Give Your Finances a New Year Check Up

Start the year with the end in mind

As January unfolds across Australia, countless individuals are setting their resolutions for the new year. Whether it's committing to get fit, breaking bad habits, or embracing new challenges in 2025, the promise of a fresh start inspires many. For medical practitioners, who often juggle demanding schedules and responsibilities, the new year is an opportune moment to pause and reflect on personal and professional goals. One crucial area that often gets overlooked is financial well-being. While many New Year's resolutions tend to fade as the year progresses, taking the time now to conduct a comprehensive review of your financial situation can set you up for long-term success.

Where to begin, you ask? Even the most well-intentioned goals require a well-thought-out strategy. Here are some detailed steps to guide you through a financial health check aimed specifically at busy healthcare professionals:

Evaluate Your Lender

The concept of a 'lazy tax' serves as a reminder of the potential extra costs one might incur from sticking with current service providers without exploring other options. For medical practitioners, who may have specialised loan arrangements, it's especially important to periodically assess whether these financial relationships are serving your best interests.

Even if you're content with your current lender, it might be time to reassess your loan structure. Consider whether your fixed rate is nearing its end or if your interest-only period is about to lapse. These milestones offer a perfect opportunity to evaluate whether your current lender and loan terms align with your financial goals.

Investigate Interest Rates

When did you last examine whether your interest rates are competitive? The financial landscape is ever-changing, and keeping abreast of industry news is vital. The Reserve Bank of Australia has adjusted interest rates several times in recent years, and understanding which banks have passed these changes on to customers can provide leverage in negotiations.

Moreover, the Australian Prudential Regulation Authority (APRA) has relaxed restrictions on interest-only loans, which has narrowed the gap between these and standard mortgages. This development could open up new possibilities for homebuyers, particularly those in the medical community looking to expand their property investments or upgrade their primary residence.

Grasping these market shifts since your last financial review can empower you to make informed, strategic decisions moving forward.

Establish Financial Goals

Just as New Year’s resolutions provide a framework for personal growth, setting financial goals at the start of the year can guide your financial actions throughout 2025. Are you contemplating a home renovation or the purchase of a new property? Perhaps you're interested in acquiring your first investment property or expanding your existing portfolio.

By delineating these goals, you can map out the steps required to achieve them. This could involve setting savings targets, reassessing your borrowing capacity, or exploring new investment opportunities. Consider where you want to be in 12 months and take deliberate actions to reach that destination.

Remember, having support can make your financial journey smoother and keep you accountable. Just as hiring a personal trainer can accelerate your fitness goals, consulting with a financial expert can provide a tailored plan to expedite your financial progress. If you're a medical or dental professional who is eager to review your finances and set forward-thinking goals for the New Year, reach out to the team at BFD Finance today.

Taking these steps not only helps in achieving financial stability but also ensures that your career in the medical field is backed by a solid financial foundation. Embrace the new year with confidence, knowing your finances are as healthy as your patients.

What You Can Borrow vs. What You Should Borrow

As health professionals, you understand the importance of making informed decisions, just as you do in your practice. When it comes to obtaining a home loan, the amount you can borrow and the amount you should borrow often differ significantly. It's crucial to realistically assess your financial situation before making a major financial commitment.

Here's how to ensure you're making the right decision:

Step 1 - Understand Your Borrowing Capacity

Your borrowing capacity depends on several factors, including:

Understanding the distinction between what you can borrow and what you should borrow is vital. As a general guideline, it's not advisable to allocate more than 30% of your monthly household income to home loan repayments, allowing you to maintain a comfortable lifestyle.

Step 2 - Build a Budget

To determine your realistic borrowing limit, start by creating a comprehensive budget and sticking to it. This should account for both your personal and professional expenses. Knowing what funds are coming in and going out will help you assess how much you can afford to repay, and thus, what you should borrow. If creating a budget seems daunting, consider seeking assistance from a financial planner experienced in the unique financial situations of health professionals.

