Should You Use a Personal Loan or Refinance for Renovation Plans?

Almost half of all Australian homeowners carried out some form of renovation in 2021 and 2022. In 2023, this renovation trend is seen to continue, with people renovating homes due to rising housing costs and aging homes. This leads to the big question people ask before embarking on such a project – should they refinance for renovation costs or should they take out a personal loan for this?

Australian homeowners have a range of finance options available when planning a renovation. This includes personal savings, government grants or a range of different loans. Two of the most common finance options are personal loans and refinancing to access equity. A homeowner’s financial situation and the proposed cost of the renovation will usually be the biggest factors to consider when choosing between a personal loan and refinance for renovation expenses.

There are some great benefits to a refinance for renovation plans. These include:

1. Lower interest rates: By refinancing, you’ll not only have access to lower interest rates (compared to the average personal loan), but you may also be able to reduce the amount of interest you’re currently paying on your home loan.
2. Ability to access home equity: You may be surprised at the amount of usable equity your property has built up over the years. Refinancing allows you to use this equity to add further value back into the property.
3. Consolidation of debt: Rather than financing your renovation across multiple forms of credit, refinancing allows you to consolidate all the costs. This simplifies debt management and may result in you paying less interest overall.
4. Adjustable loan term: Refinancing gives you the flexibility to change your loan term. This means you could potentially shorten the mortgage for quicker debt repayment or extend it to lower your monthly repayments.
5. Fixed or variable rate options: Unlike a personal loan, refinancing allows you to choose between fixed and variable interest rates. This means you can pick the option that suits you best, whether that’s greater stability or flexibility in your repayments.

The Benefits of Using a Personal Loan for Home Renovations

When choosing between a personal loan for renovations or a refinance for renovation costs, it’s a good idea to examine the various pros and cons. Some of the benefits of using a personal loan for a home renovation include:

1.     Quick approval: Personal loans often have a relatively quick and simple approval process. Many lenders now offer an online application process for personal loans, and you can receive a decision within a few business days.

2.     Fixed interest rates: One of the big differences between a personal loan for renovation costs and a refinance for renovations is that personal loans usually have fixed interest rates. This means that the interest rate remains the same throughout the life of the loan, so your monthly repayments won’t change. This can make it easier to budget for the ongoing costs of the renovation.

3.     No need to use your home as collateral: Because personal loans are unsecured, you won’t have to use your home or any other assets as collateral. This eliminates the risk of losing your property if you ever struggle to make repayments in the future.

4.     No equity required: A personal loan doesn’t require any usable equity as a prerequisite for approval. This means a personal loan may be more achievable for a new homeowner who hasn’t yet had time for their property to increase in value.

Choosing Between a Personal Loan and Refinance for Renovation Expenses

If you’re trying to decide between personal loans vs. refinancing home loan for renovations, then start by finding answers to the following questions:

• Which finance option offers the lowest interest rate?
• How will the various loan terms affect your monthly repayments and the overall cost of the loan (including total interest paid over the life of the loan)?
• What are the risk factors involved in each of the finance options under consideration?
• How long will it take for the loan to be approved and finalised?

Get Expert Advice on Which Loan Suits Your Situation

Ultimately, choosing among options like an upgrading or downsizing loan, a cash-out refinance, and a personal loan should come down to what is best for your financial situation and future goals. A homeowner who needs quick funds and who has minimal equity may find that a personal loan is the best option. Alternatively, a borrower with substantial equity could be far better off choosing a cash-out refinance or a renovation loan. To ensure you make the right decision, you need to start by getting the right advice.

The experienced team of mortgage brokers at ZEP Finance can provide expert recommendations tailored to your specific financial situation. We’ll happily answer all your questions, compare loan options from a wide panel of lenders and offer unbiased advice based on what’s ultimately going to be best for you. To get started on your dream renovation, book a phone appointment with ZEP Finance today.

What is a Good Credit Score in Australia for a Home Loan Approval?

What is a good credit score? Does it have any bearing on a home loan approval? What can you do if you have a bad credit score but want to buy a house? This article will show you what relevance your credit score has on your chances of getting a mortgage and what you can do to boost your credit score.

To begin with, you should know that there is a definite link between a good credit score and mortgage approvals. A good credit score will play a significant role in your ability to secure a competitive home loan. Despite this, a recent survey by Finder showed an alarming 73% of Australians (around 14.6 million people) don’t know their credit score. In fact, almost 1 in 2 Australians confess to never having checked their credit score, and 6% of those surveyed admitted they didn’t even know what a credit score was.

So, what exactly is your credit score? What is the role of a credit score in home loan applications? What is a good credit score in Australia? And how can you go about improving your credit score for a mortgage application?

What is a Credit Score?

Your credit score (also known as your credit rating) is a number calculated by credit agencies within Australia. These calculations are based on your credit report, which is a written record of your credit history. This report is used by lenders to establish how likely you are to repay a loan. Your credit report includes information about any current credit products in your name (such as credit cards, personal loans, car loans, etc.), your history of repayments, any credit defaults, bankruptcy/debt agreements and financial hardship claims.

How is a Credit Score Calculated?

Depending on the credit agency compiling the report, your credit score will usually be between zero and 1,000-1,200. Credit agencies will give you a credit score based on:  

• The amount of money you owe.
• The number of different credit applications you’ve made recently.
• Whether or not you pay your bills on time.

You’re entitled to a free copy of your credit report every three months. It’s a good idea to check your credit score at least once a year to ensure all the information is correct and gauge whether any areas need improvement.

What is a Good Credit Score to Get a Mortgage Approval?

So, what is a good credit score and what credit score do I need for a home loan approval? Before we get to that, let’s first check the connection between your credit score and mortgage approval. Note that lenders use your credit score to assess risk. The higher your credit score, the lower your perceived risk. The lower your credit score, the riskier your application will seem. Your credit score will ultimately influence:

• Approvals: How likely you are to be approved for a loan.
•  Interest rates: What kind of interest rate you can expect to be offered (the better your score, the better your interest rate).
•  Amounts: How much you’ll be allowed to borrow (a poor credit score will likely decrease the amount of your loan).
• Terms: Your mortgage terms and conditions. This includes how flexible the loan structure will be, what kind of fees are associated with the loan and whether it will include any features (such as a redraw facility).

