One of our favorite funders was sent application from a father and daughter, to refinance and top up the mortgage on a home owned by the father (and to buy out his ex-wife’s share).

The father was on WINZ and needed his daughter’s support for debt servicing to work. She was in stable employment on a good income. Both had clean credit and the daughter was moving back in to live with her father.

Our friendly lender approved the loan conditional upon the daughter becoming joint owner of the property, i.e. she benefited from the transaction too.

Do you know someone looking for a loan in a similar situation?

Contact us using the contact page

Over at our lending division we recently we met a couple purchasing their first home together.

As a gift from the family the couple were able to purchase at an advantageous price.

This did mean the purchase was a surprise however and so a deposit had not been saved and the young couple required 100% funding of the purchase price. (this was possible due to the equity in the property being gifted.)

Both husband and wife were self employed and had a few defaults on their credit report.

Debt servicing appeared fine based upon self-declared incomes although financials provided indicated the income declaration was reasonable.

The successful loan was approved of just over  $190,000 at 10.35% pa for a 30 year term.

Do you know anyone in a similar situation?

Let us know, we might be able to help.

Financial Adviser Code Committee Proposals & Roadshow
- Some mortgage brokers may need to become authorised

Proposed minimum standards of competence, knowledge and skills for authorised financial advisers (AFAs) were released last week. The Securities Commission and the Code Committee also conducted a consultative roadshow in the main centres. (Yay…about time)

Colleen Dennehy and John Commins attended the consultative meeting and found it very useful – not so much for clarification of what was contained in the Code Committee proposal document, but for emphasis on how implementing and supervising the new regime might evolve.

While the proposals deal with standards for AFAs, there are implications for those who deal exclusively with consumer loans (mortgages) and / or term life and disability insurance and / or general insurance. All of these are category 2 products. Advisers who give advice on these, would not, on the face of it, need to become authorised i.e. Mortgage brokers and insurance (risk) advisers.

But, as the Code Committee and Commission Director of Supervision, Angus Dale-Jones, took particular care to point out product categories are only one limb of the criteria for whether a financial adviser needs to become authorised.

The other limb is that those who provide a financial planning service – for any category of product, will also need to become authorised. The Financial Advisers Act 2008 defines “financial planning” very broadly. In fact, most advisers who provide “needs based advice” on more than one or two financial products for a particular client will need to be very careful that they do not cross the “financial planning” line.

Angus Dale-Jones said the Commission was not going to write “black letter rules” about what constituted a financial planning service. Rather, he said the Commission would take a “collaborative approach”. He made it very clear however that non AFAs operating in the category 2 product space should pay close scrutiny to what they do and if in any doubt, should become authorised.

Professional Lending Services and Professional Investment Services are committed to keeping you informed with updates on the new rules. PLS and PIS will also be providing assistance and resources exclusively for its advisers to become fully compliant with the new regulatory regime.

In the Wednesday ruling, Justice Keith Long reaffirmed his March ruling that invalidated two Springfield foreclosures. After the mortgages had been spun through Wall Street and turned into exotic “mortgage backed securities,” Long ruled, the foreclosing lenders, U.S. Bank and Wells Fargo, couldn’t legally prove they actually owned the mortgages in question.

http://www.necn.com/Boston/Business/…255562400.html

This morning (9am on 25 September 2009) the money markets were at the following levels:

Official cash rate 2.50% (unchanged)

90 day bill rate 2.78 (unchanged)

1 year swap rate 3.14 (up from 3.03)

3 year swap rate 4.73 (up from 4.63)

10 year bond rate 6.05 (up from 6.00)

Kiwi dollar 0.7205 (up from 0.6960)

Good News on the Economy

According to official GDP figures, during our last quarter we experienced a tiny amount of growth, which officially means we are moving out of recession, (according to the economists).

This is positive news but I think the good times are still a way off (here’s an article The ghost fleet of the recession anchored just east of Singapore that is pretty grim and indicates that not everything is as rosey as some would like us to believe) .

We are still susceptible to any one-off hits, such as a major company collapse, an international crisis such as a terrorist attack, or an oil price surge. Our unemployment numbers will continue to increase over the next twelve months (even if Key is saying that he thinks it has leveled out now on last nights news).

Our currency is high (and went higher overnight) which makes an export or tourist related recovery unlikely. Overall though the latest result is positive for our economy but we are still in a fragile state, and need another two improving quarters before we can say the recession is truly behind us.

