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home loan deferral

If you were one of the many people who opted to defer your home loan at the beginning of the pandemic, you’re not alone, as hundreds of thousands of Australians took advantage of the home loan deferral option offered by banks.

Now here we are six months on, and for many, the uncertainty around their economic situation has become clearer. If your loan is due to come off your deferral plan in the next month or two, what are the next steps for you?

What happens next with your home loan deferral?

The latest stats about home loan deferrals in Australia reveal that almost half a million borrowers are approaching the expiry of their deferral arrangements, according to the Australian Banking Association (ABA). Around 450,000 Australians are currently in a deferral arrangement and their loans are set to be reviewed over the coming weeks:

If your loan deferral is due to end and you are in a financial position to resume your mortgage repayments, then you may not have to do anything at this stage. Most banks and lenders have a process in place and they will be in contact with you to let you know when your repayments resume, how much they will be and what your outstanding balance is.

However, if you wish to take a more proactive stance, you may be able to take some action towards making some serious headway on your home loan.

Although the pandemic has created many challenges, one of the upsides for mortgage holders has been the reduction in interest rates. Mortgages are now the cheapest they’ve ever been – so if you want to ease your cashflow, reduce your repayments and create some peace of mind around your mortgage going forward, now could be the ideal time to refinance.

home loan deferral

Can you refinance after a home loan deferral?

The ABA has already confirmed that anyone who applied for a mortgage deferral as a result of the pandemic will not have their credit rating impacted as a result.

So, if your financial situation is in otherwise good shape, we may be able to assist you in restructuring your mortgage so you can access a cheaper interest rate or a better deal. This could include restructuring your loan over a shorter or longer term (depending on your goals) to help you either pay your loan off sooner or assist with cashflow.

Or if you’re chasing some repayment certainty, we could help you lock in a fixed rate that gives you certainty for the next one to three tears. There are some lenders who are offering a 1.99% 3 year fixed rate, which is the cheapest deal we’ve ever seen!

If you’re interested in seeing what options are available to you and how you could improve your financial situation, contact our friendly team today for an obligation-free chat. Remember, our services as a mortgage broker are completely free so you have nothing to lose – and a huge potential to gain.

Everyone wants to pay less on their mortgage and refinancing is one strategy that can help lower your interest rates, but is it worth it? We take a look at how you can get the most out of refinancing.

Why refinance?

Generally, people refinance to negotiate a better deal on their home loan and pay it off sooner. Depending on your situation, you should be able to save money by taking advantage of lower rates or new products that were not available when you first negotiated your home loan.

To put this into perspective, let’s say you took out a $300,000 loan at 7.5% over 30 years with monthly repayments of $2,098. If you refinance to a new loan at 4% you could save $239,543 ($665 per month) over the life of the loan by making the minimum repayments of $1,432 per month.

Once you have refinanced, if you continue making the same minimum repayments as your previous loan ($2,098 per month) you will potentially save $346,912 and pay off your mortgage 165 months early.

Make it work for you

Take advantage of your refinance loan by:

When should you consider refinancing?

Life brings change and your mortgage needs to keep up – maybe now you have a partner, a young family, a new job that pays more or have become empty nesters with extra cash on your hands. If the terms of your current loan do not allow you to pay more (or less) on your principal amount, it could be worth considering refinancing into a more flexible arrangement.

Refinancing or loan switching can save money but you might incur costs such as exit and establishment fees, government charges and administrative or legal expenses. These costs need to be weighed against the benefits to determine if you will save in the long run.

Before you make any decisions, be clear on your reasons for refinancing. It is also a good idea to speak to an experienced mortgage broker or financial expert to ensure you are making the right move for your financial situation.

This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information.

Louisa J Sanghera is a credit representative (437236) of BLSSA Pty Ltd AC 117651760 (Australian Credit Licence No. 391237). 

Your home loan is probably the biggest investment you will make in your life, and a debt that most people would like to pay off as quickly as possible. But how achievable is that?

