Super stoush

The big super funds are targeting self-managed super – a popular choice for small business owners – over burgeoning borrowing for property investment. And the push is on to make the $20,000 write-down facility permanent. Here’s what to watch for in next month’s Federal Budget.

It’s shaping up as the battle of the big guns against the little guys.

The big super funds are calling for a crackdown on self-managed super funds (SMSFs) borrowing to invest in property.

It puts at risk an increasingly popular wealth-creation strategy for business owners: to use Limited Recourse Borrowing Arrangements (LRBA) to buy their own commercial premises through SMSFs.

In the past 10 years, banks and non-bank lenders have been issuing loans products to target the growing SMSF market, promoting them as a way for business owners to buy commercial premises through their super fund.

In a pre-budget submission, the big super funds’ peak body, The Association of Superannuation Funds of Australia (ASFA), has called on the government to end direct borrowing by superannuation funds because it is becoming too risky.

“The amount of funds borrowed using LRBAs has increased substantially from $497 million in June 2009 to $25.4 billion in June 2016, an increase of around 5,000 per cent,” the ASFA submission states.

The submission argues direct borrowing, even through LRBAs, puts retirement savings at risk
if investments go south. Taxpayers may end up carrying the can, through the provision of aged pensions, the ASFA claims.

The association acknowledges only about seven per cent of SMSFs were currently using LRBAs,
but it states half of these had more than 80 per cent of the fund’s total assets in LRBAs.

“This indicates a lack of diversification within such funds.”

The big super funds’ position echoes that of David Murray’s 2014 Financial System Inquiry, which also recommended an end to direct borrowing through superannuation.

Acknowledging the difficulty of unwinding existing arrangements, the ASFA pre-budget submissions calls for an end to borrowing, leaving current loans in place.

“ASFA considers any changes to the arrangements should involve removing the ability to enter into LRBA arrangements in the future,” the submission states.

With the 2018/19 Budget to be handed down on May 8, the big super funds are also hoping the government will crack down on sham contracting.

The rise of the ‘gig economy’ has many in the industry, and in government, concerned about stagnant super balances. To that end, the ASFA submission also urges the government to increase penalties and lower the bar for prosecuting business caught using sham contracting arrangements.

If a worker is classified as a contractor, rather than employee, businesses are not obliged to pay benefits such as superannuation or annual leave. While more flexible work practices have caused confusion, many employers have been found to have deliberately misrepresented staff to avoid super obligations.

The legislation currently requires the employer’s error to have been reckless, but ASFA backs a Productivity Commission call for the Fair Work Act to be amended to allow prosecution where the classification was something an employer could be reasonably expected to know.

In other pre-budget submissions, small business industry groups are pushing to have the government’s popular $20,000 instant asset write-off scheme for small business made permanent. At present, it is set to end on June 30, reverting to $1,000.

Introduced in the 2015/16 budget, the write-down facility aims to encourage small businesses
with turnover up to $10 million to invest in new equipment by allowing them to claim accelerated depreciation on items up to $20,000 in value.

Tax and Super Australia, which represents tax agents, argue in their pre-budget submission that constantly changing thresholds cause confusion for SMEs and the $20,000 limit should not merely be extended, as was done in 2017/18, but made permanent.

“This ($20,000) threshold is having a real effect in the small business community in both encouraging investment in productive assets and reducing compliance burdens,” the submission states.

The Council of Small Business Australia (COSBOA) also supports making the $20,000 threshold permanent, and renews its support for the establishment of a small business investment allowance
to facilitate greater deductions on assets above $20,000 and up to $2 million.

On the productivity front, COSBOA also calls for mental health programs aimed at small business owners and the introduction of federally-funded domestic violence leave, which could be more impactful for small businesses that often lacked the resources to respond effectively.

Pre-budget submission from a range of industry and interest groups can be viewed on the Treasury website.