Current Rental Market

Those wanting to rent a residential property are seeing a greater choice available. This is not unexpected in a recessionary environment, as younger renters return home, existing renters may get an extra flatmate to cut costs, and householders may get a boarder to supplement their income.

There are more “To Let” signs appearing around our cities and Trademe has also noted an increasing number of properties available.

I believe this will be a short term phenomenon, as the rental market over the median term is likely to firm up. This is because our population is increasing both naturally and via immigration.

Debt is an accepted part of life for property investors. It quite simply comes with the territory.

Experienced investors recognise the difference between good debt (tax deductible) & bad debt (non-tax deductible used to acquire assets that don’t produce an income).

Less well recognised is that there are good ways to pay down debt.

Financial experts have teamed up with API to identify 12 creative strategies to help exterminate your debt faster.

Here are just a few tips:

SIMPLE SACRIFICES
If you’re willing to make some simple sacrifices in your lifestyle, you might well find the dollars saved will have a big impact on your mortgage over the long term. Here are five ideas to set you on the sacrifice path.

1. Make your lunch
2. Give up smoking
3. Give up your morning coffee routine
4. Hire rather than buy clothing for weddings & major events
5. Sell unwanted items.

GOLDEN RULES
As well as looking for creative ways to reduce your debt more quickly, it’s always worth keeping in mind the golden rules of debt reduction.

1. Consolidate your debt – if you have any out of control debts spread among credit cards and personal loans, which charge high interest rates, it’s often a good idea to consolidate all of that debt under your home loan so that you’re paying a lower interest rate.
2. Pay off non-deductible debt first – credit card debt, personal loan debt and even debt on your own home isn’t tax deductible. For this reason, it’s often best to pay off this debt before paying off deductible debt, such as that used to buy an investment property.
3. Pay off debt with the highest interest rate – if you have a number of debts using different facilities, prioritise them by looking at the interest rate you’re paying. The debts with the highest interest rates must go first.
4. Budget – budgeting is the biggest factor in being able to reduce debt quickly. “How you manage your cash flow has by far the greatest impact”
5. Pay more frequently – paying more frequently pays big dividends, especially switching from monthly payments to fortnightly repayments, while keeping the amount paid at half of a monthly payment. This is because borrowers paying fortnightly end up making one extra payment per year.
6. Pay more than the minimum – paying just a little bit extra in each repayment cycle will make a big impact on your debt over time. Another option is to keep your repayments at the same level as before interest rates fell. By ignoring rate cuts and maintaining higher repayments, borrowers hasten the pace of their journey to outright property ownership.

Australian Property Investor August 2009 www.apimagazine.com.au

by Gabriel Lacroix | Thursday, 17 September 2009
A year after US investment bank Lehman Brothers failed and set off the rollercoaster ride that became the Global Financial Crisis, the world has pulled back from the brink – but there are at least eight lessons investors must learn from it, according to AMP Capital Investors’ Head of Investment Strategy & Chief Economist Dr Shane Oliver.

Oliver believes the signs of improvements are virtually everywhere. “Firstly, money markets are almost back to normal and credit markets have improved dramatically. Secondly, economic indicators in most countries seem to be rebounding almost as quickly as they collapsed,” Oliver said. “This is illustrated in the OECD’s leading economic indicators, which are combinations of indicators such as consumer confidence and building approvals, which lead future activity.”

In his view, there are several lessons to be learned from the GFC. “First, the GFC has provided a reminder that the capitalist system is inherently unstable thanks in large part to human psychology, and that the idea of an efficient market that can never go astray is completely fallacious.

“Second, there is a role for government to stabilise the economic cycle. Most importantly, policy makers have a decent, albeit not perfect, set of tools in their tool kit to do this.”

The third lesson – these things happen. “While after each economic crisis there is a desire to make sure it never happens again, history tell us that manias, panics and crashes are part and parcel of the process of ‘creative destruction’ that has led to exponential increase in material prosperity in capitalist countries,” Oliver argues.

And, he says, the basic lessons remain the same: higher returns come with higher risk; the role of sentiment can’t be ignored; be wary of financial engineering and products that are hard to understand; be wary of having too much debt; don’t think that having a well diversified portfolio of growth assets will necessarily protect you in a financial panic.

© 2009 financialalert, Brillient Investment Publishing Pty Ltd ABN 19 122 531 337.

