Would you marry for money?

Would you marry for money?

Romances of the rich and famous can be extremely profitable. For the rest of us, marrying for money may be the least romantic reason to wed, but tying the knot can bring financial advantages.

Wealthy in their own right, power couple Beyoncé and Jay Z racked up a reported $US78 million ($78.5 million) in combined income in the year to May 2012, making them Forbes world’s highest paid celebrity couple this year. Individually, Forbes ranks Beyoncé and Jay Z at number 16 and 38, respectively, using its Celebrity 100 list of highest paid stars.

Second on the list, with combined earnings of $US72 million, was model Gisele Bundchen and football-star husband Tom Brady, which were Forbes highest earning star couple in 2010 to 2011.

David and Victoria Beckham jumped up one ranking into third spot this year, bringing in total earnings of $US54 million with breadwinner David earning $US46 million through his football contract and a range of endorsement deals.

All-Hollywood couple, Brad Pitt and Angeline Jolie, slipped one spot to fourth in the earning stakes this year, with combined income of $US45 million; $US5 million less than the previous year.

With last year’s Forbes fifth highest earning couple, Twilight‘s Robert Pattinson and Kristen Stewart, no longer in the mix, Will Smith and Jada Pinkett Smith moved into fifth with a total $US40 million earned this year.

Although money is not likely to be the primary reason the majority of Australian couples are married, it can make financial sense. Getting hitched can mean not only increased income but lower costs and more opportunities to save money.

Increased financial stability

Two incomes may be better than one, and not only because of a couple’s combined earning power. Should you hit a financial speed bump, such as one of you loses a job or falls ill, a second income may see you both through tough times.

Similarly, when it comes time to start a family, should one parent stay at home to raise children, the possibility of earning is always there.

Boost your borrowing potential

Sharing mortgage commitments with an income-earning partner can help you both into the property market sooner and increase your home loan serviceability.  

For instance, if you and a partner each save $30,000 to purchase a $300,000 property, a home loan of at least $240,000 will be needed. By pooling your savings, you now have a 20 percent deposit and therefore may avoid paying lender’s mortgage insurance, which is a costly additional charge imposed for those borrowing 80 percent or more of a home’s purchase price.

A larger deposit can also mean tens of thousands of dollars less interest paid in the long run.

Tax benefits

Furthermore, combining incomes can present potential tax benefits. For instance, if your partner doesn’t work or earns a low income, it may be possible to minimise your combined total tax bill by placing some or all of your investment holdings under the name of your partner. On investments such as a term deposit, the interest accrued effectively becomes tax free if your partner’s total income (including the interest) is less than $6000 a year because their marginal tax rate falls below the ATO’s lowest income tax belt.

More financial advantages

If you’re moving in together for the first time, sharing the costs of rent or the mortgage and utility bills is one advantage.

But you may also be entitled to a multi-car insurance premium reduction (this will vary between providers), shared employee benefits or a reduction in bank fees (if you share accounts, for instance).

Once you crunch the numbers with your partner, linking finances may seem less like a leap of faith and more a route to greater economic wealth.

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Learn more about home loans

How much money can I borrow for a home loan?

Tip: You can use RateCity how much can I borrow calculator to get a quick answer.

How much money you can borrow for a home loan will depend on a number of factors including your employment status, your income (and your partner’s income if you are taking out a joint loan), the size of your deposit, your living expenses and any other debt you might hold, including credit cards. 

A good place to start is to work out how much you can afford to make in monthly repayments, factoring in a buffer of at least 2 – 3 per cent to allow for interest rate rises along the way. You’ll also need to factor in additional costs that come with purchasing a property such as stamp duty, legal fees, building inspections, strata or council fees.

If you are planning on renting the property, you can factor in the expected rental income to help offset the mortgage, but again it’s prudent to add a significant buffer to allow for rental management fees, maintenance costs and short periods of no rental income when tenants move out. It’s also wise to factor in changes in personal circumstances – the typical home loan lasts for around 30 years and a lot can happen between now and then.

Will I have to pay lenders' mortgage insurance twice if I refinance?

