Get Ahead On Your Mortgage In This Low Interest Environment

 

 

 

 

Home loan customers could save over $100,000 by taking advantage of the low interest rate environment and paying off their mortgages faster, according to new data released by Westpac.

The data shows that two thirds of Westpac customers are ahead of their mortgage repayments by an average of eight months, which totalled $8,563 for the year ended 31 October 2018. Homeowners living in Nelson are the furthest ahead at 20 months, followed by Tasman and Marlborough on 15 months – though Aucklanders have repaid a greater median amount, totalling $14,456.

According to Westpac NZ general manager of consumer banking and wealth Simon Power, paying off an extra $150 a fortnight on a $500,000 30-year mortgage could shave up to 6 years off total repayments, and save over $106,000 in interest.

“With many mortgage rates falling in the past two weeks to historic lows, it’s a great time for customers to get ahead by holding their repayments at the same level at which they have been paying,” Power stated.

“If people are able toHome loan customers could save over $100,000 by taking advantage of the low interest rate environment and paying off their mortgages faster, according to new data released by Westpac.

The data shows that two thirds of Westpac customers are ahead of their mortgage repayments by an average of eight months, which totalled $8,563 for the year ended 31 October 2018. Homeowners living in Nelson are the furthest ahead at 20 months, followed by Tasman and Marlborough on 15 months – though Aucklanders have repaid a greater median amount, totalling $14,456.

According to Westpac NZ general manager of consumer banking and wealth Simon Power, paying off an extra $150 a fortnight on a $500,000 30-year mortgage could shave up to 6 years off total repayments, and save over $106,000 in interest.

“With many mortgage rates falling in the past two weeks to historic lows, it’s a great time for customers to get ahead by holding their repayments at the same level at which they have been paying,” Power stated.

“If people are able to increase the amount they repay each fortnight or month by $50, $100 or even $200 when they re-fix, it can make a substantial difference to their overall interest savings.”

He said the bank had many tips to help customers pay off their loans faster and save on interest, and customers have the chance to make significant savings in light of the low interest environment.

“It can be as simple as changing your repayments to fortnightly instead of monthly,” Power said. “You end up making two extra repayments per year, which reduces the amount owed and the interest paid.

“People could also consider increasing their regular loan repayments, shortening the term of their loan, and consider paying lump sums off their loans when it comes time to re-fix. Also, choosing to float a portion of their loan allows them the flexibility to pay off that part of their loan faster.

“Westpac’s mission is to help our customers financially, to grow a better New Zealand. One of the clearest ways we can do that is to support our customers to save more by paying off their debt faster.” increase the amount they repay each fortnight or month by $50, $100 or even $200 when they re-fix, it can make a substantial difference to their overall interest savings.”

He said the bank had many tips to help customers pay off their loans faster and save on interest, and customers have the chance to make significant savings in light of the low interest environment.

“It can be as simple as changing your repayments to fortnightly instead of monthly,” Power said. “You end up making two extra repayments per year, which reduces the amount owed and the interest paid.

“People could also consider increasing their regular loan repayments, shortening the term of their loan, and consider paying lump sums off their loans when it comes time to re-fix. Also, choosing to float a portion of their loan allows them the flexibility to pay off that part of their loan faster.

“Westpac’s mission is to help our customers financially, to grow a better New Zealand. One of the clearest ways we can do that is to support our customers to save more by paying off their debt faster.”

 

Source

Don’t throw it away: five things to check in your KiwiSaver statement

Don't throw your KiwiSaver statement away

Don’t throw your KiwiSaver statement away

If you’re like many people, statements are just one more task that you can’t be bothered with or they stay on the to-do pile until the next statement arrives. But there are some good reasons to check your KiwiSaver statement carefully when it arrives – here, we have outlined five things to look for or check.

Know the fees you have been charged

Fees can quickly eat into the gains you have made – especially if you are only making minimum contributions each year.

Fees vary quite significantly between different fund managers, and also across the different types of funds themselves. For example, investments in growth funds generally will have higher fees than more conservative funds – often because the growth funds require more management – and will also generally provide a better return over time, meaning your balance is growing at a better rate than if it was in a conservative fund.

Regulations require your KiwiSaver provider to clearly set out the fees charged in your statement – and these need to be shown as a dollar figure, rather than just a percentage.

Is your fund growing?

Check your statement each time you receive it, to make sure your balance is going up rather than down.