Here we look at some ways to pay off your mortgage sooner… 

Re-evaluate your mortgage

How long has it been since you last had a good look at the details of your mortgage? Do you know where you are in terms of the progress you are making on paying it off, and importantly, is it still the best mortgage product that suits your needs?

With a long-term commitment like a mortgage, it is tempting to set and forget, and to just make repayments as they are due. But this can be a costly mistake. It is vital to regularly re-evaluate your mortgage and refinance where necessary. New products are always becoming available, rates change ad so can your circumstances. 

By regularly re-evaluating your mortgage, you could make real savings, pay off the debt sooner or release equity to invest elsewhere. 

Make more frequent payments

Time is money and you may not think you can afford to increase the amount of repayments you make to your mortgage, but it is a very worthwhile strategy which could see you clear your loan faster, with the added benefit of having to pay less interest overall. 

If you presently pay your mortgage monthly, consider changing to fortnightly or weekly repayments (if your mortgage product allows). For example, if your monthly mortgage payment is $3,000, half this pay to $1,500 each fortnight and by the end of the year you will have paid off $39,000 rather than $36,000.

Don’t just pay the minimum

A minimum repayment is just that – a minimum! Many loans allow you to pay more than the minimum, whether it be ad hoc payments or regular overpayments. Check with your lender as to the terms of your particular product to see how much you can overpay. 

Even small increases can make a real difference. Simply by rounding up a number or adding an extra $100 to your payments will reduce your mortgage. If you don’t think this is affordable to you, start thinking outside of the box – consider putting bonuses, tax returns and gifts into your mortgage and you will soon be on your way to clearing your mortgage faster. 

Maintain repayment levels when interest rates fall

Even if your lender reduces your repayments when fees or interest rates decrease, ask them to keep your repayments at the same level as before and you will pay down more of the principle with each payment that you make. 

Get offset

If your mortgage allows for it, use an offset account – this is an account which is linked to your mortgage, and the amount of money in the offset account is deducted from your outstanding loan balance when the interest is calculated. For example, if your mortgage is $600,000 and your offset account has $20,000 in it, you will only pay interest on the remaining balance of $580,000.

An offset account saves interest whilst still giving you access to your savings and for property investors, it means they can maintain the tax deductibility of the mortgage. 

Shop around for a better deal

Your mortgage needs to suit your personal circumstances and the loan you chose previously might not be suitable any longer. If your circumstances have changed or are about to change, consider whether or not your current mortgage is still the best product for you by discussing your needs with your mortgage broker who will be able to find you the right product and negotiate rates with lenders on your behalf. 

But remember, you may be liable to pay break costs or other fees to your current lender if you decide to make changes to your loan, so this needs to be carefully explored when evaluating the benefits of making any changes. 

Your mortgage broker will be able to provide details of any potential costs to make sure you have the right loan to get that balance down sooner. 

This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information. 

Louisa J Sanghera is a credit representative (437236) of BLSSA Pty Ltd AC 117651760 (Australian Credit Licence Np. 391237). 

Recently, I sat across from a client who had a casual $2 million sitting in his bank account. That’s right – two million dollars, just languishing in an ordinary bank account, not achieving very much. 

He wasn’t investing in the stock market. He wasn’t contributing extra to his super. And the only property he owned was the home he and his family were living in. 

Can you imagine? He had $2 million just sitting in the bank; that is known as dead money. With interest rates in the toilet and so many better options out there he could be using to grow his wealth, this seemed like such a wasted opportunity to me.

He may as well have had it stuffed underneath his mattress!

Of course, I knew that I had to get him in front of a great financial planner, pronto. 

This is something that comes up quite a lot for me as a finance broker. I’m not qualified or certified to give money advice, so in these situations, I always refer my clients to a reputable financial planner. 

As a broker, all my clients require adequate TPD and income protection insurance, and most of them have no idea how to get it, what products are available or why they even need it in the first place. 

So, virtually every borrower I meet needs the aide of a financial planner to navigate this. Not to mention those clients whose expenses are holding back their borrowing power, or those who have no clue how to best structure their finances to take advantage of tax breaks and other incentives. 

