Mortgage Report - Tax Report. Saving Money and Creating Wealth

This report does not constitute the be all and end all of Mortgages and Taxes.
The intention of this report is to clarify certain market place perceptions and misconceptions and to provide possible financial alternatives.
Before acting on any information contained herein, please obtain your own independent legal and financial advice.

These are but a few gimmicks used in marketing to attract consumers……..
ARE YOU LOOKING FOR A GIMMICK OR DO YOU WANT THE “BEST” LOAN?

Let us first address the give away, discount promotions and discount interest rates.
We have all come to realise you get nothing for NOTHING in this world. (The advertisers or lenders must think we are all stupid)

DISCOUNT PETROL:
Someone has to pay the 10c, 20c or 40c per litre, petrol discount…Is it the lender??.....Is it the petrol station??.....Or is it the oil companies?? None of the above…..YOU the consumer pay through the interest rate applied to your loan.

“FREE” HOLIDAY:
Someone has to pay for the holiday…Is it the lender??.....Is it the travel agent??.....Or is it the airlines?? None of the above…..YOU the consumer pay through the interest rate applied to your loan.

DISCOUNT OR INTRODUCTORY INTEREST RATES:
Is the lender actually discounting or is it simply that the lender is overcharging in the first place? So who pays for this discount, the lender? No Way…..YOU the consumer, ultimately pay through the term of your loan.

Mortgage Buddy has also advertised that you will receive gifts. This does not mean the gifts cost nothing. Our gifts are ABSOLUTELY FREE to YOU but they do cost us money.

The items we promote and give to you as a gift, are generally sold by us. Because we give them to you free, we obviously make no money and hence no profit from what could be a potential sale. You the consumer reap the ultimate rewards from our promotions.

The lenders on the other hand are generally a company, group of companies or organisations that are owned by investors, business partners or are public listed entities. As with any company, they are in business to make money. The lender, no matter how big or small is not in business to please the consumer though in order to stay in business they must satisfy the consumer. Lenders are in business to provide profits to please the owners, investors or shareholders.

How many banks do you know that are running at a loss? None! The major lenders that we have all come to “Love, Believe & Trust” are making record profits….HOW IS THIS POSSIBLE? Very simply, by giving consumers a low return on their savings and investments then selling these savings and investments at a higher rate to borrowers or reinvesting your money combined with charging ridiculous fees for inadequate services. In no way do we condemn the making of money as we too are in business to make a profit. We do however challenge the fees for so called services when this should form part of operating costs when the lenders use your money. We are simply making the point that when borrowing money there is a marketing allowance added as a margin of the interest rate you pay that is allocated towards their promotional give-away or incentives.

COMPARE
It is so important as a consumer to obtain comparison quotes on anything you purchase. In particular, when selecting a mortgage this is generally the most costly purchase of your entire life. DO NOT accept the fact that the major lender is your most trusted companion and more importantly, DO NOT be tricked by clever marketing campaigns.

Finding the Best
Searching for the “best” can be daunting to say the least. Even the largest Finance or Mortgage Brokerage companies do not have access to all loan products from all lenders in Australia. By using a finance consultant or broker rather than going direct to any individual lender, you will obtain avenues of finance otherwise unknown to the general consumer.
Majority of mortgage brokers have access to multiple lenders offering multiple product alternatives. When dealing directly with any one lender, you are restricted to the limited range of loan products provided by that lender.
When you see an ad or receive advice from a lender stating “this is the best product”, they are absolutely right, the best product that particular lender may have in their range. This seldom represents the best loan product on the Australian market.

1) When trying to find the best loan or lender, majority of consumers are only ever directly exposed to the advertisements of major Banks, Credit Unions or Building Societies. This constant advertising has developed a relationship whereby the consumer trusts those who they know and distrusts or is at best, sceptical of all others.

There is also the fact that families and their families before them have dealt with the same bank, building society or credit union forming a seemingly unbreakable bond or relationship. All these factors lead to a false sense of security and more importantly prevents the consumer from finding the best loan or lender.

