Refinancing your home loan has the potential to save you thousands, reduce your monthly repayments and free up your finances to achieve your goals.

However, mastering the art of refinancing requires strategic planning, an understanding of the process and taking numerous considerations into account. Whether you plan on external or internal refinancing, here’s what to keep in mind.

Understand the different types of refinancing

While many people think of refinancing as switching lenders, you can also choose a better deal but stay with your original lender. Refinancing through your original lender but opting for a different deal is referred to as an internal refinance; external refinance is where you find a different lender.

In 2023, it was reported that Australia had the largest boom in mortgage refinances in history over the past three years. And according to Finder’s Housing Market Report 2023, while in 2019 just over half of refinancers were external refinancers, by mid-2023, this had jumped to 72%.

Know the market and interest rate movements

As the stats show, in recent times more mortgage holders than ever, are swapping lenders in order to chase a better deal. Often this is the main goal – to refinance to get a lower interest rate.

Given the fluctuations in the market and the rise and fall of interest rates, it’s smart to keep informed as to what’s happening. It’s also a good idea to touch base with a financial expert to get their take on whether now is a good time to refinance.

Assess your financial health

It’s then time to look at your financial situation, so you have a clear understanding of your credit score, current financial position and equity, income, and debt-to-income ratio.

It may have been some time ago that you last did this and it’s likely that some things have shifted, especially given the higher cost of living at the moment.

Understand your loan

Whatever your reasons for wanting to refinance are, you need to understand what your current commitment is and what changes you want to make.

Read through your current loan’s terms and conditions, as it may have been a while since you’ve checked them. You can chat to your current lender to see if there are any benefits you haven’t been utilising or costs you are unaware of.

Understand refinancing costs

A follow-up from knowing your loan is ensuring you have a clear understanding of refinancing costs. While the lure of a better deal can be hard to resist, you may find that it may cost you more than you had thought.

Calculate your break-even point to determining if refinancing is beneficial – this includes taking any valuation fees and payout costs (such as exit fees) into consideration. If you are on a fixed rate home loan, you may need to pay a break free if you refinance.

Consider the impact on your credit score and LVR

Another thing to be aware of is how refinancing can impact your credit score. Aspects that come along with refinancing, such as ending a loan and needing another credit check, can cause your credit score to dip. And if there is the possibility that you skip out on a mortgage payment (should the refinancing process take longer than expected, for example), this will further damage your credit score.

Loan to Value Ratio (LVR) is the difference between the amount you’re borrowing to the value of the property. If your LVR is over 80%, you need to pay Lender’s Mortgage Insurance (LMI). When refinancing, it’s likely that your LVR has shifted due to your mortgage repayments, so your LVR tends to be lower as a result. However, if your property has fallen in value and your LVR has risen, then you may need to pay LMI when refinancing.

We can assist with refinancing to ensure it’s not only beneficial for you, but that it also frees up your finances. Get in touch today so we can discuss your options.

If you have any questions or need any information please give us a call on 039723 0522.

Many people think they can’t afford to get aged care advice, but the reality is you probably can’t afford not to get advice.

RADs, DAPs, MPIRs, MTAs and ACATs !! These are just a few of the acronyms you will face when navigating aged care decisions. It might even feel like you’ve landed in a foreign country where you don’t understand the language or the rules.

Navigating your way through aged care and the jargon is not easy. Frustration, confusion and anxiety are feelings you are likely to experience, especially if you have arrived at this point with little preparation.

Some tasks are just too complex and too important to do on your own.

That’s where we can help. You don’t have to make these decisions or interpret the language on your own. We have the experience and expertise to help you make well-informed aged care decisions. We can show you how you can afford the care you need and understand how it all works – saving you time, stress and money.

Avoiding mistakes is a good reason to seek advice. Four key mistakes we often see people make when they don’t get advice include:

• Selling the home without understanding the consequences
• Being afraid to pay a lump sum (refundable accommodation deposit – RAD)
• Not generating enough cashflow
• Providing the wrong information to Services Australia and paying too much in fees.