If you have a very low credit score, you may struggle to find a lender who is willing to offer you a competitive loan product. So, improving your credit score for a mortgage application is an important step to take before you start applying.

But what constitutes a “good” or “bad” credit score in the context of mortgage approvals? While scores will vary slightly depending on the credit reporting agency, most lenders put credit scores in the following categories:

• Excellent: If you have a credit score of 800 or higher, then this is considered ‘excellent’ by most lenders. An excellent credit score will give you access to the best interest rates and loan terms.
• Good: Most lenders will view a credit score as ‘good’ if it’s over 700. A good credit score will make it easier for you to get approved for a home loan with a competitive interest rate because you’re assessed as being low-risk.
• Bad: If your credit score is below 550-500, you’re classified as “higher risk” and are in danger of being knocked back for a mortgage. While certain lenders may still be willing to approve you for a home loan, it will likely come with higher interest rates.

If you’re worried about your credit score, then don’t give up just yet. There are things you can do that will help with boosting your credit score for mortgage approval. Additionally, different lenders will have their own specific criteria. For example, some lenders may be willing to overlook a lower credit score for certain borrowers (such as first home buyers). 

The best thing you can do at this stage is talk to an experienced broker about improving your credit score for a mortgage application. What is a good credit score? Your mortgage broker will know and can guide you through the process of boosting your credit rating.

To further help you, here’s a video that explains the relationship between credit scores and home loans:

Common Misconceptions About Credit Scores and Mortgage Approvals

Now that you understand the role of a credit score for home loan approval, let’s look at a few common misconceptions:

1. Checking your credit score will lower it: Too many lender checks (known as “hard enquiries”) in a short space of time can lower your credit score. However, if you check your own credit score, then this counts as a “soft enquiry”. Soft enquiries won’t have any effect on your credit score – it’s actually good financial practice to routinely check your credit score.
2. You and your partner share a joint credit score: Your credit score is specific to you as an individual. While it might be affected by activity on a joint account or a joint loan, you and your partner will still have separate credit scores.
3. A high income guarantees a good credit score: Your income is not a contributing factor when it comes to calculating your credit score. Your credit score will ultimately be based on your credit history and whether or not you pay your bills on time.
4. You can improve your credit score by closing credit accounts: Funnily enough, closing an older account can be counterproductive to improving your credit score. A better option would be to maintain accounts that are well-managed and show a history of regular payments.
5. There’s nothing you can do about a bad credit score: Credit scores will change over time in response to how you manage credit. If you currently have a bad credit score, there are steps you can take to start improving it.

It doesn’t matter if you pay your bills late: Paying your bills late definitely does matter! To maintain a good credit score, make sure you pay all your bills on time. This includes credit cards, loan repayments and utility or phone bills.

Boost Your Credit Score for Mortgage Approval

Improving a credit score for mortgage purposes can be easier than you might think. If you’re planning on boosting your credit score for mortgage approval, try incorporating the following tips:

1. Review your credit report: Believe it or not, credit reports can at times contain errors. Regularly checking your credit report will help you to identify and correct any inaccuracies as soon as possible.
2. Always pay your bills on time: It doesn’t matter whether this is rent, utilities, phone bills, credit cards, personal loans or car loans – make a plan to always pay your bills on time. Set up payment reminders or automatic direct debits, if you can. If you’re struggling to manage your debt, it could be worth talking to a professional about a debt consolidation plan.
3. Keep your older credit accounts open: An older credit account adds length to your credit history. It helps prove to credit agencies that you’ve been successfully managing credit for a long time.
4. Keep your credit card balance low: You may be in the habit of maxing your credit card and then paying it off in full each month. However, high credit utilisation can hurt your credit score. Instead, try to avoid using over 30% of your available credit each month.  
5. Limit credit applications: Multiple “hard enquiries” in a short space of time will lower your credit score (since it makes it look like you’re desperately searching for credit). If you’re planning to apply for a home loan then try to hold off on applying for a new credit card or a car loan.
6. Try to diversify your credit: Credit reporting agencies look favourably on a mix of different kinds of credit (so long as they’re managed responsibly). If you have a credit card or two, a car loan and a mortgage (and you’re regularly paying all of them on time), this could help to improve your credit score.

Credit Scores and Mortgage Approvals – How a Broker Can Help

One of the best things to do if you’re concerned about credit scores and mortgage approvals is to talk to an experienced mortgage broker. A broker can not only provide tailored advice on boosting a credit score for mortgage approval, but they can also access a wide panel of lenders. Why is this significant? Because different lenders will look at your mortgage application differently. 

For some lenders, the role of credit scores in home loan applications will be extremely important. For others, this may just be one of several factors they consider. By consulting with a mortgage broker and comparing multiple lenders, you’re far more likely to get approved for a competitive home loan that suits your needs.

Get Started on Improving Your Credit Score for a Mortgage Application

Credit scores and mortgage approvals go hand-in-hand. So, don’t be like the 14.6 million Australians who don’t know their credit score. By being proactive and seeking expert guidance, you can work at successfully improving your credit score for a mortgage application.

To find out more about how you can check or improve your credit score, contact the team at ZEP Finance today. We’ll happily answer all your questions and provide tailored advice to help you improve your financial situation.

Benefits of Company Car Loans: What Every Business Should Know

Whether you’re financing an entire corporate fleet of vehicles or purchasing a delivery van for your small business start-up, there are some fantastic benefits of company car loans. No matter how big or small your operation may be, the various business car loan perks and features available could help support the long-term growth of your business… without wreaking havoc on your cash flow!

The Benefits of Company Car Loans

There are numerous factors to consider when financing a company vehicle. Your choice of finance will affect your current and future cash flow, while also impacting the value of your monthly and annual financial statements and registers. Despite this, many business owners find themselves stumbling around in the dark when it comes to corporate car finance options. 

This is why the team at ZEP Finance would like to share some useful information on the benefits of company car loans. We’ll start by answering the question, ‘Why choose a company car loan?’ We’ll also discuss the advantages of business vehicle financing and consider some business car loan perks and features.

Why Choose a Company Car Loan?

It’s a question that finance brokers often hear: “Why choose a company car loan?” After all, most Australians are familiar with the concept of a regular car loan, and many assume that what works well for a private purchase will work equally well for a commercial one. However, there are some unique advantages of business vehicle financing.