Having said that, don’t forget that markets do go up and down, so if you want to avoid unnecessary worry, checking your KiwiSaver balance every day may not be a good idea. Markets fluctuate on a daily basis, and while you may see a reduction in your balance one day, it may well increase again the following day.

KiwiSaver is a long-term investment, and you are looking for growth in your investment over a period of years, not day-to-day or even month-to-month.

Check the fund you are in

It is well documented that when you have a long investment timeframe, having your investments in growth funds will generally provide you with the best returns over time. You do, however, need to ensure that the ‘risk’ you are taking with your retirement fund still lets you sleep at night.

Complete a risk profile to understand your own tolerance to risk and volatility, and check that you are in a fund that will give you the best chance of a good return, within your own risk profile.

Check all your deductions or other payments have been credited

While it may be easy to think that, with everything happening electronically these days, all your deposits will just magically go through (and they usually do), it’s still a good idea to check carefully. Make sure all your contributions, or manual payments, have been credited, as well as your employer contributions and the Government contribution are showing.

Are you on the right tax rate?

Lastly, make sure you are not paying too much tax – at least on your KiwiSaver returns. The tax rates are variable, ranging between 10.5% and 28% and your rate is based on your income over the last two years. If you haven’t told your provider what tax rate you should be on, you will automatically pay at the highest rate – eating into your valuable retirement fund.

 

KiwiSaver is a set-and-forget investment in a lot of ways, especially if your contributions are being deducted directly from your salary or wage. But if you want to have a comfortable, rather than budget retirement, keep an eye on KiwiSaver and make sure you are maximising your retirement fund.

An Adviser Disclosure Statement is available free and upon request. 

What does Life Insurance REALLY buy you?

Life Insurance – while not everybody has it, those who do generally have cover to ‘pay off the mortgage’ or ‘leave something to the kids’ should they prematurely die.

However, Life Insurance provides more than just a debt repayment, or bequest facility. Life Insurance ensures your family is able to maintain their lifestyle in the event you are no longer there earning an income and contributing to the family’s costs.

And if you add up how much income the family would potentially lose, it is often a lot more than the level of cover most people have.
So, what can life insurance buy your family?

Peace of mind

In the event of your premature death, your family immediately loses your income – which they are likely to be relying on to pay bills and meet lifestyle costs. Having cover in place means your family has the peace of mind that, in the event of something happening to you, they will still be financially OK.

Freedom of choice

Having a lump sum available means that your family or surviving partner has the ability to make choices that suit them, rather than having to decide because of financial considerations.

For example, if your family can’t meet the mortgage payments, they may have to sell and move to a different area, away from schools and friends. Having cover in place to either repay the mortgage in full or meet the payments for a specified period of time, means that they have the freedom of choice to stay put or move.

Time for grief

Grief is different for everyone. While one person may want to keep working through that period, another may feel the need to take time out.

Having some funds available to replace income for a specified period of time (two years, for example), means that the surviving spouse can grieve in their own way, and not feel pressured to have to return to work – or find work if they were not working.

A lifestyle for your family

Lifestyle isn’t just about paying the mortgage and bills. What do you and your partner or family enjoy doing? What hobbies or sporting activities do your children have that you’d like them to be able to keep doing, even if your income has stopped?

By provisioning some additional funds for lifestyle needs, your family can maintain their lifestyle, with less stress and change in the event of your premature death. And remember: even if you’re not the main income earner (or maybe not earning any income at all), your contribution to the house has a quantifiable financial benefit, which needs to be considered.

An Adviser Disclosure Statement is available free and upon request. 

The problem with Insurance from the bank

We all love a bargain – after all, nothing feels quite as good as the immediate emotional reward of purchasing something ‘on the cheap’. That’s why securing Insurance from a bank might seem like a convenient, hassle-free option: low price, short forms to fill, no questions asked. But when you’re signing up for a long-term Insurance plan, are bank-sold covers good value-for-money?

Depending on your circumstances and needs, more often than not, the answer is no. Here are the key reasons why taking out Insurance through a bank, rather than through an Insurance Adviser, may not be a good idea.

The price you pay for ‘saving time’

Just like online Insurance, most bank-sold Insurance policies are marketed as quick, easy-to-set-up solutions. Consumers are told that they can get “cover immediately in branch or over the phone”, in just “10-15 minutes”, and most importantly, with “no need to provide detailed information” about their health or occupation. In Insurance jargon, it means that you are applying for a ‘non-underwritten’ Insurance cover.