DEREGULATION
Since the deregulation of the banking industry there is now a huge variety of lenders in the Australian market place. Lenders come in the form of; “Wholesale Funders”, “Originators”, “Private Lenders”, “Non Bank Lenders”, “Non Conforming Lenders” and a multitude of other brandings that are as stable and credible as the main lenders we have grown up with and have come to know. Very few of these alternate lenders spend money on advertising and as a result can actually offer far better products and rates than the mainstream lenders.

It is unfortunate that the old adage prevails, “Better the Devil you know”. This way of thinking unfortunately deprives many from having the best there is and in a large number of instances prevents the consumer from even getting a loan because the major conventional lenders have become so spoilt that they pick and choose who they wish to have as a client.

The consumer does not always have direct access to these “Non Conventional” Lenders which is why using Mortgage Buddy could be your only chance of finding the “Right” Loan and the “Right” Lender.

2) The best loan is a myth. There is no such thing as the best loan because every individual has individual needs. Even if you have sifted through 50 lenders and 3000 loan products to select what you imagine to be the best loan, there will always be another loan around the corner that you have not seen that will be better than the loan you have selected.

Our interpretation of the “right” loan is not a loan with the lowest interest rate, actually not even the loan itself but the structure and flexibility of a product to meet your financial requirements. A product that allows you to pay the least amount of interest, fees and charges from day 1 until the day you have repaid your loan in full.

Finding the right loan is a lot harder than finding the right lender. This statement is made on the fact that there may be 150 lenders in the market place but there are in excess of 3,000 loan products to select from. Upon request, Mortgage Buddy completes individual needs analysis for consumers with financial wants. Based on the result of our analysis, only then are we able to select and recommend the style of loan that would most suit your needs and wants.

3) The best lender is not a myth; it is simply that nobody has been able to find them. To brand any lender as being the best seems to be an impossible task. Finding that lender which consistently provides the most completive and flexible products with systemised reliable services has proven for all finance specialists, to be quite a challenge. Today a particular lender will be flexible in their product qualifying criteria; tomorrow that same lender alters the goal post of their criteria thus making loan approval harder. This week a particular lender will process your loan in 24 hours but next week they are so busy that they take 7 days to process the same loan. This month a particular lender may be desperate for business and will waive application fees to attract new clients. Next month the lender’s quota of new clients has been met and they then reapply application fees. For the general consumer, trying to monitor daily, weekly, monthly changes in lenders products and performances is a near impossible task.

Mortgage Buddy processes loans to multiple lenders, daily. We obtain daily information on lender’s promotional specials, changes in lending policies, interest rate fluctuations, fee waivers and a mind numbing amount of alternate product specifications and comparisons.

When looking for the right loan and the right lender, use a professional but insist on a reliable, reputable Finance Broker by asking;

Which industry body/s are they accredited with –
Mortgage Buddy is an accredited Full Member of MFIAA (Mortgage and Finance Association of Australia) plus FBAA Member (Finance Brokers Association of Australia)

What Credit Service is used for consumer recourse – Mortgage Buddy is a COSL Member No 400446 (Credit Ombudsman Service Limited)

How many lenders are they accredited with – Mortgage Buddy is directly accredited with 25 lenders plus we have indirect access to more than 20 additional lenders providing in excess of 3,000 loan products or options.

Having a financial companion that cares, is genuine in their service, ethical in their approach, morally sincere, that can assist, fast track your search, hold your hand during the process and stay by your side long after the settlement of your loan, is CRUCIAL.

In order to make your mortgage work for you it is important to understand how interest is applied to your loan.

Wording with reference to interest rates is actually quite deceiving. All lenders without exception quote or advertise an interest rate per annum for example; 6.5% p.a. This is not technically correct because with almost all loans, the interest rate is actually calculated daily not annually which means that at a certain time each day, interest is added to your loan. This is called compounding interest and it means you are paying interest on your interest (double dipping). We are of the opinion that all interest rates should be quoted as a daily, not annual rate.

