homeowners Archives

Is Debt Consolidation Right for You? A Checklist for Homeowners

12 December, 202412 December, 2024 Budgeting, Education, Finance

Struggling to keep track of multiple debt payments each month? For many Australian homeowners, juggling different debts—whether it’s credit card balances, personal loans, or mortgage repayments—can become overwhelming. Debt consolidation could be a way to simplify finances and regain control. But before diving in, it’s important to understand the ins and outs of debt consolidation, along with the options and risks involved. Here’s a practical checklist to help you assess if consolidating debt is the best solution for your financial situation. Step 1: Understand What Debt Consolidation Involves Before diving into debt consolidation, let’s clarify what it means. Debt consolidation combines multiple debts into a single loan. Instead of paying off several balances at varying interest rates, you roll everything into one payment. This often makes managing your debts easier and could even lower your monthly payments. Step 2: Evaluate Your Current Debts and Expenses Start by listing each debt, including the balance, interest rate, and monthly payment amount. Are your current debts high interest? If so, a lower-rate consolidation loan could help reduce what you pay over time. Tip – Use an online debt consolidation calculator to help compare the cost of consolidating with your current debts. Step 3: Consider Your Debt Consolidation Options When it comes to debt consolidation, homeowners have several options and choosing the right one depends on your financial needs. Here’s how a few of the common options might look in practice: Personal Loan Suppose you have multiple high-interest credit card debts. By taking out a personal loan with a lower fixed interest rate, you could pay off all your cards at once and then make just one monthly payment on the loan, potentially saving on interest and simplifying your finances. Balance Transfer Credit Card Imagine you have a $5,000 credit card balance with a high interest rate. Transferring this balance to a credit card with a 0% introductory rate for 18 months would give you a period of interest-free payments. If you pay off the balance before the promo period ends, you could avoid paying interest altogether. However, it’s essential to stick to a repayment plan to clear the debt before the higher rate resumes. Home Equity Loan If you have equity in your home, this can be an option to access funds at lower interest rates. A home equity loan provides a lump sum that can be used to consolidate debts, while a home equity line of credit (HELOC) works more like a credit line that you draw from as needed. For instance, if you have $15,000 in credit card and personal loan debt, a home equity loan could help you pay off these balances with a lower interest rate, freeing up cashflow. Keep in mind, though, that your home acts as collateral, so this option requires a commitment to regular repayments. Step 4: Check Potential Risks Debt consolidation can simplify finances, but there are risks involved. Here are some to watch out for: After reviewing your debts, consolidation options, and potential risks, take stock. Are you looking for simplicity, lower interest rates, or lower monthly payments? Can you commit to responsible spending to avoid new debt? If you’re still unsure, a mortgage broker can help you assess your options, evaluate potential savings, and choose the best approach based on your financial goals. Take control of your debt today—reach out to a mortgage broker and explore your debt consolidation options. The information provided in this article is general in nature only and does not constitute personal financial advice. 

Economic Update: April-June 2021

21 July, 202114 July, 2021 Updated on14 July, 2021 COVID-19, Economy

Employment surprise JobKeeper was a cornerstone of Australia’s response to the coronavirus pandemic. It provided millions of Australians with an ongoing income and kept thousands of businesses afloat, so when it came to an end in March expectations were that there would be a sharp spike in unemployment. One estimate was that 150,000 workers would lose their jobs. Happily, that wasn’t what happened. From March to April the unemployment rate dropped from 5.7% to 5.5%, then fell to just 5.1% in May. That’s below the 5.2% that applied in January 2020 before the pandemic hit, and an amazing outcome given the damage that COVID-19 continues to inflict on a virus-weary world. Housing continued to sizzle… Aspiring homeowners and upsizers endured another quarter of woe as home prices continued to soar. Nationally, dwelling prices were up 6.1% for the quarter and 13.5% for the year, with houses outperforming units. Of course, on the other side of the equation are homeowners, many of whom are delighted by the significant boost to their wealth. Continuing low interest rates remain the key driver, but other issues have played a part, including stamp duty discounts and households redirecting the cash they would otherwise have spent on overseas holidays. Lockdowns last year also affected the normal supply of property leading to pent-up demand. As subsidies are rolled back, supply and demand normalise and if population growth remains low, property price growth may well come back to ‘normal’ levels. And despite the RBA not expecting to raise interest rates until at least 2024, some economists are pointing to the low unemployment figures to predict that interest rates may begin to rise by the end of 2022. There is also growing speculation that the RBA and APRA will lift lending standards (e.g. requiring lower loan to valuation ratios) in order to rein in galloping price growth. …as did share markets Global markets performed strongly over the quarter with many setting record highs. Locally the S&P/ASX200 rose 7.7%, beating the MSCI All-Country World Equity Index, which was up 6.9%. Tech shares were back in the lead with the NASDAQ gaining 11.2%, while the S&P500 rose steadily to gain 8.6%. The Aussie dollar fell slightly against the major currencies weakening late in the quarter following talk that the next move in US interest rates may be up. Also… – Workers receiving the minimum wage will see a boost to their pay packets from July, with the minimum wage rising by 2.5% to $772.60 per week or $20.33 per hour. – Most people will see the superannuation guarantee (SG) payment from their employers rise by 0.5% to 10% of normal wages. This is one step on the path to raising the SG to 12% by 2025. – According to Credit Suisse, nearly one in ten Australians are now millionaires. Twenty years ago the figure was less than 1%. Of course a million dollars today doesn’t have the buying power it did 20 years ago, but only Switzerland has more millionaires per capita than we do. – Massive infrastructure projects and home renovation booms have caused a global shortage of building materials. An indicator, perhaps, that some COVID-19 stimulus measures have been a tad overdone? The information provided in this article is general in nature only and does not constitute personal financial advice.