The underwriting process is designed to give you certainty over when you’re covered for an insurable event. And this is essentially what differentiates a bank-sold policy from a policy secured with the help of an Insurance Adviser.

By guiding you through the paperwork and asking detailed questions about your individual circumstances (e.g. health, lifestyle, occupation, etc.), an adviser can help you tailor your policy to your unique needs. For example, if you have pre-existing medical conditions, those may not always be excluded: after a thorough assessment of your situation, the Insurance provider may decide to cover them and add a ‘stand-down’ period or increase your premiums.

On the contrary, non-underwritten products usually have a blanket exclusion for pre-existing conditions, as well as certain so-called ‘hazardous activities’ such as mountaineering, rock climbing or motorsports.

Are they really cheaper?

In 2016, an independent insurance product research firm compared some of the most popular Life Insurance covers available. What Quality Product Research found is that ‘quick and easy’ non-underwritten products may end up costing almost 70% more than their fully underwritten counterparts.

Of course, this is not a secret: Insurance providers clearly specify what’s excluded in the Policy Wording. But without a specialist in your corner, it’s also easy to fall for the low price tag and overlook the long-term consequences. As a result, you might end up taking out sub-standard cover that, come claim time, doesn’t deliver on what was expected.

That’s why we’re here

As we said, understanding the fine print is important, especially when you’re exploring your options and comparing products. We know the ins and outs of Insurance policies and can talk you through how these details impact you.

In a nutshell, choosing the right Insurance is an important decision: it’s about peace of mind and certainty of claim. Therefore, it’s a good idea not to rush it. Take the time to think about your needs and ask for assistance: our job is to talk you through your circumstances and help you find the right fit for them.

An Adviser Disclosure Statement is available free and upon request.

Should you withdraw your first-home deposit from KiwiSaver?

Have you been a KiwiSaver member for at least three years? Then your very first step on the property ladder may be closer than you think.

Just like KiwiSaver HomeStart Grants, KiwiSaver early withdrawals are a welcome helping hand for many first-home buyers looking to build their deposit. But before you decide to use this tool, it’s also critical not to let the dream of home-ownership get in the way of your long-term goals – your retirement savings.

Are KiwiSaver withdrawals worth it? Have a read of these tips to learn more.

Young Kiwis have property in mind

According to recent data from Westpac, an increasing number of young Kiwis are joining KiwiSaver to save for their first property.

That was the main reason mentioned by 74 percent of young New Zealanders aged 18-24, compared to 59 percent of Kiwis aged 25-29, and 16 percent of people aged 35 to 54.

At the same time, only 24 percent of 18- to 24-year-olds said they had worked out how much they would need in retirement. Plus, just 44 percent of Millennials said they had a proper understanding of their KiwiSaver scheme, with 12 percent of them admitting they did not know where their money was invested.

The cost of withdrawing from KiwiSaver

With house prices on the high side, and old age probably being less of a priority for people in their 20s, the focus on property shouldn’t be a surprise. But, even at this young age, it’s a good idea not to let planning for the long-term slip through the cracks.

Eligible first-home buyers (click here to read the criteria) can withdraw all but $1,000 from their account. There’s no limitation.

However, the bigger the withdrawal, the greater the impact on your long-term retirement savings could be. This is based on a combination of factors, like your age, the fund you’re in, and the amount withdrawn.

The benefit of owning property

Having said all that, there are valid reasons to consider home-ownership.

Owning your own place can be a great step towards wealth creation and financial security. As time passes, your home’s value may increase and you come to have equity in your home. Plus, once you’ve paid off your mortgage, you’ll free up a great deal of monthly income.

As always, when pondering your options, make sure to take every element into account, including your short and long-term goals.

An Adviser Disclosure Statement is available free and on request.

How to boost your retirement savings in your 40s

Age isn’t always just a number. On a financial side of things, your 40s may be a time of consolidation, when you can confirm or adjust your decisions, and verify your plans for the future. It can also be a good opportunity to give your pension pot a chance to grow.

Here are some steps you can take to fast-track your savings and make retirement planning a priority.

Make your mortgage work for you

Like to take control of your finances? If you have a mortgage on your family home, now may be the right time to be proactive and give this long-term commitment a health check.