If I can refer these clients to a planner I know and trust to take care of these needs, not only does that planner benefit from a new client, but I’m also able to offer a greater variety of products to the client and possibly write them a larger loan. 

It’s a win for the client, who moves towards a better financial position as a result of the advice, and a win for the financial advisor, who builds new business… which is why it blows my mind that more financial planners and brokers don’t collaborate. The benefits for all parties involved can be huge!

Accordingly, for planners, taking on new clients means loads of information gathering as you get to grips with the state of their finances and their short and long-term goals. In the process, of course, you will tally up their current debt and how this will factor in your planning. 

This is the ideal opportunity to hand over to a broker, who can help with refinancing said debt at a more attractive rate, or recommending a product with inclusions that will better fit their goals. When they arrive back at your office with more manageable monthly debt repayments and the spare cash that’s been freed up through refinancing, they’ll be better able to implement your suggestions and the financial planner can take care of their insurance needs. 

In my mind, a savvy planner is one who looks for debt first, as this is an area where substantial savings can be made without any real changes to the clients’ lifestyle or goals. Clients are more willing and able to commit to these painless adjustments than they might be to a strict budget, and if they’re happier, they’ll refer more friends, family and colleagues to the professionals who have helped them.

The cross-collaboration opportunities don’t stop there. In our increasingly online environment, working together allows financial planners and brokers to boost our social media engagement, grow our LinkedIn presence, and get more visits on our websites – all of which can lead towards more enquiries, more referrals, and more clients.

It’s essentially free advertising. For instance, I might share and promote a great blog written by a planner colleague of mine, and in turn, he’ll do the same with my most recent article. We’ll comment on each other’s updates and congratulate each other on accolades and awards, like my recent Broker of the Year and Customer Service of the Year wins at the Momentum Media Australia Business Awards. All of this serves to build our reputations and credibility in the eyes of potential and existing clients.

And all the while, we are increasing our online visibility and driving more and more traffic, enquiries and commissions.

What do you think? Are you a planner who can see the value in collaborating with an experienced broker – or perhaps you’re a broker who never realised just how complementary the two professions are? If so, maybe it’s time to start hitting up your connections and see where it takes you both.

This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation or needs before making any decisions based on this information. 

Louisa J Sanghera is a credit representative (437236) of BLSSA Pty Ltd AC 117651760 (Australian Credit Licence No. 391237). 

Do you know what Open Banking is, or how it’s set to impact you? Open Banking could be just about the biggest thing that’s happened in the Australian finance industry this century – so it’s probably a good idea that you have an understanding of exactly what it is, and what it means for you.

Regulatory changes, tech-driven innovation and evolving consumer preferences have all led to this new development, which will make the usually quite secretive and hard-to-navigate finance world much more accessible to the average person.

Essentially, Open Banking gives consumers unprecedented access to, and power over, their data.

In a nutshell, you’ll be able to share your selected banking data with accredited third parties (a process known as read access) and benefit from the new products, services and competition this change will generate.

But why is Open Banking important? How did it come about – and what will the end result be for borrowers?

The open data economy

Open Banking forms part of the Consumer Data Right (CDR), which was passed by the Federal parliament in August 2019 and covers the telecommunications, utilities and banking industries.

That’s a real mouthful, but what this legislation represents is a major step towards an open data economy in our increasingly interconnected, online world. The UK and the European Union are already enjoying the benefits of Open Banking systems, so it’s about time we caught up!

The ACCC has given the four major banks from the 1st of February 2020 to the 1st of July 2020 to implement the sharing of consumer data, and will review the rest of the rollout through the year. Other banks and lenders will be ringing in the changes from 2021.

Savings accounts, term deposits and credit cards will be among the first products to join the Open Banking ranks, followed by mortgages and personal loans, and eventually business and investment accounts, retirement savings accounts and trusts.

By 2022, we should have a fully-functioning Open Banking system, and the ACCC will move on to applying the CDR to other sectors such as utilities.