The biggest difference between a company car loan and a regular car loan is that you are awarded more benefits when you opt for a business car loan. This could include access to lower interest rates or higher flexibility in repayment structures. You may also be given the option of using the actual vehicle as collateral or security for the loan, as opposed to using business capital.The pros of corporate car finance options also include access to a range of tax benefits. For example, if the vehicle becomes a business asset under a chattel mortgage, your tax benefits are determined by the depreciation of the vehicle and the interest charged on your loan. If you decide to opt for commercial leasing, the cost will be tax-deductible as long as the vehicle remains functional in terms of business-related transport.

What Corporate Car Finance Options are Available?

A car loan for business is intended to be exactly that: financing solutions that cater specifically to the needs of commercial enterprises (from small businesses to large-scale enterprises) and their employees. These loans cover all vehicles, including employee cars, company fleet cars, delivery vans, equipment and even trucks. It all depends on the business you run! Here are some of your options:

• Chattel Mortgage: A chattel mortgage is a business loan used to purchase movable assets, such as vehicles or equipment. The borrower owns the asset, while the lender holds a mortgage as security.
• Hire Purchase: Also known as a commercial hire purchase (CHP), this is a commercial loan arrangement where a company hires a vehicle from a lender and has the option to purchase it at the end of the contract. The business gains immediate use of the asset while paying it off over time, making it a flexible financing option.
• Lease: This is a rental agreement that allows a business to use vehicles without actually owning them. Instead, the business makes regular payments to a leasing company for the use of the vehicle, typically for a fixed term. It’s a convenient way for a company to access vehicles without the upfront cost and responsibility of ownership.
• Novated Lease: A novated lease is an agreement between an employer, their employee and a third-party finance company. The employee leases a car of their choice, and the employer deducts lease payments from the employee’s pre-tax salary, reducing taxable income.
• Personal Loan: A personal company car loan allows employees to purchase a vehicle through the company they work for. The individual owns and uses the car for both personal and business purposes, with the company providing the financing. It’s a more flexible car finance option for those who need a vehicle for both work and private use.

What are the Advantages of Business Vehicle Financing?

The pros of corporate car finance options far outweigh any perceived cons. While some business owners erroneously believe that it is always quicker and easier to obtain a traditional car loan, this is generally not the case when working with an experienced finance broker.

The benefits of company car loans include:

1. Tax Deductions: With a company car loan, businesses may be able to claim significant tax deductions on interest and depreciation associated with company vehicles. This can lead to substantial cost savings and reduce the overall tax liability for the business.
2. Flexible Financing Options: Business car loan perks and features allow for a more flexible approach to car finance. Business owners can choose from various financing options, such as chattel mortgages, novated leases or commercial hire purchase agreements. These options allow companies to tailor their financing to suit their specific needs and financial circumstances.
3. Cash Flow Management: One of the biggest advantages of business vehicle financing is that it makes it easier to manage cash flow more effectively. With fixed loan terms and interest rates, businesses have the clarity they need when planning for future expenses. This ensures that cash is available when needed.
4. Upgrade Options: Some car loan products, such as finance leases, offer the option to upgrade vehicles at the end of the lease term. This makes it easier for a business owner to keep their fleet up to date.
5. Competitive Advantage: In some industries, having a modern and well-maintained fleet can give businesses an important edge over their competitors. Having access to the right vehicles can help to improve efficiency, reliability, and customer service, which are crucial factors in staying ahead of the competition.

Find Out More About the Benefits of Company Car Loans with ZEP Finance

Would you like to learn more about the advantages of business vehicle financing? At ZEP Finance, we can help you to find the company car loan that will be most beneficial for your business. 

Whether you’re looking for a novated lease, a chattel mortgage or a hire purchase arrangement, our skilled car finance brokers can answer all your questions, make expert recommendations and help complete the necessary paperwork. We can even assist with refinancing your existing company car loan while getting you a new car. Please also speak to us if you are self-employed or looking for a solution that requires minimal documentation – our low document options simply require your ABN to be registered for a minimum of 2 years. If you would like to find out more, use our convenient online contact form.

Understanding the Risks of Buying Off the Plan

Real estate agents across Australia are reporting an increase in buyers looking to purchase a property off the plan. But what does “buying off the plan” actually mean? What are the risks of buying off the plan? And how can you successfully avoid the pitfalls of pre-construction property buying? In this article, we’ll explain the things you need to know before buying property off the plan.

Understanding the Benefits and Risks of Buying off the Plan

In Australian real estate, “buying off the plan” means that you’re purchasing a property that hasn’t been built yet. While this might seem like a risky commitment, buying off the plan is a common policy with major housing developers. The interested buyer will sign a contract with the builder based on detailed architectural plans and specifications for the proposed house. After paying an initial deposit, the developer will commence work on the project and the buyer will continue to make payments in instalments as specific construction milestones are achieved.

What are the Benefits of Buying off the Plan?

Many first-home buyers and investors are drawn to off the plan property purchases because of the potential savings and associated financial advantages. These include:

• Lower initial costs when buying off the plan: Buying a property off the plan may result in significant savings when compared to buying an established home in the same area. Additionally, construction developers will often advertise off the plan properties with a range of discounts such as upgraded finishes or added features at no extra cost.
• Potential capital growth investment opportunities: In a rising property market, an off the plan purchase may allow for capital growth on the property before you even reach the settlement date. Your asset could be appreciating in value while it’s still being built.
• Pre-construction buying gets you a brand new home: Buying off the plan allows for you to customise the property to suit your lifestyle (without the hassle of renovating). You can incorporate the latest features for improved energy efficiency and low-maintenance living and adjust the size or layout of the home depending on your needs.
• Potential tax benefits for off plan property purchases: Investors who choose to buy off the plan may be eligible for certain tax benefits, such as depreciation deductions or stamp duty concessions.

What are the Challenges of Off Plan Property Purchase?