Financial advice is important, but not all advice is good advice. Sometimes things can go wrong. To ensure you are protected, is important to get advice from someone who has experience and education, is licensed under an Australian Financial Advice Licence (AFSL) and is listed on the ASIC Financial Adviser Register. If something does go wrong, you then have access to dispute resolution processes and professional indemnity insurance.

Advice should focus on more than just the costs on date of entry into care. You want the advice to also forecast how your finances will be affected over time, to make sure you don’t run out of money or make bad decisions. Examples of advice gone bad, include:

• If keeping the home, not understanding how the age pension changes after two years.
• Structuring finances to qualify as a low-means resident, without realising this may make it harder to find a place with some aged care providers.
• A person may gain comfort that the home is exempt if an eligible carer continues to live there, but what seems like an affordable option could soon be a financial disaster if the carer loses income support and this was not anticipated.
• One child in a family uses their own money to help a parent pay the lump sum Refundable Accommodation Deposit/Contribution, and only too late realises that this resulted in higher aged care fees and an estate dispute when they want to recover the money.

Our advice follows a logical process to consider the financial situation when you first move into care, what will change after that move, what the situation will look like after two years and what to expect when the estate needs to be finalised. This helps to anticipate future changes and mitigate problems as much as possible.

When aged care decisions go badly, the mistakes can be costly both financially and emotionally.  Let us take away some of the stress – we are licensed financial advisers and have the experience and qualifications to help you make well-informed aged care decisions. Contact us on 03 9723 0522 to make an appointment to discuss your aged care needs.

Suite 2, 1 Railway Crescent
Croydon, Victoria 3136

Email: integrityone@iplan.com.au

Telephone : 03 9723 0522

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This information is of a general nature and does not take into consideration anyone’s individual circumstances or objectives. Financial Planning activities only are provided by Integrity One Planning Services Pty Ltd as a Corporate Authorised Representative No. 315000 of Integrity Financial Planners Pty Ltd ABN 71 069 537 855 AFSL 225051. Integrity One Planning Services Pty Ltd and Integrity One Accounting and Business Advisory Services Pty Ltd are not liable for any financial loss resulting from decisions made based on this information. Please consult your adviser, finance specialist, broker, and/or accountant before making decisions using this information.

If you’re nearing retirement age, it’s likely you’re wondering if you will have enough saved to give up work and take it easy, particularly as cost-of-living increases hit some of the basic expenses such as energy, insurance, food and health costs.

Fortunately, someone has already worked out what you might need.

The Association of Superannuation Funds in Australia (ASFA) updates its Retirement Standard every year, which provides a breakdown of expenses for two types of lifestyles: modest and comfortable.

Based on our average life expectancy – for women it is just over 85 years and men 81 – if you are about to retire at say age 67, you will have between 14 and 18 years in retirement, on average and depending on your gender.

ASFA finds that a couple needs $46,944 a year to live a modest lifestyle and $72,148 to live a comfortable lifestyle. That’s equal to $902 a week and $1387 respectively. The figure is of course lower for a single person – $32,666 for a modest lifestyle ($628 a week) or $51,278 ($986) for a comfortable lifestyle.

What does that add up to? ASFA estimates that, for a modest lifestyle, a single person or a couple would need savings of $100,000 at retirement age, while for a modest lifestyle, a couple would need at least $690,000.

A modest lifestyle means being able to afford everyday expenses such as basic health insurance, communication, clothing and household goods but not going overboard. The difference between a modest and a comfortable lifestyle can be significant. For example, there is no room in a modest budget to update a kitchen or a bathroom; similarly overseas holidays are not an option.

The rule of thumb for a comfortable retirement is an estimated 70 per cent of your current annual income. (The reason you need less is that you no longer need to commute to work and you don’t need to buy work clothes.)

