Five financial tips for newlyweds

Recent research from Roy Morgan indicated that married couples experienced less incidence of stress, anxiety and other mental illnesses than any other type of relationship — even de facto couples. But try telling that to anyone who is going through the financial nitty gritty that comes with getting married!

You don’t just share your love with another; in many cases you are also sharing your savings accounts – and often debts, which can be an intimidating process. With this in mind, let’s have a look at some handy tips for newlyweds and how you can both be smart and stress-free with your finances. 

You don’t need to go all in

While many couples do pool all of their finances together, it isn’t always necessary. What many people do is have a joint savings account, as well as each party’s individual account. Once your living costs are determined, you can decide to deposit a certain amount each week into this.

As you’re getting married, it is fair to say you and your partner have established trust, and will have no problem sharing funds in this way. Remember that a joint high interest savings account will also only incur one set of bank fees, which may be more appropriate for you than paying two sets of these with separate accounts.

Make the right considerations

While same sex marriage is yet to be approved on a federal level, many couples will have an inherent financial imbalance based on gender. The Australian Bureau of Statistics’ trend results for average weekly earnings found that the average weekly total earnings for men were $1,678.80 as of November 2014. For women, this figure was $1,307.60.

If this is the situation in your relationship, consider talking through with your partner what each person’s contributions towards a joint credit card or your regular bills will be. It’s something that will be different depending on your exact situation, but is worth the discussion. It may also be worth chatting to your accountant about ways to make the most of a  benefit at tax time.

Settle on a common goal

Have you already purchased a home as a couple, or are perhaps considering a home loan to do so? Whatever your long term goals are, make sure you’re on the same page. Saving for a honeymoon may be one party’s goal, while the other may believe putting funds aside for a first home deposit is more important.

Open discussion about financial goals and a clear goal-setting scheme is key. You’re both in this together, and should work towards a common financial goal. This doesn’t mean putting your own dreams by the wayside, however. You can have your individual financial goals as well! 

Update your insurance

Whatever your insurance policy or estate planning is before you get married, it will likely need to be updated now that your living situation has changed. Your will, power of attorney, insurance policy and superannuation contributions will all need to be looked at in a new light.

Your premiums may change too. This is all part of the process: Your budgeting is going to change significantly.

Consider your credit card options

Give your credit card a health check and see how yours stacks up to the competitors by using our credit card comparison tools. Many credit card providers give you the option of taking out a second piece of plastic for use by family members, which may mean paying fewer fees. When you get married, you may wish to take up this option so you both have access to certain accounts. 

Getting married is a big step, and we’re sure you’ve thought through everything. But it doesn’t hurt to double check, especially when it comes to your finances. Set your goals together, compare savings accounts, incomes and goals, and enjoy a fruitful life achieving your dreams! And as always, don’t forget to shop around for the right savings account, home loan or credit card. 

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How can I get a home loan with bad credit?

If you want to get a home loan with bad credit, you need to convince a lender that your problems are behind you and that you will, indeed, be able to repay a mortgage.

One step you might want to take is to visit a mortgage broker who specialises in bad credit home loans (also known as ‘non-conforming home loans’ or ‘sub-prime home loans’). An experienced broker will know which lenders to approach, and how to plead your case with each of them.

Two points to bear in mind are:

  • Many home loan lenders don’t provide bad credit mortgages
  • Each lender has its own policies, and therefore favours different things

If you’d prefer to directly approach the lender yourself, you’re more likely to find success with smaller non-bank lenders that specialise in bad credit home loans (as opposed to bigger banks that prefer ‘vanilla’ mortgages). That’s because these smaller lenders are more likely to treat you as a unique individual rather than judge you according to a one-size-fits-all policy.

Lenders try to minimise their risk, so if you want to get a home loan with bad credit, you need to do everything you can to convince lenders that you’re safer than your credit history might suggest. If possible, provide paperwork that shows:

  • You have a secure job
  • You have a steady income
  • You’ve been reducing your debts
  • You’ve been increasing your savings

How do I know if I have to pay LMI?