There are certain challenges of off plan property purchase that buyers will need to be aware of and consider carefully before signing a contract with a builder or developer. These include:

• Developer credibility is a risk when buying off the plan: It’s essential to research the credibility and recent track record of the developer before committing to an off the plan purchase. If the developer is in an uncertain financial position or has a history of delivering sub-par projects then it’s a good idea to look elsewhere.
• Market fluctuations are a danger when investing in off the plan homes: The property market can fluctuate, and the value of an off the plan property may change between the time of purchase and settlement. While buyers hope for capital growth, there is also the risk of a decline in property values, potentially leading to financial losses.
• Construction delays are a challenge of off plan property purchases: One of the most common risks is construction delays. The completion date provided in the contract may not be met due to factors beyond the control of the builder, such as bad weather, labour shortages or difficulty sourcing materials.
• Contractual complexities can make buying off the plan confusing: Because the contracts for an off the plan purchase can be quite complex, it’s a good idea to seek trustworthy legal advice to ensure your rights are protected. Expert assistance will also ensure you understand your contractual obligations before signing.

What to Know Before Buying Property off the Plan: Our Top 3 Tips

While there are certain dangers in investing in off the plan homes, there are also steps you can take to minimise the risk. With thorough research, due diligence and the assistance of industry experts, you can successfully avoid the pitfalls of pre-construction property buying.

1.   Research the area: Stay informed about local property market trends in the area where you plan to buy. This will help you make an informed decision about the property’s potential value. If possible, visit the site so that you can check out the area (including local infrastructure and available amenities).

2.   Ensure due diligence: Don’t just take the advice of a developer or salesperson at face value. Gather all relevant information and then carefully evaluate the benefits and risks involved. You may even consider getting an independent valuation.

3.   Talk to industry experts: Seek expert advice from trustworthy industry professionals. They can help you understand the implications of contract clauses. It’s also important to seek tailored financial advice so that you understand the financial implications and risks associated with the purchase.

Successfully Overcome the Challenges of Off Plan Property Purchases with ZEP Finance

Buying a property off the plan can come with considerable benefits, as well as some unique challenges. If you’re considering an off the plan purchase then make sure you get the right advice from someone you can trust. Contact the experienced team at ZEP Finance today for some friendly and professional assistance.

All You Need to Know About Genuine Savings

The dream of owning a home often rests on securing a mortgage, however, this isn’t as easy as it may sound. Aspiring homeowners in Australia navigate a complex landscape of financial prerequisites, and one of the most critical aspects is the concept of genuine savings. Understanding this term and its implications can significantly impact your ability to secure a home loan.

In this comprehensive guide, we will explain what the term genuine savings means plus its importance in the mortgage application process. We will also discuss various examples and alternatives to this option to help you make an informed decision on your journey to homeownership.

Definition of Genuine Savings

“Genuine savings” is defined as true savings that a borrower has saved over time from their own income. These funds must have been built up over the course of the past three months for them to be considered genuine savings for a home loan. To explain further, here are a few things to remember about it:

Savings Accumulated Gradually

Genuine savings are essentially funds that have been accumulated gradually by the borrower. These funds are typically the result of consistent saving habits over time. It’s essential to show that you can responsibly manage your finances by setting aside money from your income for future investments like purchasing a home.

Length of Ownership

To qualify as genuine savings, the funds must have been in the borrower’s name for an extended period, typically at least three months. This demonstrates a stable and responsible financial history, indicating that you’re capable of managing your finances over an extended period. It’s a crucial factor that lenders consider when evaluating your loan application.

Distinguishing from Regular Savings

It’s important to differentiate genuine savings from regular savings. Regular savings can include one-off windfalls, such as bonuses, gifts, or proceeds from asset sales. While these funds can be helpful for various purposes, they may not be considered genuine savings for the purposes of a home loan application. Lenders are primarily interested in your ability to consistently save and manage your finances over an extended period.

How Much Savings Do I Need to Buy a House?

The amount of savings you need to buy a house in Australia can vary widely depending on several factors, including the location and the price of the property you’re interested in, the size of your deposit, and the specific requirements of the lender.

In Australia, a common guideline is to aim for a 20% deposit. For example, if you’re considering a property valued at $500,000, a 20% deposit would amount to $100,000. However, this isn’t a fixed requirement, and some lenders may accept deposits as low as 5% or 10%. Apart from this, a minimum of 5% of the purchase price must be shown as genuine savings. You should also keep in mind that a smaller deposit may result in higher interest rates and the need for LMI. 

Can I Buy a House Without Genuine Savings?

While having such an asset can significantly improve your chances of securing a home loan, it is possible to buy a house without it. As mentioned earlier, alternatives like using your rental payment history as evidence or seeking a guarantor can help you secure a home loan without this requirement.

It’s also worth exploring lenders that offer loans specifically designed for those without substantial funds in savings but with strong financial profiles. To gauge your borrowing capacity, these lenders may focus on factors such as your income, credit history, and overall financial stability rather than the presence of genuine savings.

Importance of Genuine Savings

What’s so important about genuine savings when it comes to homeownership? Here are some reasons why:

Assessing Savings Habits

Lenders use it as a measure to assess your savings habits. Demonstrating a history of saving and managing your finances responsibly can provide them with confidence in your ability to handle mortgage repayments. This evaluation is crucial, as it helps lenders determine whether you are a low-risk borrower.

Managing Home Loan Repayments

Genuine savings also serve as an indicator of your capacity to manage home loan repayments. By consistently saving over an extended period, you showcase your financial discipline, making you a more attractive candidate for a home loan. Lenders want to ensure that you can meet your financial obligations without defaulting on the loan.

Home Loan Application Approval

Perhaps the most critical aspect of genuine savings is their role in the approval of your home loan application. Without a proven history of responsible saving, your chances of securing a mortgage could be significantly reduced. This factor reassures lenders of your financial stability and your commitment to the investment, increasing the likelihood of a successful application.

Examples of Genuine Savings

Now that we’ve established the importance of genuine savings, let’s explore the various forms they can take:

Savings Held for Three Months or More

Traditional savings accounts that have accumulated funds over at least three months fall under this category. These accounts reflect your ability to save consistently over time, a quality that lenders highly value.

Term Deposits Lasting More than Three Months

Term deposits are another excellent example of this home loan requirement. By locking your money away for a predetermined period, you demonstrate your commitment to saving and financial responsibility.

Shares or Managed Funds Held for at Least Three Months

Investing in shares or managed funds and holding them for a minimum of three months can be considered genuine savings. This demonstrates your ability to allocate your funds wisely and manage investments over time.r

Funds from the First Home Super Saver Scheme

The First Home Super Saver Scheme (FHSSS) is a government initiative designed to help first-time home buyers save for a deposit through their superannuation fund. The contributions made to your Super can count as genuine savings.