Building your nest egg

So how can you build up a sufficient nest egg to provide for a good life in retirement? There are three main sources: superannuation, pension and investments/savings. Superannuation has the key advantage that the money in your pension is tax free in retirement.

Your superannuation pension can be augmented with the government’s Aged Pension either from the moment you retire or later when your original nest egg diminishes.

Your income and assets will be taken into account if you apply for the Age Pension but even if you receive a pension from your super fund, you may still be eligible for a part Age Pension. You may also be eligible for rent assistance and a Health Care Card, which provides concessions on medicines.

Money keeps growing

It’s also important to remember that the amount you accumulate up to retirement will still be generating an income, whether its rentals from investment properties or merely the growth in the value of your share investments and the accumulation of money from any dividends paid.

You can also continue to add to your superannuation by, for instance, selling your family home and downsizing, as long as you have lived in the home for more than 10 years.

If you are single, $300,000 can go into your super when you downsize and $600,000 if you are a couple. This figure is independent of any other superannuation caps.

Planning for a good life in retirement often require just that – planning. If you would like to discuss how retirement will work for you, then give us a call.

Suite 2, 1 Railway Crescent
Croydon, Victoria 3136

Email: integrityone@iplan.com.au

Telephone : 03 9723 0522

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This information is of a general nature and does not take into consideration anyone’s individual circumstances or objectives. Financial Planning activities only are provided by Integrity One Planning Services Pty Ltd as a Corporate Authorised Representative No. 315000 of Integrity Financial Planners Pty Ltd ABN 71 069 537 855 AFSL 225051. Integrity One Planning Services Pty Ltd and Integrity One Accounting and Business Advisory Services Pty Ltd are not liable for any financial loss resulting from decisions made based on this information. Please consult your adviser, finance specialist, broker, and/or accountant before making decisions using this information.

With property remaining a high-priced asset, it’s more important than ever for investors to ensure their property investments are a financial success.

The latest data demonstrates property’s popularity. One-in-five households (21%) owns a home in addition to their usual residence.

Maximising taxation benefits is one key element but the ATO recently found 9 out of 10 returns were incorrect, so it’s essential to check your paperwork as we approach the end of the financial year.

Get your structure right

As with any investment asset, ensuring the right ownership structure for a property asset is vital because it can make a big difference to your tax position each financial year.

It’s also sensible to check if you are using the right structure to help protect your investment from creditors, provide income in retirement, or cope with the unexpected death of a part-owner.

Managing the loan

Once you establish your investment loan, tax still remains a consideration. Any deductions you claim for your loan expenses must directly relate to earning assessable rental income.

In cases where money from the loan is used for both private and income-producing purposes (such as a property partly used for rental and partly as your home), you must split your claims into deductible and non-deductible amounts.

If you use the redraw facility on your home’s mortgage to fund an investment property, you won’t be able to claim the interest as a deduction if you subsequently use your family home as a rental. There are also capital gains tax (CGT) implications with this strategy.

Costs related to loan establishment fees cannot be claimed as a deduction upfront and must be spread over the term of the loan or a five-year period, whichever is shorter.

Rental deduction dangers

Although many investors focus on the tax deductions they can claim from a property asset, both rental income and deductions are key areas of ATO interest.

Detailed records are required to substantiate all claims and any rental income from ‑short-term arrangements and insurance payouts must be included in your return.

You also need to be careful not to overclaim. Many new investors make the mistake of claiming an immediate deduction for initial repairs after purchasing a property. Existing damage must be claimed over several years as a capital works deduction and is used when working out your capital gain or loss when selling.

Deductions such as advertising for tenants, professional property management, council rates, land tax and strata fees, building and landlord insurance, and pest control can only be claimed for time periods directly connected to earning income.

Depreciation or capital works?

Property investors are able to claim a wide range of deductions for expenses associated with maintaining and financing property assets, but care is needed.

Claims for depreciation of assets with a limited effective life (such as freestanding furniture, washing machines and TVs), can be made each year, but deductions for capital works must be spread over 40 years following construction. Capital works include improvements or alterations such as adding a driveway or altering the building.