True transparency

Open Banking is a much more transparent system than we currently have. You will be able to instruct your bank to send your data to other banks, financial institutions and authorised organisations, so that signing up for a new mortgage, personal loan, credit card or bank account will be much simpler.

Instead of chasing up personal indentification documents or printing out page after page of transaction records, you will be able to direct your bank to send your data directly to the new institution on your behalf – a massive time-saver.

You will also find that the process of comparing products and services should become much easier. Working with an experienced and qualified mortgage broker remains the most effective way to get the best possible loan for your situation, as we are in the industry being updated on the latest market changes and credit card movements every day, which means we can direct you towards the loan product (and the lender) that best suits your needs.

However, Open Banking is a massive step in the right direction for a more robust and competitive banking industry overall, and I think we can all agree, that’s good news for borrowers.

The nitty gritty: Did you know?

This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation or needs before making any decisions based on this information.

When you are looking for your first or next investment property, you are probably trying to approach each inspection through your potential tenant’s eyes. Will people want to live here? Will they pay a premium rent for these particular features and amenities? Will they love it so much that they will stay long-term, saving you the bother and expense of advertising for new tenants… And of course, how much of a return will the property pay?

These are all valid and important questions. But unless you plan on holding onto the property forever, eventually you will need to sell it. And it might surprise you to learn it will more than likely to be a homeowner, not an investor, who takes it off your hands.

Contrary to what media would have us believe, the real estate market is not dominated by investors. Most people out there actively in the market are actually buying homes to live in – investors do not have anything near a monopoly over the Australian property market.

In fact, owner occupiers drive the market, as they comprise 70 per cent of buyers. So, it makes sense to look for properties that appeal to these buyers – otherwise you are narrowing your pool of sellers and potentially sabotaging your capital growth.

Buyer’s agent Brady Yoshia says that considering owner occupier appeal is important when purchasing any property, be it to live in yourself or as an investment.

“From an investment perspective, to attract high-quality tenants the property needs to meet their desired lifestyle and accommodation needs,” Brady advises.

“Tenants are more discerning than ever, and if you wouldn’t like to live in the property due to its condition or location, other people will no doubt feel the same.”

Brady says that this applies to both tenant and future owner occupiers, and also suggests that it’s a good idea to consider how you would feel personally about living there, just in case you find yourself in the position where you need to move into the property down the track.

So, how do you identify such a property?

Brady says there are a number of features that owner occupiers will be on the lookout for, including:

If you are thinking of buying a very unusual property, perhaps because it is on the more affordable side or because it meets your unique requirements, then consider whether this will appeal to future buyers – or are you potentially selling yourself short?

Beyond these factors, Brady says it is important to know what is happening in the area, from a development and population growth perspective – for example, are there any significant infrastructure upgrades planned, which might affect access or liveability? You can also enquire with the local council to find out if there are any large-scale development applications in the pipeline.

When imagining your future buyers, consider all the possibilities – professional couples, young families and even retirees and downsizers. Shops and essential amenities like doctors, banks and Centrelink offices should all be relatively easy to get to, along with at least two options for commuters such as a main highway and a train station.

“Areas that have owner occupier appeal are usually within the catchment area for good schools,” adds Brady; you can find maps online that will show you where these boundaries lie.

Public transport and access to universities and commercial hubs and proximity to hospitals are also important, which areas such as the CBD, Parramatta, Chatswood and Macquarie Park in Sydney all being good examples of suburbs with both owner occupier and investor appeal. In Melbourne, houses near coveted schools such as Box Hill High and Balwyn High are always in demand, along with anything in the sunny bayside area.

But regardless of the specific city, keep in mind that it is owner occupiers that drive the market. If you want a property that has wide appeal now and in the future, then it pays to keep both renters and homeowners in mind when shopping for your next property investment.

This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation or needs before making any decisions based on this information.


When you are young, being the owner of your very own car is the ultimate dream, and it has been considered a rite of passage for many decades. But has that changed over recent years?