A few things might have changed in your life since you first signed on the dotted line: is your home loan still aligned with your needs? Even small changes can make a big difference over the life of a mortgage – not to mention your financial life as a whole.

If you’d like to explore your options, a mortgage adviser will help you find the best ways to structure your home loan.

Get rid of high-interest debt

Taking on debt is not necessarily a bad thing, unless it’s getting in the way of your savings goals. And if it’s allowed to grow, high-interest debt can quickly accumulate, preventing you from funding other important long-term needs – like retirement.

It’s a good idea to create a budget and funnel as much money as you can into repayments. Once your debt has become a thing of the past, you’ll be in a better position to secure your future.

Investing today for tomorrow

Your ‘time horizon’ is one of the most important components of any investment plans, including KiwiSaver. The longer your investment horizon, the more time you have to ride out the ups and downs and increase your retirement cushion.

At 40-something, time is still on your side. You may even consider investing in higher-risk funds (growth or aggressive) if they’re aligned with your personal attitude to risk.

Not sure about your risk profile? Please feel free to contact us: we’ll be happy to help you identify it and find the right balance in your investment portfolio.

How fit and healthy are your savings?

How much have you saved so far? Are you on track or off track for your desired retirement? Once again, your 40s are an ideal time to assess your progress and take action.

If you’ve already built a little nest egg, you may look at putting it into a high-interest account, so that it works to its full earning potential. And if you’re falling behind, it’s not too late to catch up. What you need is to take a look at the numbers and set up a realistic savings strategy. Need help? Talking with a financial adviser can give you a fresh pair of eyes you need to put your financial life into perspective.

 

An Adviser Disclosure Statement is available free and upon request.

Income Protection or Trauma Insurance: which is for you?

At first glance, Income Protection and Trauma Insurance may look very similar. After all, both are designed to protect you financially if you’re sick or injured. But if you get past that first impression, you will realise that they provide very different types of cover.

So, which works best for you? To answer this question, let’s dig deeper into the differences.

 

What’s Income Protection Insurance?

Income Protection offers you a monthly replacement income if you become disabled or severely ill. The amount of these monthly payments is tied to what you earn, and can only be collected when you’re not able to work.

Plus, you can tailor this type of cover to your needs by selecting the right ‘benefit amount’, ‘wait period’ and ‘benefit period’.

Benefit amount

The Income Protection payments usually amount to a maximum of 75% of your original earnings. But if you have lower day-to-day expenses, or simply want to reduce the premium, you can opt for a lower percentage.

Wait period

Another way to bring down costs is to choose a longer ‘wait period’ (if appropriate to your circumstances). This is the amount of time that you can afford to wait before you receive your first monthly payment – and of course, the longer the ‘wait period’ you choose, the lower the premium will be.

The choice strictly depends on your situation: do you have a ‘rainy day’ fund? How long could you afford to wait, without earning an income?

Benefit period

You can specify a ‘benefit period’ in your policy, which is the maximum period of time that your insurance provider will pay you while on claim. While some people choose to only receive Income Protection payments for two to five years, you can also opt to receive them until you reach retirement age at 65.

 

What’s Trauma Insurance?

With Trauma Insurance, there’s no waiting period involved. This type of cover is paid upon diagnosis or severe critical condition, and offers a lump sum regardless of whether or not you’re unable to work. For example, it can help you take care of expenses that health insurance doesn’t cover (rehabilitation, carers, extra treatments, etc.).

About the meaning of ‘critical condition’

Usually they represent serious, life-threatening illnesses such as stroke, heart attack and malignant cancer, but the list of covered conditions can vary significantly between different policies. That’s why it’s so important to understand what your policy entails, and which conditions are covered.

Stand-alone or ‘Accelerated’

You can either select a Stand-alone Trauma Cover or attach it to your Life Insurance (‘Accelerated Trauma Cover’). While this is usually cheaper than the Stand-Alone Trauma Cover, keep in mind that your Trauma Insurance claim will reduce the payout of your Life Insurance.

 

If you’d like to discuss Insurance that can help you when you can’t help yourself, feel free to contact us. Getting the right cover is all about understanding the finer details, and the right Insurance adviser is here to make sure that you get the right policy.

An Adviser Disclosure Statement is available free and upon request.

Rainy-day fund: how big should it be?