Equity in Current Property

If you already own property, the equity you’ve built up in that property can be considered genuine savings when you’re looking to purchase another. Lenders often look favourably at applicants who can leverage the equity in their existing property to secure a new one.

What Aren’t Considered Genuine Savings

Understanding what doesn’t qualify as genuine savings is equally important. Here are some sources of funds that don’t count:

Gifts or Inheritances

While gifts or inheritances can provide a financial boost, they are generally not considered genuine savings since they are one-time windfalls rather than the result of consistent saving habits.

Asset Sales (e.g., Selling a Car)

Proceeds from selling assets like a car are also not considered. These are often lump sum amounts that do not reflect a history of saving.

Tax Refunds

Tax refunds, although a welcome addition to your finances, are not considered genuine savings. They are typically irregular and depend on various factors, such as your income and deductions.

Work Bonuses

Work bonuses, even if substantial, are typically excluded from this category. They are one-time payments and do not demonstrate consistent saving habits.

The First Home Owners Grant

The First Home Owners Grant (FHOG) can provide financial assistance to first-time home buyers, but it is not considered genuine savings. It is a government incentive designed to make homeownership more accessible.

Short-Term Savings (Less than 3 Months)

Savings held for less than three months generally do not qualify. Lenders prefer to see a more extended history of consistent saving.

To help you further understand what genuine savings are, here’s a video that can explain it to you.

Options When Lacking Genuine Savings

If you find yourself lacking this factor for home buying but are still eager to embark on your homeownership journey, there are alternative strategies to consider:

Using Rental Payment History as Evidence

Did you know that using rent as genuine savings to show your ability to meet regular financial commitments is also possible? Rent as genuine savings is one avenue a lot of first-home buyers take when they don’t have enough money saved up for a deposit. Consistently paying rent on time demonstrates financial responsibility, which can be appealing to lenders.

Seeking a Guarantor for the Loan

Another option is to seek a guarantor for your home loan. A guarantor is someone who agrees to take responsibility for your loan if you default on payments.

Finding Loans that Don’t Require Genuine Savings

Some lenders offer loans that focus on proof of stable income and timely bill payments. These loans may have different eligibility criteria, so it’s essential to research and compare your options carefully.

ZEP Finance is Here to Help with Your First Home Purchase

Whether you choose to use your rental history as genuine savings, seek a guarantor, or explore lenders that don’t think this is necessary, there are paths to homeownership for everyone. With the help of mortgage brokers here at ZEP Finance, you can embark on your homeownership journey with confidence. 

We know that there are multiple avenues to make your dream of owning a home a reality, with or without genuine savings, and we can help you get there. Contact us today to find out what these avenues are.

Ever think about opening your own business? If you have, then you’re not alone. Unfortunately, thinking about running your own business is the easy part. Getting the funds to start such an endeavour is one of the challenges you will face. If you don’t have enough to get your business idea up and running, one option you have to help make your business dream come true is a business loan.

Embarking on a business journey is an exhilarating experience. Every entrepreneur dreams of bringing their vision to life, and often, a business loan is the catalyst that makes this possible. However, before you embark on this financial journey, understanding your eligibility and the factors that influence it can be the key to smooth sailing.

The 5 Factors That Can Make or Break Your Business Loan Application

Just like almost every loan out there, a business loan requires applicants to present a few things to their chosen lender. These are what can qualify, or disqualify, a person who’s in the running for a loan. Even if you’re planning on taking out a loan small enough to just run a home business, it’s still dependent on meeting certain criteria to entitle you to the funds you want. Here are those five factors:

1. Purpose of the Loan

In the vast ocean of small business loans, clarity is your compass. Lenders aren’t just interested in providing funds; they want to know how you plan to use them. Are you looking to purchase state-of-the-art equipment, secure a prime business location, or perhaps stock up on unique inventory?

Pinpointing the exact purpose of your loan not only strengthens your application but also ensures you’re on the right track. A well-defined purpose reflects foresight and meticulous planning, which are traits that lenders value immensely.

If numbers or projections seem daunting to you, remember that there are financial brokers you can approach for help. Their expertise can provide invaluable insights, ensuring your loan purpose is both clear and compelling.

2. History & Character

Every entrepreneur has a story, and when it comes to business financing, this story matters. Your past experiences, successes, and even failures paint a picture that lenders keenly observe.

Have you previously dabbled in the industry you’re venturing into? Do you have a track record that showcases resilience and innovation? These factors can significantly bolster your chances of securing a startup business loan.

Beyond the professional realm, your personal character also plays an equally pivotal role. Integrity, reliability, and a strong work ethic are intangible assets that can make your business loan application shine. A robust CV, paired with glowing references, can be your testament to your character, which most lenders seek.

3. Economic Climate

The business world is dynamic, influenced by global events, technological advancements, and of course, the ever-shifting economic climate. As an entrepreneur, you usually don’t have control over global economic trends. You do have the ability to adapt to these changes, which is crucial.

Lenders are more inclined to invest in businesses that showcase resilience and foresight. Is your business idea relevant to today’s market? Does it address a current need or perhaps tap into emerging trends? Aligning your business proposal with the current economic pulse can be the assurance lenders need to see your venture as a viable investment.

4. Assets & Collateral

When it comes to small business loans, tangible assets can be your strongest allies. Think of them as anchors, providing stability and assurance to lenders. This can be a piece of property, a vehicle, or even valuable equipment. These assets can be used as collateral when you take out a business loan since these offer lenders a safety net.

Note that it’s not just about possessing these assets but it’s also about effectively showcasing their value. Detailed documentation, timely appraisals, and a clear understanding of their worth can make your loan application stand out. Remember that lenders appreciate borrowers who come prepared since this shows both responsibility and foresight.

5. Your Income & Savings

While passion and vision are the heart of any business, financial stability is its backbone. A consistent income stream and a healthy savings account can significantly enhance your eligibility for a business loan. These financial indicators offer lenders tangible proof of your ability to manage finances and, more importantly, repay the loan.

You should be aware that it’s not just about the amount you have in savings and earnings but also the consistency and growth over time. Even if you’re venturing into uncharted waters with a startup, a solid personal financial foundation can be the reassurance lenders need. After all, a smooth financial history often indicates a borrower’s reliability and commitment.