Having the freedom to go wherever you want, whenever you want, is one of the most important milestones of adulthood – at least to teenagers, who have spent their entire life until this point shepperded from point A to point B by loved ones. 

However, data from the recent Household, Income and Labour Dynamics in Australia (HILDA) survey shows us that between 2011 and 2016, the number of young Australians getting their driver’s license at the ages of 18 and 19 has actually decreased six per cent. 

A 2019 article, Millennial mindset exacerbates car sales slide, published in The Australian Financial Review, discusses this decline in car sales, attributing it to a “greater reluctance by young people to become car owners.” There could be a number of reasons behind this decline, including the cost and increasing regulation and requirements around getting licenced. Also, the uptick in ride sharing and online delivery services such as Uber and UberEats might mean that people don’t require cars as much as they used. 

Another potential reason? Young people may be putting their time, energy and money towards buying property instead. 

Why you should ditch your car for a house deposit instead

While a large number of Aussies still place huge importance on owning a car, more and more young people are also starting to realise the benefits of forgoing personal modes of transport, all in the name of home ownership. 

While real estate is generally always a sound investment, buying a car might not be. It’s common knowledge that once you purchase a car and drive it away, it immediately depreciates in value. This means that car is an asset – one that declines in value every day – rather than being an investment. 

The catch here is that the longer you have your car, the less it’s worth. This is due to that depreciation we mentioned, which is the result of regular wear and tear, as mileage racks up, and as more services and fixes are required. 

Another little-known fact is that your car loan repayments are doing you no favours with the bank either. While it can be helpful to your credit rating to be paying off a car (provided you are making your repayments on time), the more financial obligations you have each week, the less money a bank or lender is going to be willing to lend you.

For instance, it is estimated that every $5,000 in personal debt you have, reduces your borrowing power by up to $20,000. Having a $20,000 car loan could mean a bank is willing to lend you $80,000 less than it would if you didn’t have a car. 

If you are trying to pay off a car loan while simultaneously trying to put money aside to buy a home or an investment property, you might find yourself saving for quite some time. As anyone who owns or has owned a car before knows, you tend to constantly have one hand in your pocket. Car servicing, registration, petrol and general upkeep can all be quite costly. 

If you have read this and you are thinking with regret about the car parked in your garage or driveway, don’t despair. Instead, consider whether you could live without it? By selling your car, you will not only enjoy a cash windfall that could be used to help you purchase a property, you will also have less financial obligations every week in terms of repayments, petrol and servicing. 

Remember: the sooner you start working towards the dream of owning your own property, the sooner it will happen. If you would like to discuss your overall financial situation to see how soon you could buy a home or investment property, contact us today. 


This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation or needs before making any decisions based on this information. 


If you have a mortgage on your home, there is a good chance you have some equity – and if that’s the case, you may be able to refinance your loan to access some of that money, so you can have funds on hand to ride out this uncertain period. 

What is equity?

Recently, I spoke with a client who said she had no equity in her property, as she’d only bought the home six months earlier. It turns out, she had almost $400,000 in equity in the loan! She just wasn’t sure what equity was. 

Put simply, equity is the difference between the current value of your property and the loan balance against it. 

In my client’s case, her home was worth $1,000,000 and her loan was $600,000. She therefore has equity of $400,000. 

How can you access your equity?

Property as an asset class is not a very liquid asset – meaning, once you buy a property and hand over your deposit, your funds and any growth in value can be “trapped” there. That is, unless you decide to sell the property or you refinance. 

When you refinance you can draw out equity and keep those extra funds in an offset account. While in offset, they are “offsetting” the loan balance, which means you don’t pay any interest on those funds. 

However, with the money accessible, you have the financial breathing space to manage the next six months and beyond. 

How does refinancing to access equity work?

Let’s go back to my client as an example. She currently has a loan of $600,000 and a loan repayment of $2,450 per month. 

If we refinance her loan to $650,000 on a variable-rate loan of 2.5%, her loan repayment will increase to $2,550 per month. This means she will have to find another $100 per month for her mortgage repayment. 

