Archive for finance
I still haven’t had my operation but it looks like I will live and I finally feel well enough to start talking to you again .
Only a brief word today however, prompted by my broker Scott sending me this yesterday…….
Most Kiwis have been enjoying low home loan interest rates for a while. So how should you handle your home loan?
Should you fix?
Should you float?
Should you split things down the middle?
Only you can answer that question, but this update is designed to help you make a decision about your home loan.Remember, there’s no way to guarantee a perfect decision on home loan rates. But there are things to bear in mind when making the best decision for you.
To fix or not to fix? – That is the question.
It’s certainly a question that plenty of homeowners are asking right now. And the best way to answer it is to weigh up your priorities and choose the rate and the term that’s best for you. So here are some things you may want to think about.
Why choose a fixed rate?
A fixed rate means you’ll know exactly what your repayments will be over a fixed term. So whatever interest rates do, you’ll be able to budget for your repayments with certainty. You can even increase the amount you repay by up to $1,000 a month or $500 each fortnight without any penalties (as long as those increased payments remain for the fixed rate period.)
Why choose a floating rate?
Right now, floating rates are lower than fixed rates. While it’s unlikely they’ll stay that way, they are currently the cheapest way to borrow money. They’re also more flexible if you want to make extra repayments on your loan at any time. The downside of a floating rate is that rates can change at any time – and that means your regular repayments will change too.
What can you afford?
When planning your budget, it’s a good idea to think about the impact of rate increases. If your regular repayments go up, what will this mean for your other financial commitments and lifestyle costs such as holidays and entertainment.
What’s the cost of certainty?
While it will cost a little more to fix your loan now, over time the price difference between a fixed and floating rate is likely to be small. That’s the price of knowing exactly what your regular repayments will be.
What are your plans?
Your personal plans also impact your interest rate decision. If it’s likely you’ll be making a lump sum payment on your loan in the near future, you may be better to keep a floating rate or only fix for a short term.
Is it a good idea to split?
By splitting your loan between a fixed and a floating rate, you can strike a balance between certainty and flexibility. How you split the loans depends on which of these is more important to you.
So you have read this article and are thinking to yourself “this is a pretty non-committal position” to take, and I would have to agree with you.
The reason? At the moment there is no clear winner when looking at floating or fixed interest rates as a general rule, it comes down to your personal circumstances. There will be some of you who would definitely benefit from doing one or the other strategy but for most it will be a combination of the two.
Please feel free to contact me by clicking here if you would like to talk about your current position and how to best future proof your home loan costs.
Kind regardsScott Miller
Advanced Mortgage Solutions
0508 466 356
to register for next weeks US Cashflow Webinar. There are some exciting developments and we will have lots of time to answer your questions!!
We now have no doc loans in place and a stupidly strong currency, time to learn enough to dip your toes in the water, it’s cool, clear and profitable!
Only Passion will sustain you when everything turns to custard ~ Dean.
Anyway as I was sitting waiting I overheard a conversation between a lovely Tongan lady and her plaintiff.
It appeared the Tongan lady purchased goods form the plaintiffs business, said business being a mobile sales truck that travels around South Auckland selling everything form clothes to furniture at inflated prices and outrageous interest rates.
The lady had clearly bought goods she couldn’t afford so was no in court being ordered to pay a minimum amount per week.
The plaintiff was clearly cunning and predatory, based on the end of the conversation.
The Tongan lady asked that as soon as they were out of court, was there any chance she could buy two more tables like the one she is in court over not paying for as “Christmas is coming up and they are beautiful”.
“Of course, replied the vendor, just come and ask for me at the office once you leave here.”
I wanted to reach down her throat and pull her cloven hooves through her body but what do you do about such evil behaviour by the cunning abusing the naive?
Get going and Stay Safe ~ Dean Letfus
Low interest rates and some easing of lending is a great thing for investors, no two ways about that. But it is interesting that it immediately brings out……, well “greed” isn’t quite the right word, snob value isn’t quite right either….., let me try to explain.
Todays news about houses in certain parts of Auckland selling for nearly double valuation is quite sobering or exciting depending on whether you are buying or selling. People who think like investors would taking advantage of the low interest rates to create cashflow or buy slightly better property that is still cash neutral and that is smart investing.
But of course what also happens is that the larger buyer pool look at what their weekly payments will be and as is obviously happening in the CBD, adjust their buy price UPWARDS focusing solely on the fact that they can afford the payments.
I don’t have and deep conclusion to reach from this observation other than the fact that no democratic government will ever find a way to keep property prices down to control inflation. Human nature will always raise a home buyers emotional quotient. I loved this quote in the Herald:
“Another couple told of similar problems in Herne Bay, where they struggled for 18 months to buy and eventually doubled their price range and paid about $1.9 million for a nice but basic family home.”
Can’t find anything for a mil, well shucks let’s pay 2 then .
Get Going and Stay Safe ~ Dean
In case you missed it there was a case this week in New Zealand where a house was “foreclosed” on or repossessed, by chainsawing through the foundations and putting it on the back of a truck!!
In trying to find out more detail I came across a forum that was punding away at the bank for its heartlessness. One apt post said”
“Come on guys, they would have had months of warning. Westpac didn’t wake up yesterday and think; “Who can we **** off today? I know let’s go take that guys house, oh and let’s actually “take” it!”
The whole thing smacks of “more going on than we know”, but it is a timely reminder of the folly of not talking to your bank.
I have had incredible pressure from banks over the last 2 and a bit years and in some cases stopped paying mortgages for some time but always kept the banks fully informed. As a result I am still able to find my houses on their own sections.