Include these expenses in your budget:

Step 3 - Future-Proof Your Figures

Leave some flexibility in your budget for potential changes in circumstances. As health professionals, unexpected events like job loss, illness, or rising interest rates could affect your ability to make repayments. Consider other factors: Is your income likely to increase with additional qualifications or promotions? Do you plan to have children, which might temporarily reduce your working hours? Are you nearing retirement and considering a more flexible work schedule?

These are personal questions that will influence how much you should borrow. Remember, lenders inform you of how much you can borrow, but you know your situation best. It's up to you to decide how much you should borrow. For personalised guidance, consider consulting a mortgage broker who understands the financial intricacies faced by health professionals in Australia.

By taking these steps, you can make a well-informed decision that supports both your financial health and your professional commitments.

How to secure a competitive home loan

If you’re a homeowner, it’s important not to set and forget on your home loan. After all, what suited your situation a year or so ago may not necessarily suit you today.

With interest rates going up and a constantly changing market, it’s a good idea to regularly review your home loan to ensure you’ve got one that serves your best interests.

Here are our tips on what to consider:

Keep track of interest rates

Lenders regularly update their interest rates. If you’re on a variable home loan, your current rate will constantly change. By staying up to date with the rates on offer in the market, you’ll know if you’re paying too much – and you’ll have leverage to negotiate with your lender. Which brings us to our next tip...

Negotiate with your lender

You may not think you can get a better rate from your existing lender or have them price match with another lender. The good news is that it is possible. If you find a lower interest rate with a different lender, or your existing lender offers new customers a cheaper rate for the same product, it's worth speaking with them. They may offer a better deal to keep your business.

Switch to a different lender

You aren’t bound to your lender, so if you’re not happy with their offering, you can seek a more suitable solution with another lender. Refinancing or switching your mortgage to another lender may help you achieve your property goals. You do, however, want to make sure you factor in any break costs.

Speak to us!

As mortgage brokers, we keep our fingers on the pulse when it comes to home loans. We take the guesswork and hassle out of comparing lenders and will negotiate with them on your behalf. We’ll also manage the refinancing process for you.

Book an appointment with our team, and we can help you understand your options.

Could Refinancing Be Your Ticket to Substantial Savings?

In today's fast-paced world, everyone is on the lookout for effective ways to save money. Whether it's setting up automated savings accounts or brewing homemade coffee instead of buying it on the go, there are countless strategies people employ to keep their finances in check. However, there's one surefire method that many people tend to overlook: refinancing.

As we've highlighted before, not shopping around for the best home loan deal could be costing you significantly. By refinancing, you can potentially take advantage of new offers, lower interest rates, or more favourable loan structures that better align with your financial needs. This could translate to a better deal and substantial savings over the life of your home loan.

Understanding the Benefits of Refinancing

Consider this scenario: you owe $500,000 on your home at a 3.50% interest rate, with 25 years remaining on the loan. By refinancing to a lower interest rate of 2.85%, you could achieve significant savings. If you continue with the minimum monthly repayment of $2,332, you could save an impressive $51,266 over the loan's duration. Furthermore, by increasing your repayments to $2,503 a month, matching your current minimum, you could save a staggering $72,201 and pay off the loan 28 months earlier.

Is Refinancing Right for You?

If you suspect there might be a better deal available, start by conducting thorough research. The Moneysmart website offers useful tools such as a mortgage calculator and a mortgage switching calculator to help you compare various rates and repayment timelines.

However, keeping up with the ever-changing offers from different lenders can be daunting and time-consuming. This is where a trusted mortgage broker can be incredibly beneficial, especially for health professionals seeking special deals tailored to their unique circumstances.

If you are contemplating refinancing, making a call or sending an email to a BFD Finance expert can be your first step towards substantial savings. Ensure you bring your current loan details and interest rates for a thorough comparison. To expedite the process, gather the necessary documentation in advance, such as identification verification, proof of income, and records of expenses, including bank statements, payslips, tax returns, and credit card statements. Rest assured, we will guide you through each step of the refinancing journey!