Improvements such as renovating a bathroom, are a building cost and must be claimed at 2.5 per cent annually over 40 years from completion.

Check your CGT

When it comes time to sell your investment, an important consideration is capital gains tax (CGT). The key to making your investment tax-effective is to ensure you have identified all legitimate expenses contributing to the property’s cost base so you can correctly calculate the capital gain or loss.

The property’s cost base includes the price paid plus your buying and selling costs (such as stamp duty, legal fees and the agent’s commission). You are not permitted to include amounts already claimed as a deduction, including depreciation and capital works.

Any capital gain must be included in your tax return for the income year the property is sold, while capital losses can be carried forward and used in future years.

To ensure you are making the most of your investment assets, call our office today.

Suite 2, 1 Railway Crescent
Croydon, Victoria 3136

Email: integrityone@iplan.com.au

Telephone : 03 9723 0522

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This information is of a general nature and does not take into consideration anyone’s individual circumstances or objectives. Financial Planning activities only are provided by Integrity One Planning Services Pty Ltd as a Corporate Authorised Representative No. 315000 of Integrity Financial Planners Pty Ltd ABN 71 069 537 855 AFSL 225051. Integrity One Planning Services Pty Ltd and Integrity One Accounting and Business Advisory Services Pty Ltd are not liable for any financial loss resulting from decisions made based on this information. Please consult your adviser, finance specialist, broker, and/or accountant before making decisions using this information.

If you are building or undertaking major renovations to your home, you may be looking for a construction loan. Unlike a standard loan, a construction loan allows you to pay for each stage of the build without having to come up with all the funds upfront.

How construction loans work

Also referred to as building loans, this type of loan is aimed at people either building a new home or making significant structural changes, such as adding a room or changing the roof, to their pre-existing home.

Construction loans allow for flexibility throughout the build or renovation, through the process of drawing down progress payments.

Draw down progress payments

A key feature of a construction loan is the flexibility to draw down your loan in instalments throughout the building process, which is referred to as a draw down or progress payments, rather receiving the full loan at the start of your major project.

There are usually five to six stages in which you’ll receive the instalments, including the deposit, foundation works, the framework, lock-up, fixing (plumbing and electrical) and completion.

While this payment arrangement, rather than receiving a lump sum at the beginning, can seem cumbersome, it means that you’ll only be drawing down on your loan to pay your builder and other contractors as they complete stages of work.

This can be beneficial as you will only be charged interest on the amount drawn down, not the total. You also don’t have to pay back the principal loan amount until after construction has been completed. helping you manage your cashflow throughout the project.

Fixed price contract

Construction loans are usually based on a fixed price contract, whether that be the land you are building on or the property you are renovating. This means that there is little room for change while the building or renovations are going ahead.

This loan tends to be interest only for the period of building/renovations, then become principal and interest once completed. You may be able to negotiate that the interest only term can be continued, so discuss this with us if it is something that appeals to you.

Should changes need be made to your build along the way, you must discuss this with your lender as this can be likely to vary the forecast costs. As variations are very common in building and renovating, it’s wise to make sure you have accounted for possible changes when applying for the loan.

How to apply

To apply for a construction loan, you will need to show the lender your council approved building plans and fixed price building contract from a registered builder. Usually, you will also be asked to make a deposit of 10% – 20% of the total cost, it’s worth noting that you might have to pay Lenders Mortgage Insurance if your deposit is less than 20%.

Having a licensed builder greatly increases your chances of getting the loan, though in some instances you can still apply for the loan as an owner builder. Applying as an owner builder involves more paperwork and can be more arduous, so be prepared that this process may take longer.

You may be visited by a valuer during the construction/renovation process, to ensure that everything is running to plan. Based on the valuer’s report, the lender will either continue the payments or alert you of a problem.

Be aware of the dates of your loan, such as when the build must be completed by (for example, within 24 months from the date of your first draw down). If the build has been delayed, keep us informed, as we will need to discuss your moving timelines with the lender.