You know it suddenly dawned on me that people often have no idea what I do or my company does for people.
Over the years we have jokingly called ourselves the millionaire makers because so many of our clients require over $1,000,000 in retirement to be able to provide them with what they want in retirement.

I know lots of you will shudder and say that’s unrealistic etc etc, however the reality is that the only reason people make those comments is because they have been conditioned to think that a million dollars is a lot of money. It’s not.

If you think about it though it’s not hard to figure out that needing a million dollars to retire on is not so far fetched, think about it. At the moment you can get say 6% at the bank on a fixed interest account. So if you and your partner earned say $40,000 each per annum that’s $80,000. you decide you want to live on that same income so work back, how much do you need to give you $80,000 if you are getting 6% from the bank? It’s about $1,350,000. See not hard to find out you are going to need a large lump sum for retirement.

But wait you say, we only need $40,000 when we retire…… oh really? So you are immediately saying you will take a 50% pay decrease, imagine if you had to do that today ….could you? Probably not but we won’t have the mortgage you say….. no you won’t but you will have an awful lot of time on your hands and most people tell me they want to spend that money traveling…Is traveling cheap….nope.

Anyway lets say you did decide you could retire on half what you are earning today and you could travel on the cheap or do whatever it is that you decide you will do in retirement, you still have to factor in inflation.

That’s right, unless you are going to retire tomorrow inflation is going to get you. So the $40,000 that you decide you could drop down to is now $40,000 in 10 years time which means it’s more like to be around $60,000 that you need (find a inflation calculator somewhere and pop in figures like 4% per annum over 10 years) so again we get to the calculation….. $60,0000 needed, 6% earning rate so money in the bank needed….$1million.

Anyway enough harping on about that. When we do the numbers 99% of people have needed more than $1,000,000 in income producing assets for their retirement, which is why we jokingly called ourselves the millionaire makers.

So why did I start this post? Because I just finished a strategy for a couple who have 19 years until they retire.

As I completed the strategy and looked at what we will accomplish for them it dawned on me how much value we provide to our clients.

You see this couple have 27 years to go on their existing mortgage (does that sound familiar?) and they needed $1,500,000 in income producing assets for them to be able to complete all their goals including overseas travel, $60,000 in today’s income, a yacht and various other goals.

When I completed the strategy we achieve the following for these lovely people.

Home paid off in 10 years and 8 months.
Interest saved on mortgage…. over $200,000
Tax saved……over $80,000
Wealth created for Retirement $2.1 million dollars.

Now don’t be shocked…this couple have 19 years to achieve this and the combined income is $100,000 however the monthly surplus they can put towards their strategy is only $150 per week.

So I thought I might brag a little.
We have helped so many people accomplish the same thing over the 9 years I have owned Financial Gain Australia and now Financial Gain NZ (which trades as Professional Investment Services), that I thought it might be time to let people know that this is possible and the service is out there for people who want it.

Today I read about a new product being released in Australia for investors. Fantastic.
Hopefully ANZ will bring this product over the ditch as well and provide it here for kiwi investors.

The following is an excerpt from the article.

The ANZ Portfolio mortgage operates like a line of credit and is geared to enable investors to consolidate multiple loans under the one facility with the added convenience of up to 12 sub accounts. Equity can be released quickly when opportunities arise allowing investors to move quickly when required.

The investment market looks particularly strong at present. Prices have largely remained stable across most markets over the last few years while rental values have continued to increase.

“Given the ongoing pressure of property undersupply and increasing demand due to migration we see considerable potential for the investment market over the coming 12-18 months.“

Mr Bock said that the product had been a year and a half in development and admitted that there was “an element of coincidence” in the present investment market potential and the product launch.

The timing, he said “couldn’t have been better.”

It is interesting spending so much time with the kids.

It’s been a couple of weeks since I have spent the whole day working as school holidays has meant most of the time I have been doing various daddy things.

The newspaper has not been opened.

Emails have been reposnded to slowly.

The movie theatre and parks have seen a lot of me.

These school holidays have meant that I have been on a sort of island, you know where you go away and when you come back you find out all sorts of things have happened. The difference here though is that not a lot has happened in my time away.

Mortgage rates are where they were.

The dollar is still at about the same level against the greenback.

Property prices has been steady.

The share market has moved upwards slightly over the week or so.

And my shoes are extremely muddy. It pays not to wear dress shoes to a muddy park.

Maybe I should go on holiday more often.