Get the Business Loan You Need with the Help of a Broker

The entrepreneurial journey is indeed filled with challenges, but with the help of a broker, these challenges can be easily overcome. If you’re ready to turn your business dreams into reality, get the help you need in business financing with ZEP Finance.

Our team of experienced brokers will guide, advise, and support you at every step. Whether you’re thinking of applying for startup business loans or targeting a loan small enough for a home enterprise, we’re here to help. Reach out today, and we can help you take that first step towards business success.

When you find yourself struggling to make ends meet, car loan refinancing is an avenue you can take to help ease the burden of your financial challenges. It’s a strategy that can potentially lead to more affordable repayments, better loan terms, and significant savings.

But what exactly is car loan refinancing, and how does it differ from your original car loan? For those who want to learn how to refinance a car loan, this guide provides helpful insights.

Understanding Car Loan Refinancing

So, what does it mean to refinance a car? Car loan refinancing is the process of switching your current car loan to another lender or product with different terms. Essentially, when you decide to refinance your car, you take out a new car loan to pay off the old one and continue with repayments under the new terms.

This might sound like a process that’s complicated, and it can be. But, by following the right steps and with the guidance of a refinance broker, it can be completely manageable.

When to Consider an Auto Refinance

There is a right time and wrong time for people to consider an auto refinance. If you’re asking yourself “When should I refinance my car loan?”, here are some of the times you can think about doing it:

• Lower Interest Rates Available – If current market interest rates are lower than when you took out your original car loan, refinancing can allow you to capitalise on these lower rates, potentially saving you money over the life of the loan. 
• Improved Credit Score – If your credit score has improved since you first secured your car loan, you might qualify for better loan terms and lower interest rates.
• Change in Financial Situation – If your financial situation has changed, either due to a job change, increased expenses, or other factors, refinancing can help adjust your monthly payments to better fit your current budget.
• A Desire for a Shorter Loan Term – If you wish to pay off your car loan faster and can afford higher monthly payments, refinancing to a shorter loan term can help you achieve this goal.
• A Desire for a Longer Loan Term – Conversely, if your current monthly payments are too high, refinancing to extend the loan term can reduce the monthly amount, making it more manageable.

When NOT to Consider a Car Refinance

Refinancing a car loan can be beneficial under the right circumstances, but there are specific situations where it might not be the best decision. Here are some of the times when you shouldn’t consider refinancing a car loan:

• Near the End of Your Loan Term – If you’re close to paying off your current car loan, refinancing might not make financial sense. The potential savings from a lower interest rate might be minimal compared to the costs and effort of the refinancing process.
• High Prepayment Penalties – Some car loans come with penalties for paying off the loan early. If your current loan has a significant prepayment penalty, the costs might outweigh the benefits of refinancing.
• Increased Loan Duration – Refinancing to significantly extend the loan term can mean you’ll pay more in interest over the life of the loan, even if monthly payments are reduced.
• Depreciated Car Value – If your car’s value has significantly depreciated, you risk ending up in an “upside-down” loan situation, where you owe more than the car is worth. This can be problematic if you plan to sell or trade in the vehicle in the near future.
• Upfront Costs Outweigh Savings – Always calculate the potential savings from refinancing against any upfront costs or fees. If the costs of refinancing are higher than the projected savings, it’s best to stick with your current loan.

Steps to Refinance a Car Loan with a Refinance Broker

As mentioned earlier, refinancing a car loan can be a complicated endeavour, particularly when you haven’t done it before and don’t know what steps to take. This is why working with a refinance broker is ideal in such a situation. Here are the steps you’re likely to take with the help of a refinance broker:

• Consultation with a Refinance Broker – Begin by scheduling a consultation with a refinance broker. They will provide an overview of the car loan refinancing process and understand your specific needs.
• Broker-Led Research and Comparison – The refinance broker will look into their network of lenders and car refinance options to find competitive refinance offers tailored to your situation.
• Credit Score Assessment – Your broker will guide you in checking your credit score, ensuring it’s in good standing to increase your chances of approval and secure better rates.
• Collating Documentation – With your refinance broker’s guidance, you’ll gather all the necessary documentation for your application. This includes proof of income, current loan details, and other relevant financial documents.
• Broker-Assisted Application – When all documentation is complete and deemed accurate, your refinance broker will assist you in applying for the new loan. They will also ensure all details are correctly filled out and your application is submitted to the most suitable lender based on your profile.
• Finalisation and Transition – Once your application is approved, the broker will liaise with the new lender to ensure a smooth transition. This involves paying off your old loan and setting up the new one.
• Understanding Potential Costs and Fees – Aside from helping you with the refinance, your refinancing broker will provide a detailed breakdown of any costs involved in the car loan refinancing process. This can include early exit fees from your current loan, application fees for the new loan, and potential valuation fees. They will also help you weigh these costs against the projected savings to ensure refinancing is the optimal choice for you.

Is Car Loan Refinancing Ideal for Your Situation?

Car loan refinancing is indeed a good option for getting out of a financial rut, as long as you’re in the ideal circumstance for it. With the guidance of an experienced refinance broker helping you make informed decisions on this matter, you can potentially gain significant savings and a more comfortable financial future.If you’re considering refinancing your car loan and don’t know where to start, the skilful and knowledgeable refinance brokers of ZEP Finance can help. Don’t hesitate to contact us so we can make the process smoother and more beneficial for you. You can also contact us for help with investment property and home loan refinancing concerns.

Cash Out Refinance and Your Home Equity: What You Need to Know

Owning a home is a significant milestone in any person’s life. It’s important to realise, however, that your property can be more than just a place to live. It holds a hidden asset known as home equity, which can provide financial opportunities, such as a cash out refinance, when the need arises.

What is a cash-out refinance and when can homeowners tap into it? What is the relationship between this type of refinance and your home equity? Is this the only option available to homeowners?In this article, we will delve into the world of cash-out refinancing, its correlation with home equity, and the crucial factors to consider before you can refinance. We will also outline the other options you have and why a cash out refi may be better for you than these alternatives.

Understanding Home Equity

Before we discuss what a cash-out refinance is, let’s first discuss home equity. What is home equity and how does one gain equity on a property they own?

Home equity is essentially the difference between your property’s current market value and the outstanding balance on your mortgage. It’s an important indicator of your ownership stake in your home and can be a valuable financial resource. The calculation is simple: if your home is worth $300,000 and you owe $200,000 on your mortgage, your home equity is $100,000.