Refinancing could be a game-changer for health professionals looking to optimise their financial future. Don't miss out on the opportunity to secure better terms and save money.

Construction Loans and Renovation Loans

Construction Loan Process

Construction loans work differently from home loans because of how the funds are given out. Home loans provide a lump sum upfront, but construction loans release funds in stages as the building progresses. At key steps, like laying the foundation or finishing the project, the builder sends an invoice, and the lender releases funds after approval. You only pay interest on the funds used, not the total loan, which can save on interest costs. These loans are usually interest-only until fully drawn.

Lenders keep a close eye on renovation progress, unlike with standard property purchases. They inspect the work before approving payments, ensuring it meets standards, which can be reassuring.

Applying for a Renovation Loan

Getting a renovation loan is different from a home loan. First, you'll need detailed plans from a reputable builder, which you present to your lender. The lender appoints a valuer to assess these plans and determine the property's On Completion Value. This helps set your loan amount and includes a timeline for construction and payment schedules. You'll also need quotes for materials and special installations.

Once you get a loan offer, pay a deposit to secure the funds. At each stage, you'll sign a request with your lender to approve the work and release payment.

The Risks of Renovating

One risk is overcapitalising, where you spend more on improvements than the property's value increases. It's important to consider both the construction loan and any existing debts, like your mortgage. Compare similar local properties to gauge your home's value post-renovation. For example, if you bought your house for $650,000, owe $575,000 on your mortgage, and have a $250,000 construction loan, the On Completion Value should be over $900,000 to avoid overcapitalising.

Talk to your broker today to understand more about construction and renovation loans. Paul@bfdfinance.com

Confused about home loan pre-approvals?

Pre-Approvals; Making Borrowing and Buying Easier

If you're unsure about home loan pre-approvals, follow these four steps.

Ready to buy a property? You'll need to demonstrate to the seller that you have sufficient funds. For most people, this involves securing a loan, and the first step is obtaining pre-approval. Pre-approval, also known as conditional approval or approval in principle, is an indication from a lender of how much you can borrow. With pre-approval, vendors and agents know you're serious about purchasing. Here's how to proceed:

Gather Your Financial Information

To estimate how much you can borrow and afford, provide a lender with a complete financial overview. This includes your income, assets, and financial obligations such as existing debts and living expenses (like bills, entertainment, food, and car expenses). You'll need evidence of:

If you follow a budget and have a regular savings history, consider providing bank statements as proof. Use this information to gauge your borrowing capacity. Several free mortgage tools and calculators are available that can assist.

Meet a Lender or Broker

Schedule an appointment with a lender or mortgage broker. They will provide a checklist of necessary documents, including the evidence mentioned above and required forms of ID. During the meeting, the lender or broker will calculate your borrowing potential. If you wish to proceed, you can complete a pre-approval application form.

Undergo a Credit Check

The lender will arrange for an independent credit bureau to conduct a credit check. This may influence your borrowing capacity and the amount you can borrow.

Receive Conditional Approva

If your credit rating permits, you'll receive a conditional approval certificate from the lender, typically valid for 90 days. This indicates, but doesn't guarantee, the amount you can borrow. Use this figure to determine how much to spend on a property, considering your deposit size. Account for expenses like conveyancing fees and stamp duty. Also, be aware that you may not be able to borrow the full amount indicated by the certificate. Obtaining pre-approval allows you to house hunt with confidence.

What Happens Next

Once you've made an offer on a house, whether at auction or private sale, you'll need to secure full loan approval. Contact your lender or mortgage broker with property details, and they'll guide you through the home loan application process. Securing pre-approval is a crucial step in the home-buying journey.

For assistance in determining your borrowing capacity, contact Paul Jarvis at BFD Finance on 0410 442 951 or paul@bfdfinance.com.