Aussies forced to sell up to live it up!

Aussies giving up home loans for comfortable superannuation retirement

Australians are preparing to sell their homes and spend less on their kids in order to fund their retirement years, according to a recently released survey. For those with excessive credit card debt or a significant home loan balance, this news could encourage them to rethink their finances now in order to make fewer sacrifices later in life. 

Australians may be unprepared for retirement

The MLC Wealth Sentiment Survey shows that 11 percent of Australians intend to sell the family property in order to pay for retirement.

Furthermore, over half of the survey respondents said they don’t think they will have “enough or far from enough” to retire. 

“Women also continue to worry more than men about retirement, with one in three saying they will have far from enough to retire,” explained National Australia Bank (NAB) wealth group executive Andrew Hagger.

There’s a trillion-dollar retirement savings gap currently at play, according to NAB, which manages the MLC brand. Coupled with Australia’s ageing population, it’s not hard to see why many Aussies are unprepared for retirement.

Australians will slash spending

While a little over one in ten individuals plan to sell their homes in order to fund their golden years, a further 42 percent are unsure what they’ll do with regards to what might be their most significant asset.

It’s not just property that’s consuming people’s thoughts — the survey showed that 23 percent of Australians intend to pull back how much they spend on their children. 

In a further bid to keep their high-interest savings account firmly in the black, 30 percent of individuals across the nation think they’ll spend less money on home improvements and significant household items. 

Not everything gets the cut

While some Australians are thinking about saying goodbye to the family home, spending won’t necessarily be cut across the board.

Surprisingly, while individuals hold concerns about having sufficient savings for retirement, overall concern levels dropped during the third quarter, according to the survey.

Most of the survey respondents expect their health spending will increase, as well as insurance premiums and utility bills. 

And while they’re gearing up to spend less on dining out and entertainment once they hit retirement, they’re not going to cut back on everything. In fact, holiday-ready and investment savvy Australians will continue to exist: The survey found that Australians may have fewer fancy dinners but they’re less likely to cut spending when it comes to investments, superannuation, groceries and travel. 

The good news is, there are still many ways Australians can boost their retirement funds. Early this year, the concessional contribution cap increased for those under 50 years to $30,000.

“The earlier you start saving, the more your superannuation will benefit from the effect of compound interest. Every dollar you put in super before you turn 35 could be worth around seven dollars in retirement,” said Association of Superannuation Funds of Australia chief executive Pauline Vamos earlier this year.

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Shopping for a new home is an exciting experience and getting a pre-approval on the loan may give you the peace of mind that you are looking at properties within your budget. 

At the time of applying for the ANZ Bank home loan pre-approval, you will be required to provide proof of employment and income, along with records of your savings and debts.

An ANZ home loan pre-approval time frame is usually up to three months. However, being pre-approved doesn’t necessarily mean you will get your home loan. Other factors could lead to your home loan application being rejected, even with a prior pre-approval. Some factors include the property evaluation not meeting the bank’s criteria or a change in your financial circumstances.

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Home loans spanning 40 years are offered by select lenders, though the loan period is much longer than a standard 30-year home loan. You're more likely to find a maximum of 35 years, such as is the case with Teacher’s Mutual Bank

Currently, 40 year home loan lenders in Australia include AlphaBeta Money, BCU, G&C Mutual Bank, Pepper, and Sydney Mutual Bank.

Even though these lengthier loans 35 to 40 year loans do exist on the market, they are not overwhelmingly popular, as the extra interest you pay compared to a 30-year loan can be over $100,000 or more.

Does Australia have no cost refinancing?

No Cost Refinancing is an option available in the US where the lender or broker covers your switching costs, such as appraisal fees and settlement costs. Unfortunately, no cost refinancing isn’t available in Australia.

Can I change jobs while I am applying for a home loan?

Whether you’re a new borrower or you’re refinancing your home loan, many lenders require you to be in a permanent job with the same employer for at least 6 months before applying for a home loan. Different lenders have different requirements. 

If your work situation changes for any reason while you’re applying for a mortgage, this could reduce your chances of successfully completing the process. Contacting the lender as soon as you know your employment situation is changing may allow you to work something out. 

If I don't like my new lender after I refinance, can I go back to my previous lender?

If you wish to return to your previous lender after refinancing, you will have to go through the refinancing process again and pay a second set of discharge and upfront fees. 

Therefore, before you refinance, it’s important to weigh up the new prospective lender against your current lender in a number of areas, including fees, flexibility, customer service and interest rate.

Can I refinance if I have other products bundled with my home loan?

If your home loan was part of a package deal that included access to credit cards, transaction accounts or term deposits from the same lender, switching all of these over to a new lender can seem daunting. However, some lenders offer to manage part of this process for you as an incentive to refinance with them – contact your lender to learn more about what they offer.

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An complaints officer – previously referred to as an ombudsman -looks at formal complaints from customers about their credit providers, and helps to find a fair and independent solution to these problems.

These services are handled by the Australian Financial Complaints Authority, a non-profit government organisation that addresses and resolves financial disputes between customers and financial service providers.

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When the Reserve Bank of Australia cuts its official cash rate, there is no guarantee lenders will then pass that cut on to lenders by way of lower interest rates. 

Sometimes lenders pass on the cut in full, sometimes they partially pass on the cut, sometimes they don’t at all. When they don’t, they often defend the decision by saying they need to balance the needs of their shareholders with the needs of their borrowers. 

As the attached graph shows, more recent cuts have seen less lenders passing on the full RBA interest rate cut; the average lender was more likely to pass on about two-thirds of the 25 basis points cut to its borrowers.  image002

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