Investing

Budgeting

For many people budgeting is a dirty word, but it seems in the current economic climate this is fast becoming more fashionable. Australian households are now saving more than ever, with the household savings ratio now well above 10 percent, which is the highest level in many years. This means that household budgets are being watched more closely and those budget worksheets are getting a good workout.

As far as we know a budget has never harmed anyone, in fact it can be quite beneficial to household finances, as it normally results in more careful financial management leading to longer term financial freedom, as opposed to short term credit card binges which can take years to pay off. Nevertheless if you have already had that credit card binge and now find yourself with a foul tasting debt overhang, you can get yourself out of trouble sooner by careful budgeting.

A budger planner can be a very handy tool in assisting with this process. One of the best budgeting tools available can be found online athttp://moneysmart.gov.au/tools-and-resources/calculators

This is a very useful tool as it can help you to break down the weekly, monthly and annual costs of all the various expenses and show you whether you are actually spending more or less than you think you are. It helps you track your money, and realise where you can save.

For further help with budgeting or any assistance with managing your financial situation give us a call.

Pay your loan off sooner

Most people know that by putting extra money into their home loan they will pay it off sooner, but few realise just what sort of a difference this can make. For example, on an average mortgage of $300,000, with an interest rate of 7% pa, if you put in an extra $25 per week you would save 4 1/2 years off the term of your mortgage and save yourself $74,190 in total.

Another way to ensure you are reducing your home loan as quickly as possible is to make sure you have the most competitive and suitable home loan for your circumstances. If you have not had a mortgage health check in the last 12 months, it is a good idea to contact us just to make sure you have the best product for your needs. With lenders now having abolished early exit fee’s, the cost of moving to a better deal is lower than ever before.

Building

There is a bit of a process involved in choosing a block of land, then deciding what type of home you want to build, and what you want in that home. This can take quite a bit of effort and sometimes even cause a little extra stress, so naturally some wonder “Is it all worth it?”.

The pros of building your own home include;

  • You get exactly what you want, from room size right down to colours (Within budget of course)
  • You save money on Stamp Duty (Stamp Duty is only payable on the price of the vacant land)
  • You have the privilege of moving into a Brand new home
  • There are currently some big incentives available for people who build (Including the id=”mce_marker”0,000 QLD build bonus, and other builder incentives)
  • The cost of significant renovation’s to an older home can far exceed the cost of building a new one
  • There is a smaller chance of finding major problems with the home such as leaky pipes or faulty wiring
  • Greater Depreciation benefits if you are an investor, so more tax savings

The cons of building your own home include;

  • You pay interest on the mortgage whilst the home is built (The mortgage size increases as construction progresses)
  • This can make your finance options a little trickier (However we can normally sort these out for you)
  • You have to wait for it to be built before you can move in
  • It can be challenging to stay within your budget (Those bright and shiny things add up very quickly!)

The above list is certainly not conclusive but can help in choosing between alternatives if you are currently considering the purchase of another home.

NRAS

NRAS stands for National Rental Affordability Scheme, and is a Federal Government scheme aimed at increasing the supply of affordable housing. The NRAS is a win-win for both investors and tenants alike, as investors are provided with a Tax Credit (Tax free payment) each year for 10 years in return for renting out the properties at 20% to 25% below normal market rents. By offering these incentives the government hopes to increase the supply of affordable housing to those in moderate income households such as teachers, nurses, and police who can rent the properties for 20% to 25% below what they would ordinarily pay in rent.

Currently in financial year 2013 the NRAS tax credit amount is $9981, however this amount increases each year in line with rental CPI. For most investors once the NRAS tax credit is taken into account the property will be cash flow positive, although in something unique to NRAS properties it will still be negatively geared, thus reducing your taxable income.

Obtaining finance for the purchase of an NRAS property can be tricky, so it is best to speak to a mortgage broker who is experienced in this area. At Get Ahead Finance we have financed a large number of NRAS transactions over the past few years, and will be happy to help guide you through the maze.

To visit the department of housing’s website and learn more about NRAS please click on the following linkhttp://www.fahcsia.gov.au/sa/housing/progserv/nras/Pages/default.aspx

To find out more about the NRAS or NRAS properties which are currently available please contact us to discuss.