Or to put it plainly: Property Market Value – Outstanding Home Loan = Your Equity in Property

Now, several factors influence home equity. Property value fluctuations, improvements or renovations made to the home, and market trends all play a role. If the value of your property decreases, your equity will decrease too. If you make mortgage payments over time, your equity will also increase as you pay down your mortgage.

Home improvements can also impact your equity in a property. For example, if you renovate your home and increase its value, your equity will increase too. However, some home improvements may not necessarily increase your property value, so it’s important to do your research before investing in any significant changes.

Recognising the true value of your home equity is the first step in understanding how it can work for you.

Exploring Cash Out Refinance

Now, let’s tackle the question of what is a cash-out refinance and what it can mean to you?

What is a Cash Out Refinance?

Cash-out refinance is a type of mortgage refinancing option that enables homeowners to access the equity they’ve built up in their property. The process involves replacing an existing mortgage with a new one for an amount that exceeds the current outstanding balance. The difference between the new loan amount and the old mortgage balance is then disbursed to the homeowner in the form of a lump sum payment.

The released cash in a cash out refi can be used for various purposes. These include home improvements, debt consolidation, education expenses, and investments as well as anything else you can use cash for. This might also lead to lower monthly payments due to the possibility of securing a more favourable interest rate.

Consolidating high-interest debts, like credit card debt, into a single mortgage payment can potentially save you money in the long run. There’s also the potential for tax deductibility on mortgage interest payments, depending on local tax regulations.

However, it’s important to understand that this also comes with risks. Increasing your loan amount could lead to higher monthly payments depending on the total mortgage amount and potentially extend the overall mortgage term. You should also be aware that the real estate market’s volatility could impact your property’s value and the success of your refinance plan.

The Relationship between Cash-Out Refinance and Home Equity

Now, there is a reason why some people call this type of refinance an equity refinance, and that’s because your home equity plays a big part in it. You see, your home equity serves as the foundation for the cash-out refinance process.

The amount of equity a homeowner has in their property directly influences how much they can borrow through this refinance. The released funds are determined by the difference between the new loan amount and the outstanding mortgage balance. This is essentially the homeowner’s equity. So, the more home equity a homeowner has, the greater their potential to access substantial amounts of cash through a cash-out refinance.You should be aware that home equity also plays a crucial role in determining the Loan to Value Ratio (LVR) of the new mortgage. Your LVR ratio, which compares the loan amount to your property’s value, plays a significant role in how much you can cash out.

Cash Out Refinance Vs Alternative Options

When considering cash-out refinance, it’s essential to weigh it against alternative options. Home equity loans offer alternatives for accessing your home equity. Here are the differences between a home equity loan and a cash out refi:

Cash Out Refinance vs Home Equity Loan

Cash-Out Refinance

• Replaces your current mortgage with a larger loan, resulting in a single mortgage with an agreed interest rate (either fixed or variable) and repayment term.
• Regular repayments that can include both principal and interest.
• Provides a lump sum of funds at once, making it suitable for larger expenses.
• Involves settlement fees similar to those of a regular mortgage refinance.

Home Equity Loan

• Separate loan in addition to your existing mortgage, creating two distinct loans with fixed repayment terms.
• Usually comes with a fixed interest rate, ensuring stability in monthly payments.
• Separate monthly payment in addition to your original mortgage payment.
• Provides a lump sum as well, but it can be better suited for targeted projects or needs.
• Comes with a shorter term, which may result in higher monthly payments but less interest paid in the long run.
• May carry hefty settlement and processing fees, depending on the lender.

As you can see, these options come with pros and cons, but only a cash-out refinance offers the most benefits. You don’t have to pay two loans at the same time, can get a lump sum at settlement, and often involves very minimal settlement fees. So, when it comes to comparing cash out refinance vs vs home equity loan, you can easily see which option comes out on top.

How Much Equity Do I Need to Refinance?

In general, lenders prefer borrowers to have at least 20% equity in their home when refinancing. This means that you would need to owe less than 80% of the home’s current value.

However, some lenders may offer refinancing options to borrowers with less than 20% equity, but they may require you to pay for a lender’s mortgage insurance (LMI). LMI is an additional cost on top of your mortgage payment and is designed to protect the lender in case you default on your loan.

Should you opt for cash out refinancing now?

So, should you think about refinancing right now? With the Reserve Bank of Australia (RBA) increasing the cash rate multiple times since May 2022 (from 0.10% to 4.1% at the time of this writing), variable-interest rate mortgage holders are likely feeling the pinch.

If you find yourself paying upwards of $2000 or more on your monthly repayments and have some equity in your home that you can tap into, a refinance might be a good idea.

Is a Cash Out Refinance the Right Option for You?

Cash-out refinancing is a powerful financial tool that allows homeowners to leverage their property’s equity for a range of purposes. The relationship between cash-out refinance and home equity underscore the importance of the latter.

To make informed financial decisions about your refinancing options, it’s best if you talk with a professional mortgage broker who can outline the pros and cons of all your options and who can give you the right advice on what to do.

Whether you’re struggling with high mortgage repayments, want to pay off your home loan faster, or simply want to take advantage of lower interest rates, ZEP Finance is here to help.

We have years of experience in the industry and a proven track record of success, and we’re more than capable and willing to guide you through the refinancing process and help you achieve your financial goals.

Contact us today to learn more about our refinancing mortgage broker services.

Do you know your current home loan interest rate? Thinking about getting a better rate elsewhere or accessing your equity for additional funds? Have you ever asked yourself lately if it’s time for a home loan refinance?

In 2023, the Reserve Bank of Australia (RBA) implemented a series of interest rate hikes in response to the country’s economic conditions. With the economy rebounding strongly after the challenges posed by the COVID-19 pandemic, the RBA has taken a proactive approach to control inflation and ensure sustainable growth.

As a result, the official cash rate has been raised by several percentage points, reaching levels not seen in many years. These interest rate increases have had a notable impact on home loans across the nation.

These interest rate hikes have led to a significant rise in borrowing costs for prospective homeowners. Mortgage interest rates have climbed steadily too, affecting both existing and new borrowers. Homeowners and new home buyers are now facing higher monthly repayments on their loans, which is putting pressure on household budgets.