The RBA has decided to once again leave the official cash rate unchanged at 1.5%

The Reserve Bank of Australia decided to once again leave the official cash rate unchanged at 1.5% with the last rate move back in August 2016. I’d like to share today’s rate announcement and the thoughts on why the Reserve Bank of Australia has made this decision.

With a combination of retail deflation (ie the price of retail goods falling) and continued weak wages growth still impacting economic growth, the Reserve Bank have signaled that we can expect to see rates where they are for the time being. They have indicated however that they expect the next rate move to be an increase and are concerned about the potential shock that this may cause the economy.

Rates remain constant now but it is important that you are prepared if they increase. There may be different rates available from our lenders, so your broker is always on hand to ensure you have the right financial solution for your current circumstances.

If you’d like to have a chat about what today’s news means for you and your finances, please don’t hesitate to get in touch with an AFG broker.

The RBA decided to once again leave the official cash rate unchanged at 1.5%

The Reserve Bank of Australia decided to once again leave the official cash rate unchanged at 1.5% with the last rate move back in August 2016. I’d like to share today’s rate announcement and the thoughts on why the Reserve Bank of Australia has made this decision.

With weak wages growth, continued low inflation and a lack of significant economic growth we can expect interest rates to remain where they are for the time being.

Even when rates are unchanged, the role of your broker remains the same. There may be different rates available from our lenders, so your broker is always on hand to ensure you have the right financial solution for your current circumstances.

If you’d like to have a chat about what today’s news means for you and your finances, please don’t hesitate to get in touch with an AFG broker.

Reserve Bank of Australia has again opted to leave the official cash rate on hold at 1.5%

The Reserve Bank of Australia decided to once again leave the official cash rate unchanged at 1.5% with the last rate move back in August 2016. I’d like to share today’s rate announcement and the thoughts on why the Reserve Bank of Australia has made this decision.

With wages growth remaining modest and concerns emerging around the impact retail deflation is having on the overall economy, interest rates are predicted to be steady for the majority of 2018.

Even when rates are unchanged, the role of your broker remains the same. There may be different rates available from our lenders, so your broker is always on hand to ensure you have the right financial solution for your current circumstances.

If you’d like to have a chat about what today’s news means for you and your finances, please don’t hesitate to get in touch with an AFG broker.

For 2018’s first announcement RBA has opted to leave the official cash rate on hold at 1.5%

With the new year underway, we’ve come to the first rate news for 2018. I’d like to share today’s rate announcement and the thoughts on why the Reserve Bank of Australia has made this decision.

In its first meeting of the year, the Reserve Bank of Australia decided to once again leave the official cash rate unchanged at 1.5%. The last rate move was in August 2016.

With inflation remaining well constrained, rates appear to be firmly on hold until at least late in the year.

Even when rates are unchanged, the role of your broker remains the same. There may be different rates available from our lenders, so your broker is always on hand to ensure you have the right financial solution for your current circumstances.

If you’d like to have a chat about what today’s news means for you and your finances, please don’t hesitate to?get in touch with an AFG broker.

Borrower beware: the hidden costs of buying a new home

You’ve done the hard yards and saved a deposit, hunted down the right property and bartered a better price. The Sold sticker is all but slapped on the for sale sign. Then you realise there’s more than the agreed price to consider. If a car has on-road costs, then you might say property comes with on-street costs. Here’s a snapshot of what additional expenses you can expect when you buy a home.

Stamp duty

Next to your deposit, this is usually the biggest outlay. Stamp duty is a tax charged by state and territory governments on the purchase of property. The amount of duty charged will depend on the state government’s formula and the sale price. There are usually concessions for first-home buyers, ranging from discounts to extended payment periods. A good rule of thumb is to tuck away an extra five per cent on your deposit to cover stamp duty, plus some additional purchase costs. You should also check whether your state charges mortgage stamp duty on your loan amount.