Using the example of 6.5% per annum, this should be quoted or advertised as 0.0178% per day. To calculate the daily interest you are charged, simply take 6.5% divide by 365 (days per annum).
The relevance of this is that unless you have a financial calculator, how would you calculate the amount of interest a lender charges you. On the other hand, knowing the daily interest rate makes it easy to determine the amount of interest you will pay your lender, by using a household calculator.

Formula:
If you have a $250,000 loan at an
interest rate of 0.0178% per day
$250,000 X 0.0178% = $44.50 interest
This interest will be applied to your loan at midnight tonight which means tomorrow your new loan balance would be $250,044.50.
Each day this formula repeats itself which highlights that every day until you make a loan payment, your loan will continually increase.

Now that you are aware of how you are charged interest it is important to find a way that you can actually reduce the amount of interest you pay your lender, daily.

The only effective way to do this is to take any money you have in a savings account, under your mattress or in the cookie jar and place this money on your home loan. It is also imperative that you place all your wages directly on the loan the minute you are paid. For obvious reasons, if you earn a monthly wage, go to your boss or paymaster and plead your case that they change your wage cycle to weekly.

Lets see the result;
Loan $250,000 @ 6.5% per annum
Midnight Day 1 apply 0.0178% interest = $44.50
Loan Balance Day 2 = $250,044.50 then at Midnight Day 2 apply 0.0178% interest = $44.50
Loan Balance Day 3 = $250,089.00 then at Midnight Day 3 apply 0.0178% interest = $44.51
Loan Balance Day 4 = $250,133.51 then at Midnight Day 4 apply 0.0178% interest = $44.52
Loan Balance Day 5 = $250,178.02 then at Midnight Day 5 apply 0.0178% interest = $44.53
Loan Balance Day 6 = $250,222.53 then at Midnight Day 6 apply 0.0178% interest = $44.53
Loan Balance Day 7 = $250,267.03 then at Midnight Day 7 apply 0.0178% interest = $44.54

You can see what will continue to happen if you kept doing this for the whole month, however, if on the 7th day you put your wages onto your home loan (assuming your combined weekly household wages were $1,000.00)

Loan Balance Day 7 = $250,267.03 put in your wage of $1,000 which means your loan balance will drop to $249,267.03 then at Midnight Day 7 apply 0.0178% interest = $44.36
Immediately you can see that you will pay less daily interest to your lender. When you put this in the context of a 25 year loan combined with the assistance and guidance provided by Mortgage Buddy to help reduce the term of your loan thus reducing your daily savings by dollars rather than cents, this can equate to huge amounts of money that stays in your pocket rather than giving this money to your lender.

THIS IS NOT PRACTICAL!
Of course you can not put all your wages into your home loan, how would you live?

The answer is actually quite simple….Over the past 15 years, lenders have sought clever ways to attract clients. In their endeavours to achieve this result, lenders have provided marketing gimmicks such as 55 days interest free credit cards, introductory rates and professional rates, redraw facilities plus numerous other products and services that if used correctly can be of tremendous benefit to the consumer. (It is amazing the benefits a consumer receives through competition)

A number of astute borrowers have managed to piece together the home loan jigsaw puzzle to save themselves 10s of thousands of dollars. These astute borrowers have either used these savings to improve their standard of living or have reinvested these savings, wisely.

Using selected products provided by the lenders, you too have the opportunity to improve your standard of living, reduce the term of your home loan and have extra money to invest for the future of you and your family.

Where do I start….is the question asked by most consumers that are not making their mortgages work for them. The formulas are too complicated…..

I still don’t understand compounding interest and how I can save money on my loan…..if I did try and do this, which lenders tools and products do I use……how can I put all my wages into my loan and still live……HELP?????????