Each lender has its own policies, but as a general rule you will have to pay lender’s mortgage insurance (LMI) if your loan-to-value ratio (LVR) exceeds 80 per cent. This applies whether you’re taking out a new home loan or you’re refinancing.

If you’re looking to buy a property, you can use this LMI calculator to work out how much you’re likely to be charged in LMI.

What happens to my home loan when interest rates rise?

If you are on a variable rate home loan, every so often your rate will be subject to increases and decreases. Rate changes are determined by your lender, not the Reserve Bank of Australia, however often when the RBA changes the cash rate, a number of banks will follow suit, at least to some extent. You can use RateCity cash rate to check how the latest interest rate change affected your mortgage interest rate.

When your rate rises, you will be required to pay your bank more each month in mortgage repayments. Similarly, if your interest rate is cut, then your monthly repayments will decrease. Your lender will notify you of what your new repayments will be, although you can do the calculations yourself, and compare other home loan rates using our mortgage calculator.

There is no way of conclusively predicting when interest rates will go up or down on home loans so if you prefer a more stable approach consider opting for a fixed rate loan.

What happens when you default on your mortgage?

A mortgage default occurs when you are 90 days or more behind on your mortgage repayments. Late repayments will often incur a late fee on top of the amount owed which will continue to gather interest along with the remaining principal amount.

If you do default on a mortgage repayment you should try and catch up in next month’s payment. If this isn’t possible, and missing payments is going to become a regular issue, you need to contact your lender as soon as possible to organise an alternative payment schedule and discuss further options.

You may also want to talk to a financial counsellor. 

How personalised is my rating?

Real Time Ratings produces instant scores for loan products and updates them based what you tell us about what you’re looking for in a loan. In that sense, we believe the ratings are as close as you get to personalised; the more you tell us, the more we customise to ratings to your needs. Some borrowers value flexibility, while others want the lowest cost loan. Your preferences will be reflected in the rating. 

We also take a shorter term, more realistic view of how long borrowers hold onto their loan, which gives you a better idea about the true borrowing costs. We take your loan details and calculate how much each of the relevent loans would cost you on average each month over the next five years. We assess the overall flexibility of each loan and give you an easy indication of which ones are likely to adjust to your needs over time. 

How often is your data updated?

We work closely with lenders to get updates as quick as possible, with updates made the same day wherever possible.

How can I get a home loan with no deposit?

Following the Global Financial Crisis, no-deposit loans, as they once used to be known, have largely been removed from the market. Now, if you wish to enter the market with no deposit, you will require a property of your own to secure a loan against or the assistance of a guarantor.

How much of the RBA rate cut do lenders pass on to borrowers?

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

What is 'principal and interest'?

‘Principal and interest’ loans are the most common type of home loans on the market. The principal part of the loan is the initial sum lent to the customer and the interest is the money paid on top of this, at the agreed interest rate, until the end of the loan.

By reducing the principal amount, the total of interest charged will also become smaller until eventually the debt is paid off in full.

How common are low-deposit home loans?

Low-deposit home loans aren’t as common as they once were, because they’re regarded as relatively risky and the banking regulator (APRA) is trying to reduce risk from the mortgage market.

However, if you do your research, you’ll find there is still a fairly wide selection of banks, credit unions and non-bank lenders that offers low-deposit home loans.

How do I take out a low-deposit home loan?

If you want to take out a low-deposit home loan, it might be a good idea to consult a mortgage broker who can give you professional financial advice and organise the mortgage for you.

Another way to take out a low-deposit home loan is to do your own research with a comparison website like RateCity. Once you’ve identified your preferred mortgage, you can apply through RateCity or go direct to the lender.

What is an ombudsman?

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.

Remaining loan term

The length of time it will take to pay off your current home loan, based on the currently-entered mortgage balance, monthly repayment and interest rate.

Do other comparison sites offer the same service?

Real Time RatingsTM is the only online system that ranks the home loan market based on your personal borrowing preferences. Until now, home loans have been rated based on outdated data. Our system is unique because it reacts to changes as soon as we update our database.