However, she will also have access to $50,000 in equity, which will now sit in her offset savings account. She can use these funds to pay the gas and electricity bills, school fees, groceries and any other obligations she is having trouble paying during this pandemic. 

Importantly, while the funds are sitting in her offset account, no interest will be charged against them. The interest on $50,000 at 2.5% is $1,250 per year or $104 per month. If the borrower doesn’t dip into those savings for one month, then the monthly repayment will stay the same at $2,550 – but $104 of that repayment will go towards the principal of the loan, instead of being paid in interest. 

How much does refinancing cost?

Shifting your home loan to a better deal to access a cheaper interest rate and release some equity can come with some fees and charges. These may include: 

Keep in mind that if you are refinancing an investment property, some of these fees and charges may be tax deductible. 

Also, many lenders are currently offering cash-back offers and incentives to entice you across to them. These are valued between $2,000 and $4,000, which is more than enough to offset the fees and charges involved in refinancing. 

You also have the potential to save money across the life of your loan, with a reduced interest rate. If you’d like to explore your options and see what deals are available to you when it comes to refinancing, contact us today for an obligation-free consultation. 


This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation or needs before making any decisions based on this information. 

cash flow

Never have more of us been this uncertain about the state of our finances. The Coronavirus pandemic has taken the wind out of our collective sails and put us all on unsteady footing – but there are things we can do and steps we can take to get back on the front foot financially. 

Got a mortgage? You could:

 Are you renting? There are solutions for you too! Consider:

Whether you are renting or paying off your mortgage, there are options and support measures to help you through this very challenging period. If you want to discuss your options or even if you’d like some help trimming the fat in your budget (we have a helpful budget planner you can use!), contact our friendly team today.


This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation or needs before making any decisions based on this information. 

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Welcoming a beautiful baby into your family won’t just make your heart explode with love, and seriously disrupt your sleep. It can also have a significant impact on your investing journey – which is why it’s ideal to plan ahead, to avoid running into home loan issues. Jacqueline So reports…

For many, starting a family is an important milestone in life – a representation of growth as an adult, of having a hand in shaping the future, of leaving a legacy. Having kids comes with its own set of financial responsibilities, but one area that investors often don’t give proper thought to is the impact it can have on their borrowing power if they wish to buy their own home or investment property. 

“One of the biggest impacts of having children is the simultaneous reduction in household income and the increase in other day-to-day expenses. Becoming a parent is a significant life event – it’s physically, emotionally and financially intense,” explain Molly Benjamin and Betsy Westcott from the Ladies Finance Club. 

“When starting a family, it’s more important than ever to make sure your income is secure. Expenses such as extraordinary medical bills for a mother or child, the mother needing to stop working earlier than planned, or realising the car or home isn’t big enough to cater to your new family can be a huge blow to your budget and finances if not planned for. 

“Remember, you will be at home more, so expect to see an increase in everyday household bills like electricity, water, petrol, phone, medical care and car maintenance. Whacking these payments on to a credit card can lead to a slippery downhill spiral.”

Unfortunately, many Australians do not adequately prepare their household budgets for the pressures of raising children. Benjamin and Westcott not that “a majority of Aussie families are living pay to pay, and whilst this may be OK for weekly expenses, they often panic when the quarterly electricity bill comes in.”

Working a typical day job, it can be difficult to support a comfortable lifestyle for yourself and your household, particularly if you have little ones, or have one on the way. So, many Aussies are turning to property investment as a means of generating passive income and capital growth over the long term, or making it possible to step away from a nine-to-five job eventually. 

But it’s important to consider where your borrowing power sits in all of this. Investing in property as a parent is quite different from investing as a single person or a couple – especially on the financial side. 

According to government research, it costs around $17,000 per year on average to raise two children – a significant blow to any household’s bank account. As a result, many parents can find their borrowing capacity hampered by the simple fact that the expenses related to raising a child eat up much of their finances, which in turn affects how a lender will view their lifestyle expenses. 