IN ORDER TO PAY OFF YOUR LOAN QUICKER YOU MUST STOP LIVING
Absolute rubbish

All that is required is assistance and guidance. We at Mortgage Buddy are of the opinion that life was meant for living. Life is not about being debt free as quick as possible. We are able to show and personally help countless Australians, pay off their home loans quicker whilst at the same time improve their standard of living and provide the added bonus of securing a financially healthier future.

Anyone from any walk of life can achieve incredible savings without our assistance, however, we come across countless consumers every day that have tried and failed. There are instances where it seems to be almost impossible for some consumers to simply take the first step or to remain focussed once the step has been taken. Operating the systems incorrectly or partially and not fully understanding how to use the concept of “Interest Minimisation” seem to be the major factors for mistakes in the past. Being coerced or tricked by clever advertising also creates a major challenge to the consumer developing an altered mindset that you do not have to do it the bank’s way. Generally it is all just too hard, very scary and a nightmare trying to find someone you can trust.

There is an easy, guaranteed way to beat the banks and succeed.

Mortgage Buddy will come to you, show you in detail and explain in plain English so that you fully understand the principals. We will find the right lender and the right loan plus the right product tools to fast track your interest savings.

The Bible says we must pay our taxes, the Government says we must pay our taxes, Mortgage Buddy says you must pay your taxes, but we do question
MUST YOU PAY SOOOO MUCH
? ? ? ? ? ? ? ? ?

Every working Australian has the opportunity to minimise their taxes. The Office of State Revenue allows for certain tax claims and deductions and there are guidelines in place that enable all taxpayers to effectively offset their taxes. If applied wisely, these offset taxes could assist in creating wealth for you and your family.

These are not schemes or scams. Talk to your accountant, talk to your financial planner, talk to the taxman and you will find there are bounties of opportunity to reduce the amount of taxes you pay.

I am simply a worker; I don’t own a business or a company.
Nobody is “simply a worker”! If you work and earn money, you too have equal opportunities to become an investor that could result in you receiving certain tax breaks and advantages.

I know absolutely nothing about being an investor.
Would it shock you to know that this statement could be made by more than 50% of the Australian population which represents approximately 10 million people? FACT, there is an enormous amount of people that are missing out on wonderful opportunities simply because they have not been shown, do not know who to approach for assistance, do not believe it can be done, do not believe they may qualify but most sadly because they imagine ……..…...

It is only the “clever” and the “rich” that can become investors.

There is a multitude of investment opportunities available; however, we have selected to provide you with the principals of one form of investment that is commonly available.

Too many people have lost money!
Too many sharks in the business!
The property market has crashed!
There is too much risk!
Where is the best suburb to buy?
What if I don’t have a tenant?
What if the tenant wrecks my property?
I can’t afford to buy another house!
I don’t want anymore debt!

We could write an entire report on reasons why the consumer will not and does not consider this option.
Take the time to read on and you may be pleasantly surprised by the simplicity and attainability of property investing.

Understanding the 2 types of property investment methods is the first step;
Positive Gearing
Negative Gearing
We believe that a portion of your investment portfolio should contain a combination of both these options.

What Is Positive Gearing?
When the outgoing cost associated with owning an income producing property (including setup costs and interest) are less than the rental income, this positive cash flow becomes an additional taxable income thus no Tax Relief will be applicable.
In other words, this investment makes you money and you must now pay more Taxes.

What Is Negative Gearing?
When the outgoing cost associated with owning an income producing property (including setup costs and interest) exceed the rental income, this negative cash flow can be offset against other taxable incomes (including salaries etc) that result in Tax Minimisation.
In other words, you are losing money.

The reason for wanting a “Positive Geared” investment is obvious but why on earth would anyone want a “Negative Geared” investment?

Let us ask the question another way, if you could purchase an investment property worth $300,000 and all that it cost you in real money from your own pocket was $100.00 per week, is this an option you would consider or would you rather put your $100.00 a week into a secure savings account with your bank?

