel convenient and carefree – however it’ll be anything but if you crash, or someone runs into you.

In fact, 1 in 4 Australians who visit south east Asia ride a scooter, yet are not covered when doing so. That’s because most insurers adopt the national standard for the definition of a moped – an engine capacity under 50cc.

If the engine is bigger than that – and most are at least 125cc these days – you’ll need an Australian motorcycle licence, and in many cases an international or local motorcycle licence, in order to be covered.

Not so long ago a 21-year-old Sunshine Coast man died while holidaying in Bali after crashing his scooter.

A huge fundraising effort raised $50,000 in less than a week to pay for an RACQ LifeFlight air ambulance jet to bring him home. Sadly, the man passed away a few days after arriving at the Royal Brisbane Hospital.

3. Sporting, leisure and adventure injuries

Each travel insurance policy will differ when it comes to what sporting, leisure and adventure activities are covered – or what you need to pay extra for.

In fact, 2 out of every 3 people who travel to South East Asia engage in some form of risky behaviour, much of which will void many travel insurance policies.

So consider what activity you’ll want to participate in and search the PDS document (use the Ctrl + F keyboard search trick) to see whether it’s covered or excluded.

If you’re travelling to Europe or Japan and want to do some skiing or snowboarding, it’s likely that you’ll need to pay for additional coverage. The same goes for some water-based adventure activities, such as jet-skiing or scuba diving to certain depths.

If you’re heading to south east Asia and want to do some surfing, cycling or white water rafting then good news: many policies cover them, but it’s definitely worth double checking.

4. Pre-existing medical conditions

The other big one that can land you in hot water is not declaring a pre-existing medical condition to your insurer.

In fact, about 1 in 6 travellers fail to do so.

Claims can be voided by something as seemingly unimportant such as an allergy, all the way through to a cancer you’ve beaten.

For example, according to DFAT, one poor bloke took a fall at home and fractured his hip a few months before a long-awaited cruise to Alaska.

During rough weather at sea, he had another fall and broke his hip in a different place.

Due to the pre-existing hip injury his insurer refused to meet the costs of being treated on the ship, evacuated to a hospital in Anchorage, and transferred to LA for surgery.

In the end, he was billed for $120,000 in medical treatment and a further $70,000 in medical evacuation costs. He settled the bills by mortgaging his house.

Final word

The moral of the story is simple: don’t risk a mortgage or your life savings by failing to see if you’ll be covered these holidays.

If you’re travelling overseas it pays to spend 15-30 minutes reading through the PDS to ensure you’ll be covered for the activities you plan to participate in.

And if you’re not sure, get in touch with the insurer – it’s better to be safe than sorry.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

Don’t dive into credit card debt this Christmas

Every Christmas almost half of the Australian population decides to go swimming in credit card debt to get through the festive season. But there’s two big reasons why you shouldn’t do that this year.

Bad news: new data from St George bank shows that 46% of Australians haven’t saved up for Christmas gifts and need to use their credit card at the checkout.

Worse still, 1 in 3 people say they need to rely on their credit cards to survive.

While this may have worked for some families in the past, there are two new factors this year that should make them think twice about doing so.

Factor #1: New credit card rules from January 1

As of January 1, banks and credit providers will be required to check your debt-servicing capacity more thoroughly before issuing a credit card.

Essentially, credit providers will only approve your application if they’re satisfied you can repay the card’s credit limit, at its interest rate, within three years.

If not, you’ll be denied a credit card, or offered a lower limit.

In years gone by, credit card providers have gone on advertising blitzes for interest-free credit card deals in January and February.

So families who have made it an annual tradition to take up these offers will be due for a shock – they might not be able to transfer their full debt this time around.

This will either leave them with two credit cards to pay off, or worse still, one big debt already accruing interest.

Factor #2: It will be harder to get a home loan

It’s getting harder and harder to obtain a home loan due to the banking royal commission lending crackdown.

Even doctors are having detailed accounts of their living expenses examined with a fine-toothed comb before having finance approved.

They’re not just checking the last month or so, either. Lenders will trawl through your accounts for several months for any spending anomalies.

If a lender sees that you’ve thrown caution to the wind with your credit card over Christmas you might just be put on their naughty list and denied finance.

Essentially, that could hamper your chances of obtaining finance for a home loan until about April next year.

How we can help

It’s believed that the stricter rules on credit cards will have a knock-on effect on applications for all types of credit, according to some experts.

So if you’re already in debt trouble and would like help consolidating it into a personal loan, then the time to do so is before the new year, when your financing options could become more limited.

And if you’re not quite in credit card debt just yet, but the forecast isn’t looking so great, then get in touch.

We have plenty of great budgeting techniques we’d love to share with you to help ensure you have both a Merry Christmas – and a happy, credit card debt-free New Year!

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

Stress tested your home loan recently? Don’t stress

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Seven in 10 Australian mortgage holders have not stress tested their home loan. But don’t stress, it’s much easier to do than you think.

Deloitte Access Economics’ latest report makes for pretty interesting reading.

It turns out the average Australian has a “wide-ranging hesitancy to make any sort of change” when it comes to their mortgages and other financial products.

“Why is it that educated consumers who know they’re not getting the best deal on many of their household products are so unwilling to take action to improve their household finances?” asks Deloitte.

Interesting mortgage stats

It turns out that 41% of Australians with a mortgage don’t check for interest rate changes because they either have no interest, don’t know what the RBA cash rate is, or do not see its relevance.

Even more interesting is that 68% of people say they have never stress tested their home loan.

“This is a particular worry,” says Deloitte.

“Recent estimates show that a 0.5% increase from current interest rates would cause mortgage stress to jump from one in four mortgaged households to one in three.”

Worse still, a 2% increase would throw half of all mortgaged households into stress.

Now, that might sound like a big increase, but don’t forget that it wasn’t so long ago that interest rates were at that level. In fact, it was only six years ago in June 2012.

So how do you stress test a home loan?

Simple.

Calculate how much extra a 0.5%, 1% and 2% increase on your mortgage would cost you each month and whether your budget can allow for it.

If you’d run into trouble, give us a call and we can work through some risk mitigation options with you, which could include locking in a home loan rate.

Why don’t people care about getting a better deal?

Interestingly, 1 in 3 people know there are better deals out there, while 1 in 5 don’t bother to check for a better deal.

It turns out there are three key reasons people don’t change to a home loan that would see them better off financially, with the first being decision making paralysis.

“Too often, many consumers get stuck before making a choice – and then they do nothing,” explains Deloitte.

Another big reason is people “hate feeling dumb”.

“Consumers also hesitate when they fear or worry about the possibility of making a bad decision. This, coupled with the fact that people tend to avoid what makes them nervous,” adds Deloitte.

The final key reason is that people simply put it off.

“Outcomes set in the distant future typically lack a sense of urgency in contrast with everyday needs, making it easy to defer decision making to a tomorrow that never arrives,” says Deloitte.

How can you overcome these barriers?

Well, here’s the good news. We can help you overcome all three.

For decision making paralysis we can come up with a shortlist of options, reducing the choices you need to make.

Worried about feeling dumb? I bet you we’d feel pretty dumb if we did your job for a day too. But we make it our business to help educate you and bring you up to speed in this market.

And how can you overcome avoidance? Simple. Give us a quick call today and we’ll get the ball rolling for you. You’ll be surprised how little time and effort it takes.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.