Many people think the worst is behind us and that may be true, however there are still lots of people under the gun financially and the temptation is to hide and do nothing. This is almost certainly what happened to the family above and whilst the outcome is more dramatic than normal it was hardly unfair or the banks “fault”.
My personal experience of asking for my private parts back form every bank in the country has been that even the ones who are unreasonable respect the fact you came and saw them and definitely don;t rush you into trouble as long as you keep the channels open. And in fact most institutions will work very hard to assist you.
Often there is no good solution and we have to come to terms with that. I am going to lose my home, my rentals or go bankrupt or whatever. We will want to blame the bank, the cat, our boss, the tv evangelist and the government but generally it is going to be better for us to accept responsibility for getting through it if not causing it.
And whatever you do, talk to your lenders BEFORE you miss a payment if possible. If too late for that get off the computer and ring them now.
What s that I hear?? Sounds like a chainsaw………
Get Going and Stay Safe ~ Dean Letfus
One of my favourite journos, Diana Clement, wrote an interesting piece in the Herald today regarding peoples money management skills. She commented on the fact that 35% of people get their advice from family and friends and that often that advice was bad.
Whilst I know this to be true I think there is a bigger problem and that is that most people are relatively clueless about money these days. And so we have to ask ourselves why. To be financially literate and competent seems to require swimming against the tide and yet it shouldn’t have to be should it?
Post depression and post war cultures were very responsible financially because their lives depended on it. Today it seems our lives depend on credit .
So if take a bigger picture view the fact is we and our children are bombarded daily with “education” coming to us through print and TV ads all training us to buy stuff without any understanding of the risk or real cost. I find it reprehensible that all sorts of laws are implemented to attack evil property investors for example but our television can be littered with debt consolidation loans and it’s on $60 a week advertising. I recently saw a slew of adverts offering “no interest for 5 years”. They should be lined up and shot because the majority of those people will end up paying the interest because they don’t understand the principle behind the product, which is that people don’t pay it off on time and end up incurring all the interest anyway.
I talked about this topic a while ago and sadly I will be talking about it till I die as we are not going to change the “system” we have allowed to engulf us unless we reach a point again where money skills are life and death.
What we can do however is take the chances that do present themselves to speak life into people who are struggling, especially if you have walked out of the marketing lies into good money management and financial freedom.
One piece of very surprising good news in Diana’s article is that our consumer spending has dropped form $1:10 spent for every dollar earned to 98 cents spent for every dollar.
Maybe there is hope, or maybe things are really bad out there and people lives are depending on it?
Get Going and Stay Safe ~ Dean Letfus
I love “Fiddler on the Roof” and the Rich Man song is forever embedded in my brain.
However some of the song lyrics are well, incorrect. The fact is most of us who endeavour to better our financial position work $%^!$^)$&_#%* hard for a period of time and then hopefully reap the rewards down the track.
So don’t be discouraged when things don’t fall into your lap. The harder you work the luckier you will get. Remember this as the year cranks up and you start moving towards your goals.
And talking about money there is definitely a shift towards easier money occurring in teh finance sector. I will get Kris to do a more comprehensive update in the newsletter but just today I have heard of 2 lot sof solicitors nominee money available at 7% interest rate plus an angel investor willing ot help with no money down deals. The banks seem to be getting easier to work with and generally life is pretty good if you are looking to buy.
So get going and Stay Safe ~ Dean
PS: The interest in US property is something off the charts so I have asked 2 top USA experts to join me for a 2 hour webinar next week to discuss the opportunities and pitfalls. It’s free and there is no up-sell to another event or anything else, just lots of professional info. You can register at: http://bit.ly/hYaiRZ
There are some potential fish hooks with this strategy requiring strong due diligence, but I am seeing an increasing trend in a difficult credit climate of vendors selling their entities rather than their properties to keep current funding in place.
I was offered a deal like this yesterday and in talking to my solicitor he advised it was becoming common practise.
Obviously every deal is different but I’ll use my offered deal as an a example of how they can work.
Owner has a clean trust with 2 properties inside it. Both properties are mortgaged with same bank.
After trying a straight sale without success owner/vendor is now offering to sell the trust effectively by bringing in purchaser as trustee and later on removing themselves from the trust.
as the trust has the current loans and the vendor is happy to leave his personal guarantees in place for 5 years there is no issue with the bank or even need to advise them in this case as nothing relevant to the bank has changed.
Existing bank account remains with purchaser being added as a signatory and bank being advised that all transaction now require BOTH signatures.
If the rust is GST registered this part of the purchase price is deducted as it has already been claimed and received and the balance, being Purchase price, less GST and less current loan balance, is to be paid to the vendor.
In the deal I am looking at a modest deposit can be made, like 40 grand on a 600K deal and the balance of the purchase price can be made in 4 or 5 years as part of a refinance.
So this deal means one can get into a cash flow positive property in Auckland for 40K down with all financing in place.
One then has 5 years to sort out refinancing to remove current owner form trust and the balance due to teh vendor is an interest free loan for that period.
Hope that makes sense, it is a fabulous strategy in this market for many vendor and buyers.
In fact with the above example I could probably get into it for no money down as the vendor doesn’t need cash, just wants the burden of day to day ownership removed.
So the main issues to think about are:
1. Ensuring the bank is not needing to be advised or have an issue. This is all about the detail of how the entity is moved, sold or restructured but is easily enough done.
and 2. there can be potential issues or other liability in an entity which is why we normally DON’T take them over. Your solicitor will need to look into this for anythign obvious and in some cases it is going to come down to your lawyer being happy by talking to their lawyer that there is nothing hidden.
This is always a real risk so buyer beware but if you can resolve that concern it is a pretty cool way to get financing when you can’t get financing.
Stay Inspired and Stay Safe ~ Dean Letfus