Are you one of the many who’ve found themselves strapped for cash due to these rate increases? Are you finding it hard to make mortgage payments due to the increase in monthly mortgage dues? If you answered yes to both questions, then this article is for you!

This article will tackle what a home refinance means and how it can help you cope with these interest rate increases. It will also show you how to perform a home loan health check to determine if your current loan is still good for your circumstances, or if you need a home loan refinance to get more favourable terms.

What is a Home Loan Refinance?

Home loan refinancing, or mortgage refinancing as some people call it, involves replacing your existing mortgage with a new one. This new home loan can come from a different lender, or a homeowner can renegotiate terms with their current lender.

This process allows borrowers to take advantage of changing market conditions, like what you’ve just read above, to help secure more favourable interest rates. This can also be used to adjust the loan structure to better suit a homeowner’s financial needs.

With the new loan, a homeowner gets to pay out the balance of the existing mortgage, and they can start making payments on the new loan after, following the new terms and repayment schedule they’re given.

Reasons Why You Should Refinance Your Home Loan

There are several compelling reasons why you should refinance your home loan in Australia. Here are some of them:

• To access lower interest rates, which can lead to reduced monthly repayments and to increase savings over the life of the loan.
• To consolidate multiple debts, such as credit card debts and personal loans, into one loan to allow for simplified finances with potentially lower overall interest costs.
• To switch from a variable interest rate loan to a fixed-interest rate loan or vice versa at the end of a fixed-rate period, allowing for more stability or flexibility depending on market conditions.
• To tap into home equity so that extra funds can be used for home improvements, investments, or other financial goals.

How You Can Refinance Your Home Loan

Refinancing your home loan in Australia involves several steps. You should try to follow these to streamline the process. These steps include the following:

• Assess your current financial situation and determine your refinancing goals.
• Research different lenders and their home loan offerings, comparing interest rates, fees, and loan features.
• Gather all the necessary documentation, including proof of income and bank statements.
• Submit your application to your chosen lender and await approval.
• If your application is successful, your new lender will pay off your existing home loan, and you’ll start making repayments according to the new loan terms.
• Get help from an experienced mortgage broker in Lennox Head to ensure you are getting the right advice for your refinance.

Costs Associated with a Home Loan Refinance

Application fees, legal fees, property valuation fees, and potential exit fees from your current lender are common costs involved in refinancing. You need to factor in these costs and calculate whether the long-term benefits of refinancing outweigh the initial expenses associated with it.

To give you an overview, here are the general upfront costs you might encounter when mortgage refinancing, along with some estimates:

• Mortgage application fee ($500 – $800)
• Property valuation fee ($300) – often paid for by the lender
• Discharge fee ($150 – $300)
• Break costs that depend on the loan amount (fixed interest rate vs current variable interest rate, and the remaining time on the fixed term)
• Settlement fee ($200-800)
• Mortgage registration fee ($154.20 including GST)
• Exit fee ($154.20 including GST)

When is it Ideal to Refinance Mortgage Loans?

The ideal time for refinancing a mortgage depends on several factors. These include current interest rates, your financial goals, and the remaining term of your existing loan. Generally, it makes sense to consider refinancing when interest rates have dropped significantly since this can lead to substantial savings.

When interest rates are high, you can refinance mortgage loans to help reduce interest rates and give you favourable repayment terms. Also, if your credit score has improved since you first took out your home loan, you should check to see if you can qualify for better interest rates and loan terms.

Eligibility Criteria for Accessing a Refinance

Lenders typically consider several factors when evaluating a borrower’s eligibility for a home loan refinance. Meeting the lender’s eligibility criteria is crucial for securing a favourable refinancing deal.

These factors can include the following:

• Proof of Australian citizenship/permanent residency
• Good credit score
• Positive debt-to-income ratio
• Must have stable employment and proof of income
• Have more than 20% equity in your home

What is Home Equity and How is it Calculated?

Your home equity is the difference between your property’s market value and the balance of your mortgage. It is a basic equation that determines how much of the property you own.

To calculate how much home equity you have, start by finding out what your property’s current market value is. Next, deduct the balance that you still owe on your home loan. The remaining amount is how much equity you have.

It also helps to check if the property market in your area has appreciated since you first purchased your home. If you’ve been making additional mortgage repayments, chances are you’ve built up a substantial amount of equity.

How Much Equity Do I Need to Refinance?

Lenders usually allow you to access up to 80% of the equity in your home, minus what you still owe on your home loan. Knowing your property value is key to getting a good deal so valuation is important to know how much of your equity you can use when you refinance.

Tips for Finding Favourable Home Loan Refinance Offers and Rates

• Being a little bit more proactive about your mortgage can help uncover hidden savings and opportunities for you and your family. If you want to make the most of your refinancing plans, below are a few expert tips you can try:
• Conduct thorough research and shop around to compare home loan refinance offers from various lenders.
• Find out your credit score to know what kind of interest rate you qualify for.
• Work on improving your credit score and paying off outstanding debts to increase your chances of qualifying for better rates.
• Choose between fixed or variable interest rate mortgages in accordance with the changes to the official cash rate which is set by the Reserve Bank of Australia.
• Know which loan features you need, e.g., redraw facilities, offset accounts, and fixed interest rates.
• Negotiate your current terms with your lender and consider enlisting the help of a mortgage broker for expert advice and to liaise for you.
• Sign up for a property appraisal to help your lender determine how much your home is worth and whether you have enough equity in your house to qualify for a refinance.

What Is a Home Loan Health Check?

Before you consider a refinance, you should first conduct a home loan health check.

This is the process of reviewing aspects regarding your property, like your current mortgage product (i.e., interest rate, features), property value, home loan statement, your loan-to-value ratio (LVR), and more.

An experienced mortgage broker can perform this review for you in a short amount of time. If you want to find out more about your home and your refinancing eligibility, you should consider getting a FREE home loan health check with us!

Home Loan Refinance Help with ZEP Finance!

If you still find yourself asking “Is it the right time for a home loan refinance?”, seek the help of a professional mortgage broker. They can help you make informed decisions based on your financial circumstances.

At ZEP Finance, we will be able to provide you with an accurate estimate of your borrowing capacity AND are more than happy to give you a FREE home loan health check!

Click the button below to speak with one of our expert mortgage brokers.