“When you apply for a loan, the lender will assess your living expenses. The exact formula they use will vary from bank to bank, but living expenses are generally assumed to increase with each dependent child you have,” explains Louisa Sanghera, managing director of Zippy Financial Group. 

Lenders have been especially careful when it comes to assessing potential borrowers following the royal commission. Sanghera points out that “a $5,000 debt or expense can reduce your borrowing power by around $25,000.”

Getting a loan can therefore be quite trying for those who have heavier household expenditure that includes childcare and tuition. 

“When it comes to kids and your mortgage application, there are a range of factors that banks take into consideration, but as a general guide, each child you have can reduce your borrowing power by anywhere from $30,000 to $70,000,” Sanghera says. 

“Imagine you have three children, each of them going to childcare or private school at a cost of $10,000 each or $30,000 in total per year. This could then reduce your borrowing power by $150,000 – and the bank hasn’t even taken into consideration other costs, like nappies and food.”

Having life insurance, total permanent disability and trauma policies is crucial at this stage, which means additional expenditure. 

“If the working parent cannot work through injury or illness and they do not have income protection, the family could end up losing out big time. Most people also do not realise that their insurance provider will not pay for them to take time off to sit by their child’s bedside if they are critically ill,” say Benjamin and Westcott. 

Set your priorities straight

The key to being able to balance your finances favourably across supporting children and investing in property is to have a plan. 

Benjamin and Westcott advise parents to “review your goals in context of what is your biggest priority – we suggest listing your short- (one to three years), medium- (four to six years) and long-term goals, and then labelling what are needs versus wants. Then prioritise them from most to least important. Starting a family will mean that your priorities change.”

This means that parents need to view monetary inflow and outflow realistically and capitalise on any benefits they may be entitled to. 

“Get clear on how much the family unit will earn in income. Find out what government support you may be entitled to, like family tax benefits, parental leave pay, dad and partner pay,” suggest Benjamin and Westcott. 

“Work out what the family expenses are expected to be, including the upfront costs of having a baby plus the ongoing expenses. Separate fixed expenses, such as the mortgage or rent, insurance, medical, childcare, car, utilities, memberships and transport, from the flexible expenses like food, clothing, entertainment, gifts and holidays.”

They also recommend addressing debt as early as you can: “consider what large purchases you might need to make, adjust your spending patterns to ensure your family’s needs are met, pay down debts and potentially get ahead of mortgage repayments so you can take a repayment holiday when the baby arrives.”

You can also save on childcare by getting help wherever you can find it. 

“The average cost of childcare before subsidies in Australia is $109 a day but can reach as high as $180 a day in capital cities,” Benjamin and Westcott point out. 

Thus, if you can get your own parents, family members or friends on board to aid you, it will go a long way!

Sanghera also notes that parents need to watch out for the little things that cut into their finances almost without them realising it. 

“Look for ‘money leaks’ – things like credit card interest, subscriptions and memberships you don’t really use – and any other ways you can reduce your spending and increase your appeal in the eyes of the banks,” she recommends. 

“Maternity leave is one of those areas that investors should plan carefully around. If you’re planning to have children, then it might be worth borrowing as much as possible before you go on maternity leave – once you drop to a single income, even temporarily, your borrowing power will be impacted again.”

By preparing to save early, parents can set aside a strong budget for long-term investments. 

“One financially savvy couple we spoke to started practising what it would be like to live on their income minus childcare fees six months before the baby was due. That way, when it came to paying for childcare there was no massive shock or surprise, and they had also built up a nice little emergency fund as well,” Benjamin and Westcott point out. 

“The best way to build your financial future during this time is to put small amounts often into your mortgage, and salary-sacrifice into your super to make compounding interest work for you. The parents we spoke to who were feeling financially happy and enjoying their time with their new bub were the ones who had planned for and were ready for all financial situations!”

Molly Benjamin and Betsy Westcott of Ladies Finance Club offer the following tips:

Source: Your Investment Property Magazine, April 2020