Lets see….
How much would you make if you invested $100.00 per week in a property worth $300,000 and that property increases in value by only 4% per annum over the next 5 years?
Capital Growth = $66,300

How much would you make if you placed $100.00 per week in a savings account which gives you 4% interest per annum over the next 5 years?
Interest Earned = $28,800

The factor to consider here is not what the investment costs but how much it will cost YOU in real money.

This result indicates the reason why everyone would want to “Negative Gear”.

“Negative Gearing” is used as leverage whereby the income you receive from a tenant, combined with rebates in taxes returns a potentially greater dividend than simple savings. This is Tax Utilisation.

If you were to purchase an investment property valued at $300,000. You would borrow 100% of the value of the property plus all costs associated with the purchase of that property.
Assume that the repayments of the loan were $425.00 per week and there were associated weekly costs in maintaining this investment property of an additional $75.00 per week. This means the total weekly cost to buy and maintain the investment property would be $500.00 per week.
Associated costs include; full insurance protection against any eventuality, land & water rates and property management.

Now assume that you were to receive $300.00 per week rental income on this investment property.

The result is a weekly shortfall which means you would actually be paying $200.00 per week out of your own pocket. This $200.00 represents a loss of income to you of $10,400 per annum. Due to the fact that this investment is a business, any business losses can be claimed directly against your taxable income.

There’s MORE……
As an investor, you are now able to claim additional losses which are comprised of depreciation, accountancy fees, establishment and professional fees, inspection costs plus other legitimate tax deductions. For the purpose of this exercise we will assume that the total amount of taxable claims (losses) you may make could be in the vicinity of around $23,000 per annum.

Prior to becoming an investor, we will assume you earn $45,000 per annum which means you are probably paying around $9,800 per annum to the tax man.

AS AN INVESTOR
The $23,000 indicated as your investment property losses, is to be deducted from your gross income of $45,000 thus making your new annual taxable income only $22,000.

The result is that you only pay $2,994 to the tax man which means the savings in taxes of $6,806 per annum has assisted in you being able to purchase this $300,000 investment property at an actual cost of only $65.00 per week out of your own pocket.

The reason that so many people do not take this step is that they can not afford to wait till the end of the year to claim their tax rebates.

Mortgage Buddy makes the investing process simple and affordable by referring you to Accountants that will submit the necessary forms to the Office of State Revenue so that you actually get to keep the $132.00 tax rebate in your weekly pay packet rather than waiting till the end of the year.

TIPS
When selecting an investment property, in most instances the only way to obtain Maximum Depreciation for Tax Advantages is to purchase a Brand New Property.

The amount of claimable depreciation can also be greater when selecting a villa or unit as you are generally able to claim percentage depreciation against common areas such as pools, hallway fittings and lifts.

Where do I buy my Investment Property?
Choosing a location is the most critical factor in obtaining maximum capital growth when purchasing for wealth creation purposes. The golden rule is that majority of Real Estate agents have little or no idea where or what percentage growth is predicted for "Hot" suburbs of the future. The general Real Estate Agent simply sells properties in his or her immediate location. Armed with this knowledge it is advisable to seek the assistance of a Property Specialist.

PROPERTY SPECIALISTS obtain statistical data based on past trends offering proven results combined with industry knowledge of future planned developments and economic factors.

What if my investment property doesn't have a Tennant?
This is the most common reason why all too many potential investors have not proceeded with an Investment Property Purchase. This question combined with, "What if the tenant wrecks my property?" plus "What if I lose my job?". In all these eventualities, it is critical to obtain full insurance when taking on such a venture. Insurances can cover you for "Loss of Income" through sickness or accident and in the event of death of one or more parties that purchase the investment property, the investment loan may be paid out in full so as not to place a financial burden on other parties involved. "Property Insurance" will cover damage to property and "Tenancy Insurance" will cover non tenancy income.

When choosing to “Negative Gear”, you should approach this with a medium to long term time frame in mind. Most investment professionals will say that you should consider a 5 to 10 year time frame.