If your deposit was less than 20 per cent of your property’s value when you took out your original loan, you may have paid lenders’ mortgage insurance (LMI) to cover the lender against the risk that you may default on your repayments. 

If you refinance to a new home loan, but still don’t have enough deposit and/or equity to provide 20 per cent security, you’ll need to pay for the lender’s LMI a second time. This could potentially add thousands or tens of thousands of dollars in upfront costs to your mortgage, so it’s important to consider whether the financial benefits of refinancing may be worth these costs.

What percentage of income should my mortgage repayments be?

As a general rule, mortgage repayments should be less than 30 per cent of your pre-tax income to avoid falling into mortgage stress. When mortgage repayments exceed this amount it becomes hard to budget for other living expenses and your lifestyle quality may be diminished.

How do I refinance my home loan?

Refinancing your home loan can involve a bit of paperwork but if you are moving on to a lower rate, it can save you thousands of dollars in the long-run. The first step is finding another loan on the market that you think will save you money over time or offer features that your current loan does not have. Once you have selected a couple of loans you are interested in, compare them with your current loan to see if you will save money in the long term on interest rates and fees. Remember to factor in any break fees and set up fees when assessing the cost of switching.

Once you have decided on a new loan it is simply a matter of contacting your existing and future lender to get the new loan set up. Beware that some lenders will revert your loan back to a 25 or 30 year term when you refinance which may mean initial lower repayments but may cost you more in the long run.

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. 

Can I get a home loan if I am on an employment contract?

Some lenders will allow you to apply for a mortgage if you are a contractor or freelancer. However, many lenders prefer you to be in a permanent, ongoing role, because a more stable income means you’re more likely to keep up with your repayments.

If you’re a contractor, freelancer, or are otherwise self-employed, it may still be possible to apply for a low-doc home loan, as these mortgages require less specific proof of income.

Is there a limit to how many times I can refinance?

There is no set limit to how many times you are allowed to refinance. Some surveyed RateCity users have refinanced up to three times.

However, if you refinance several times in short succession, it could affect your credit score. Lenders assess your credit score when you apply for new loans, so if you end up with bad credit, you may not be able to refinance if and when you really need to.

Before refinancing multiple times, consider getting a copy of your credit report and ensure your credit history is in good shape for future refinances.

I have a poor credit rating. Am I still able to get a mortgage?

Some lenders still allow you to apply for a home loan if you have impaired credit. However, you may pay a slightly higher interest rate and/or higher fees. This is to help offset the higher risk that you may default on your repayments.

I can't pick a loan. Should I apply to multiple lenders?

Applying for home loans with multiple lenders at once can affect your credit history, as multiple loan applications in short succession can make you look like a risky borrower. Comparing home loans from different lenders, assessing their features and benefits, and making one application to a preferred lender may help to improve your chances of success

Will I be paying two mortgages at once when I refinance?

No, given the way the loan and title transfer works, you will not have to pay two mortgages at the one time. You will make your last monthly repayment on loan number one and then the following month you will start paying off loan number two.

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.

What are the responsibilities of a mortgage broker?

Mortgage brokers act as the go-between for borrowers looking for a home loan and the lenders offering the loan. They offer personalised advice to help borrowers choose the right home loan for their needs.

In Australia, mortgage brokers are required by law to carry an Australian Credit License (ACL) if they offer credit assistance services. Which is the legal term for guidance regarding the different kinds of credit offered by lenders, including home loan mortgages. They may not need this license if they are working for an aggregator, for instance, as a franchisee. In both these situations, they need to comply with the regulations laid down by the Australian Securities and Investments Commission (ASIC).

These regulations, which are stipulated by Australian legislation, require mortgage brokers to comply with what are called “responsible lending” and “best interest” obligations. Responsible lending obligations mean brokers have to suggest “suitable” home loans. This means loans that you can easily qualify for,  actually meet your needs, and don’t prove unnecessarily challenging for you.

Starting 1 January 2021, mortgage brokers must comply with best interest obligations in addition to responsible lending obligations. These require mortgage brokers to act in the best interest of their customers and also requires them to prioritise their customers’ interests over their own. For instance, a mortgage broker may not recommend a lender who gives them a commission if that lender’s home loan offer does not benefit that particular customer.