Wednesday, January 16, 2019

finance

Happy New Year... or is it? Once the smoke of the Harbour Bridge fireworks has blown away, many of us are left feeling a little dusty, and not only from too much food and drink. For at the end of January, along with the tennis, comes credit-card bill shock - the unwelcome financial hangover from the Christmas and New Year festivities. 

Of course, it is best not to splurge on the plastic, but it is not always easy to resist spending more than you should on putting extra sparkle into the family holidays. So, if you are facing a credit crunch, why not make a New Year's resolution to get your finances in order. 

Tick all three boxes on our money-wise checklist and you will be able to look forward to a more prosperous 2019. 

Check your super

How is your super fund performing? What fees are you paying? Are your investments aligned with your ethics... are they high or low risk? There are a few super comparison websites out there, but don't just click on one. As well as your investments' overall performance, there are plenty of other services and insurance options to take into consideration. Also, remember to consolidate any old accounts you may have lurking out there. You can track your old super online using the ATO's MyGov service. 

Check your insurance

While home, contents and car insurance are essentials, many people don't look further to other forms of cover - those that can protect your family if you face a catastrophic change in your health or circumstances. As well as a good level of life insurance, it is prudent to consider income protection that will protect you through critical illness as well as cover for total permanent disability. 

Consolidate debt

If you have equity in your home, there is no reason to pay the high interest rates charged by most credit card providers. In these times of low inflation and low wage growth, interest rates are likely to remain at record lows right through the next 12 months and beyond. By consolidating all your debts onto your home loan, you could save thousands of dollars and become debt-free faster. 

At each stage of your check-list, it is important to talk to the professionals. That is where the Zippy Financial team can help. Thanks to our team of experts, we can give you all the advice you need: mortgage, insurance and financial planning. If you want to start 2019 on a firm financial footing, make it your New Year resolution to give Zippy Financial a call. 

renovations

You have been dreaming of that new kitchen and dining room for as long as you can remember, and now the time has come to put your plans into motion. But do you really have the budget to afford the works? Here are a few things to think about before making the leap from your Pinterest board to blueprints. 

Work out your budget

Before you look at borrowing any money, you first need to work out how much your renovation will cost. Ask an architect to send you their comprehensive guide to costing a renovation. 

Before you finalise your plans, you can arrange for a building inspector to help identify any structural work that might be needed. Major work could significantly increase your budget, so it may be worthwhile to talk directly to a professional to get a more tailored understanding of how much you are up for. Architects and master builders are usually happy to provide a quote, so think about getting more than one quote to give you an idea of the range. 

In addition, add a percentage of contingencies: most experts recommend that you add another 10% to 20% to the overall budget to cover the inevitable delays and complications that arise throughout the renovation process. 

Once you know what the costs may be, you can start to think about how to raise the case. Of course, in an ideal world you will have saved up at least part of the amount beforehand, but renovations can run into the tens or even hundreds of thousands, so most people need to borrow some money. 

Unlock your equity

If you have been in your home for a while, chances are that you have considerable equity, both as a result of paying off your initial home loan and from rising property values. 

Equity is the amount of your home that you own; that is, the value of your property, less the outstanding loan amount. For example, if your property is valued at $500,000 and you owe $300,000 on your loan, your equity is $200,000 ($500,000 - $300,000 = $200,000). 

As long as you can meet the repayments and the renovations are likely to add value to your property, most lenders should be willing to lend you a percentage of your equity for home renovations. Depending on your situation, this equity could be accessed through redrawing, increasing your existing loan or refinancing your loan entirely. A mortgage broker will be able to advise on the best option for you.

Building loans

Most home loan providers will offer a product called a building or construction loan, which acts as a line of credit that you can draw on as renovation costs become due. The advantage of these are that you are not making repayments on the full value of the loan at once, but only on the progressive loan balance, which will change over time. That means you can start to pay off the first invoice before the next one comes in, saving you money overall. 

Your broker can assist in checking with your home loan provider whether the loan is 'interest only' for an initial period. It if it, this will also help to keep your costs down during the crucial building period. If the provider does not have a specific building loan, they may let you have a general line of credit, which functions similarly. Once the renovations are finished, the loan or line of credit can even be rolled into your home loan. 

Personal loans

Especially where a renovation is small - perhaps you just want to update your kitchen without any building works - you might consider a personal loan. As personal loans are generally not secured against your property, the interest rates are usually higher. However, as the term of the loan is much shorter, you should pay less interest over time. 

Each option has advantages, so it is worth spending some time considering them carefully. Remember, your mortgage broker can always help you with any questions you might have. 

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Contact Details

Zippy Finance 

PO Box 3078
North Turramurra
NSW 2074

T 1300 855 022 

Louisa Sanghera is a credit representative (437236) of BLSSA Pty Ltd ACN 117 651 760.  Australian Credit Licence 391237. ABN 85 168 278 975.

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