Legal fees

You will need a solicitor or conveyancer to handle the legal transfer of the property title and make the necessary searches. Legal fees can vary widely. You are entitled to a quote up front, and should always ask for one. The more complex the transaction, the higher the fee. But don’t be tempted to cut corners. If there’s something you want to investigate about the property you are buying – compliance with development approvals, a heritage listing, potential flood levels, a shared driveway, proposed road corridors or rezoning (just to name a few) – this is your chance before your cooling-off period ends. Just remember your solicitor has probably not seen the property. While most will undertake thorough searches on your behalf, they won’t know your plans for the property. Speak up if there’s something specific you want to know.

Lending fees

Your loan itself may come with additional costs, including application fees, set-up fees and a property valuation. Depending on the type of loan, there may also be monthly account fees.

Lenders Mortgage Insurance (LMI)

Banks and credit unions will require you to take out this rather costly cover if they are lending you more than 80 per cent of the value of the property.
However, this insurance protects the lender, not you. It’s a safety net that covers any losses the lender may incur in the event of a mortgagee sale.

Mortgage registration fee

This is a charge by the state or territory land titles office to register the lender’s mortgage on the property’s title record. It’s paid by the borrower
and runs to around $125.

Pest and building inspections

Often lumped in together, these inspections provide very different information and are worth every cent. Don’t think you need one or the other. You need both, and each should be carried out by a suitably qualified and licensed expert. Often a building inspector is also qualified for pest inspections. A pest inspection costs about $100-150 and primarily checks for signs of damage caused by white-ants (termites) and borers. It can also shed light on rodent and cockroach infestations, which shouldn’t affect the structure of a property but may give you some bargaining chips on the price! A building inspection, at about $300, will report on the condition and structural integrity of the home, internally and externally, and flag any potential issues. Property sales are generally subject to building and pest reports, with the exception of auctions. If buying a property at auction, get these inspections beforehand.

Home insurance

Your home is likely to be your biggest ever purchase, so it’s well worth protecting with insurance. There are a number of factors that will affect the size of your home insurance premium, including location, the home’s age and building material, the rebuilding value and the size of the excess you choose. Your lender will require you to take out and show proof of home building insurance to cover the estimated amount they are lending you towards the building component of the property. However, this amount may leave you underinsured and, if the worst happens and you lose your home to a fire or severe weather, out of pocket.
Most insurers offer home building calculators online so you can estimate your sum insured to replace your entire home. Make sure you also factor in fences, swimming pools and any expensive building materials or fittings. Although not required by lenders, you should also take out contents insurance for your household items.

For 2017’s final announcement RBA has opted to leave the official cash rate on hold at 1.5%

We’ve come to the final rate news for 2017, in what has certainly been a jam packed year. We like to share today’s rate announcement and the thoughts on why the Reserve Bank of Australia has made this decision.

The Reserve Bank of Australia decided to once again leave the official cash rate unchanged at 1.5% for the 16th consecutive month.

This was an outcome that was again widely anticipated by financial markets. With inflation well constrained the status quo could well continue deep into the next year.

Regardless of whether rates move up, down or stay the same, your mortgage broker’s role remains unchanged. Your broker is always on hand to ensure you still have the right financial solution for your current circumstances.

If you’d like to have a chat about what today’s news means for you and your finances, please don’t hesitate to?get in touch with an AFG broker.

10 reasons why borrowers need a mortgage broker

In an age when technology helps us research, shop and even – at times – think, we might wonder what other help we could possibly need when it’s time to buy our next home.

But, unless you have weeks of spare time and a brain that can store hundreds of home loans, plus their fees and conditions, and then match them to your situation, log off and set up a time to see a mortgage broker.