CONSIDER the fact that you are not a property speculator who is reliant on the property markets increasing rapidly in order to make a quick profit. Investing in the method we have talked about, the property market can increase or decrease but history has proven that if you are able to hold the property for a substantial period, you are bound to make money even in times of a property slump.

No matter how much money you could potentially make, do not take this step or for that matter, any investment step unless you are 100% aware of all the pros and cons. Use professionals to assist with every step you take because it is so important that you are comfortable enough to be able to;
SLEEP AT NIGHT

Here are some true life examples of benefits received, wealth creation attained and life improvements achieved for our Members.

Mortgage Buddy SAVES $65,000.
Sue & Jim of Quakers Hill are now in a position of saving $65,000 on their home loan and being debt free in 18 years rather than 25.
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Mortgage Buddy Prevented Loss of Home.
Darren and Michelle of Huntley fell in arrears with their loan due to family illness. Their current lender was ready to foreclose. After pleading their case to 3 different lenders, we settled their new loan days before the auction thus saving their family home.
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Mortgage Buddy provides
Holiday of a Lifetime.
Alan, Jennifer and family of Raby had never left home for a holiday. Through our debt consolidation, refinancing and releasing the equity in their home, this enabled them to install a pool plus Alan & Jennifer took their 3 children to Disneyland for 3 weeks. They will also reduce their mortgage by 8 years.
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Mortgage Buddy GIVES $50,000.
Adrian and Fiona of Green Point, our 3% Home Loan Winners receive up to $833.00 per month from us for the next 5 years, towards repaying their home loan.
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Mortgage Buddy said YES.
David of Albion Park Rail was trying to survive on a Government Pension and Super. David’s credit cards were to their limit and he was paying over 8% for his home loan. After consolidating debts and refinancing his existing home loan to a different lender at a lower rate of interest, we were able to save David $450 per month.

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Mortgage Buddy
Helps First Home Owners.
Nathan and Emma of Dapto had no genuine savings. They had been rejected by the banks and credit unions. With our assistance in providing a 100% home loan, Nathan & Emma now own the home of their dreams.
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Mortgage Buddy assists
Workers become Investors
We have assisted the following families to utilise the equity in their homes to prepare for the future.

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Debbie from Elermore Vale is a single working mum looking to further her career in nursing and plan for retirement. We showed Debbie how to use the equity in her home to pay for the course and purchased her first investment property.
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Steven and Lesley of Speers Point are hard working battlers. Since meeting us, they have purchased their first investment property and their future is looking brighter.
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Tony and Simone from Singleton were paying way too much tax with no results. They have now made their taxes and equity in their home work for them with their first investment property.
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Brian and Pat of Tamworth thought their super would be enough to cover them. Since meeting us, they have purchased two investment properties and are now looking forward to their financially healthier retirement.

In this report we have skimmed the surface in relation to Mortgage Optimisation & Tax Utilisation.
Now it is up to you to take the next step.

Possibly the most important factor we wish to highlight when obtaining finance or taking the first steps toward investing is that you;

Yes, it can all seem quite confusing but the reality is quit different.
You simply need the will to want more.

Support, systems, guidelines and industry body protection legislations have opened safe avenues and opportunities previously not available to the Australian Consumer.

MIAA (Mortgage Industry Association of Australasia)
(02) 9967 2896
www.mfaa.com.au

ASIC (Australian Securities and Investment Commission)
1300 300 630
www.asic.gov.au

At Mortgage Buddy, our intention is to show the truth, provide alternatives and offer solutions.
We are only a call away and welcome any question you may have. We offer a mobile service whereby we will come to you in the comfort of your home.
Mortgage Buddy offers education, understanding, support and guidance.
We pay for your first in-home consultation that consists of a detailed personal financial assessment, specific mortgage minimisation scenario and detailed investment concept explanation.
Your personal consultation is absolutely FREE and you are under no obligation to use our services.
Once you have become a Mortgage Buddy Lifetime Member, you will NEVER BE CHARGED any ongoing fees or charges for any benefit, service, assistance or professional contact provided by us,
FOR LIFE!