Once the building or renovations are completed, you will need to provide the final paperwork, such as the builder’s final invoice or receipt, building insurance policy and certificate of occupancy.

The building and renovating process can be stressful as it is, so chat to us today to see how we can help you navigate construction loans. We can step you through the process to get you on your way to securing the money to fix up or create your home.

If you have any questions or need any information please give us a call on 039723 0522.

Loud budgeting is a trend that may have started as a joke but is being embraced by those who want to share their financial goals and priorities and in doing so, also improve their chances of achieving them.

It was comedian and writer Lukas Battle who brought the term “loud budgeting” to the world in a TikTok post, presenting it as an alternative to “quiet luxury” as loud budgeting represents a move away from spending to impress or conform.

As is the way with trends, the idea resonated with people, was picked up and run with by a growing group of budgeters. The spirit of the trend is about saying a loud “no” to what doesn’t align with your values. But there’s more to it than that, and there is also a right way to go about loud budgeting that will enable you to keep your finances on target – and your friendships intact.

The benefits of loud budgeting

But before we look at how to get it right, let’s explore why loud budgeting can be such a powerful tool to put you in control of your financial journey.

The fundamental reason it works is because talking transparently about your finances and sharing your reasoning behind how you want to spend your money gives you power and lets you decline invites in a way that is less likely to offend others.

Being open about your challenges can create a sense of community and inclusion. By sharing and acknowledging that it is normal to have limited spending capacity and that it can be a juggle to manage our short-term spending with our long-term savings goals, helps everyone understand each other’s pressures.

Once things are out in the open you are also more accountable. When you have shared your financial hopes and dreams with others, you are more likely to do what is required to stay on track and get support from those who care about you.

Making it loud – and successful!

Think of your goals

Before you start sharing your financial goals with others you must be clear on what they are. Think about what is important to you and what you are working towards. Don’t just have figures in your head – do a proper budget of what you have coming in, what you need to save to meet your targets and what you have left over to spend, so you can make educated decisions.

What matters to you

When you have decisions to make about how to spend your money it can help to think about what is important to you and make intentional choices. That ensures you are not living unnecessarily frugally, but being selective about what you choose to spend your money on, taking into consideration what matters most to you.

Eye on the prize

It’s important to keep your eye on the prize (or prizes) whatever form they may take. Looking to the longer term, this can be smaller goals, like saving up for a special occasion or bigger ones, such as a home deposit. It could also be prioritising payments such as mortgages, student loans and other kinds of debt. Check in from time to time to track your spending and savings against your goals.

Careful communication

Being careful in your phrasing will help make sure feelings aren’t hurt when you decline an invitation. Part of loud budgeting is not saying ‘no’ outright – it’s about explaining what’s going on for you and offering an alternative that works for you. For example, if you’re invited out for a dinner that you know will blow the budget, you could say “I’m trying to get enough together for a deposit to buy a place so I’m on a tight budget at the moment, can we catch up for a BYO barbeque at my place instead?

Making financial choices that are in line with how you want to live your life and prioritising long-term goals over temporary indulgences is a great way to set yourself up for a fantastic future. So why not speak up and try making your budgeting loud?

Suite 2, 1 Railway Crescent
Croydon, Victoria 3136

Email: integrityone@iplan.com.au

Telephone : 03 9723 0522

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This information is of a general nature and does not take into consideration anyone’s individual circumstances or objectives. Financial Planning activities only are provided by Integrity One Planning Services Pty Ltd as a Corporate Authorised Representative No. 315000 of Integrity Financial Planners Pty Ltd ABN 71 069 537 855 AFSL 225051. Integrity One Planning Services Pty Ltd and Integrity One Accounting and Business Advisory Services Pty Ltd are not liable for any financial loss resulting from decisions made based on this information. Please consult your adviser, finance specialist, broker, and/or accountant before making decisions using this information.