Here are 10 reasons why a mortgage broker is as valuable as ever:

  1. It makes financial sense. For the vast majority of home loans, your mortgage broker’s service is free. Lenders pay mortgage brokers a fee when they connect them to borrowers.
  2. Mortgage brokers work for you, not the lender. As keen as banks and credit unions might be to open their coffers, they have an equal interest (pardon the pun) in making as much money as possible from you over the life of your loan. A mortgage broker, on the other hand, will put your financial needs first and look for the loan that best suits your circumstances.
  3. Spoiled for choice. A mortgage broker has access to hundreds of loans from a long list of lenders – far more than you will encounter if you choose to go it alone. Mortgage brokers also have access to more boutique and wholesale lenders who don’t traditionally advertise to mum-and-dad property buyers, have some fantastic products and are eager for a slice of the mortgage market.
  4. Save your legs. Mortgage brokers will do the loan application leg work for you, not only making life easier but giving you a better chance of swift approval because your mortgage broker knows what’s required from the lender.
  5. After-hours service. Most mortgage brokers will come to you at a time that suits, an appealing selling point for busy professionals and families.
  6. Perfect match. Contrary to popular belief, banks generally like to deal with mortgage brokers because they put forward home buyers who meet all the lending criteria. It can often save higher-risk borrowers from being rejected and earning a red flag on their credit history.
  7. Avoid the pitfalls. Honeymoon offers, exit fees and fixed rates are just some of the terms that can confuse and confound. Your mortgage broker will take a long-term view and navigate through all the lenders’ fees, terms and conditions to make sure you’re not paying more than you should over the full life of your loan.
  8. Borrow within your means. You’re less likely to over-stretch and get yourself into financial difficulty down the track when you take out your loan through a mortgage broker. Where some lenders may allow you to borrow to capacity or offer a loan that’s not quite right for your situation, a mortgage broker will always recommend the loan that makes the most financial sense for you.
  9. Switching is simple. If switching lenders, either because you’re refinancing mid-loan or have bought and sold, your mortgage broker will manage the inquiries and all the paperwork. If buying a property, they will also often deal with your conveyancer or solicitor to keep things moving along.
  10. Get a health check on your existing home loan. At any time you request, a mortgage broker can scan the lending environment to make sure you’re still getting the best deal. And if your circumstances change, your mortgage broker can deal with your existing lender or find a new loan to meet your needs.

 

Reserve Bank of Australia has again opted to leave the official cash rate on hold at 1.5%

With celebrations for the race that stops a nation in full swing, the Reserve Bank of Australia has made this decision.

The Reserve Bank of Australia decided to once again leave the official cash rate unchanged at 1.5%. The rate has not changed since September 2016.

This outcome was widely predicted by financial commentators. With inflation seemingly well under control and the Sydney property market now showing signs of cooling, many are predicting that the next rate change may not come until well into 2018.

Regardless of whether rates move up, down or stay the same, your mortgage broker’s role remains unchanged. Your broker is always on hand to ensure you still have the right financial solution for your current circumstances.

If you’d like to have a chat about what today’s news means for you and your finances, please don’t hesitate to get in touch with your broker.

Our top brokers in Victoria for 2017

We’ve said it before, and we’ll say it again: we are incredibly proud of all the hard work our brokers put into providing fantastic customer service and support. At AFG we champion our brokers’ ability to find a loan that matches your particular needs, at a time and a place that suits you. Our Victorian brokers provide mortgage and commercial broking services in Melbourne and throughout regional Victoria, and?we can put you in touch with a broker in your area.

Each year we reward our brokers for all their efforts, and at the AFG Victoria 2017 Awards Night held in July we congratulated the following award winners and finalists:

 

Broker Group of the Year

Loan Gallery Finance Pty Ltd

Broker Group of the Year: Finalists

Broker of the Year

Alexander Sobolevsky, Link Mortgage Services

Broker of the Year: Finalists

AFG Home Loans Award

Chris Akyildiz (Orange Home Loans)

Insurance Writer Award

Nancy Gupta (Money Providers)

Equipment Finance Award

Daniel Zadnik (Hawthorn Finance)

Commercial Writer Award

Larry Zhou (Link Capital Finance)

Rising Star Award

Jasmeet Singh (Australian Loan Xperts)

Rising Star Award: Second Place

Sadish Visvalingam (Premier Financial Advisors)

Best Diversified Business Award

ARG Finance

Best Broker Group – Sole Operator

Eugene Sholomov (Minfin Australia)

Best Broker Group 1-3 Loan Writers

Link Mortgage Services