No doubt you’ve heard this before: “Save money for a rainy day”. It might be easier said than done (especially with the household budget and other expenses to meet), but it’s good advice.

The truth is, it might well ‘rain’ at some point in the future. Creating a healthy emergency fund is like building a solid (financial) shelter from the storms of life. But how much should you set aside? And why, exactly? Here are some key points to get you started.

Why it’s so important?

Recent BNZ Financial Future Research revealed that an increasing number of Kiwis are living pay-day to pay-day, with one in five respondents having no money at all set aside for emergencies, and nearly half having less than $1,000 saved.

There’s a lot of financial and emotional reasons why having a rainy day fund makes sense, including a couple of our top picks: (1) it helps you to stay afloat during tough times, and (2) it can play an important role in reducing the need to take on extra debt.

Whatever happens – unexpected loss of income or expenses – a rainy day fund means you will have an emergency stash of cash to draw on. Sounds like a plan?

Getting started

A good first step is to identify what kind of emergency might occur. A loss of earnings due to health issues, a business problem, redundancy, even an unexpected dentist bill… These are all good reasons to have a rainy day fund.

How much do you need?

Now that you have built a list of possible reasons for your rainy-day fund, you can start calculating how much you may need to save.

A good rule of thumb is to have enough to cover three to six months’ worth of living expenses. This is the typical recommendation, but of course, your rainy day fund may vary depending on your circumstances.

Having three months’ worth of expenses in your emergency fund is a good starting point. But if you have people depending on you financially, you may want to put away more – six months’ worth of expenses, for example.

Should you save more than this?

Once again, the answer depends on your situation. As you get better at saving, you can even work towards accumulating a year’s worth of living expenses in a savings account.

In any case, if at some point you feel that you have more set aside for emergencies than you actually need, you may wish to consider investing the surplus or putting it into a higher-interest account.

As always, don’t forget that we’re here to help you make well-informed decisions about your finance – including savings and investments. This is what we do and love: helping you build a solid financial plan and enjoy the life you’re looking forward to.

 

An Adviser Disclosure Statement is available free and upon request.

Four common Insurance mistakes

With so many details to pull together, Insurance can be a complicated topic – especially if you’re not familiar with the jargon. Less than 10% of Insurance claims are not paid, and in most cases it is because of an avoidable mistake.

In this guide, we take a good look at the most common ‘insurance mistakes’, and how we can help you avoid them.

Unwitting non-disclosure

Insurance providers are fans of forms: that’s a given. And there’s a reason why Insurance applications come with so many questions: it’s a process called ‘underwriting’.

To determine your premium rates and policy conditions, the Insurance provider needs to gather all relevant information about you, including any past medical conditions and habits you may have (e.g. smoking). But what if your memory fails you when you’re filling in the forms?

Without guidance, it can be easy to overlook details that seem insignificant or simply forget about them, but it’s important to note that unintentional non-disclosure or misrepresentation could result in a future claim being rejected and even your policy being cancelled.

As your adviser, we can help you avoid unwitting non-disclosure – by asking the right questions and answering all of your queries.

The one thing that can jeopardise your claim

Once again, when it’s time to claim, being truthful is always a good idea. This includes providing the correct information – nothing more and nothing less than this.

Things like adding non-existent items to a Contents Insurance claim or falsifying receipts, for example, cannot just lead to a claim denial. They may put your future insurability at risk and even result in prosecution.

So please don’t hesitate to contact us: we can help you ensure that your claim is filed correctly, and do everything we can to ensure that the payout is fair, reasonable and quick.

Not reading the small print

Are you sure that you know what your Insurance does and does not cover?

Time spent reading the small print can be tedious, and it often creates more questions than answers. It’s one thing to identify all inclusions and exclusions; it’s another thing understanding their implications.

Needless to say, we know the ins and outs of your cover. Have any questions for us? Please feel free to get in touch.

Missing premium payments

Keeping up with your premium payments is also crucial. If you fail to pay for a certain amount of time, your policy could lapse, leaving you uncovered and unable to make a claim.

If it was an oversight, consider setting up direct debit: it will take care of it for you. But if – for any reasons – you’re finding it hard to meet your premium payments, please let us know as soon as you can. Working closely with your Insurance provider, we may find ways to help you manage your premiums without losing cover.
As you can see, there are a number of important things to consider. So reach out to us whenever you need assistance: we’re in your corner to make your Insurance journey as simple and smooth as possible, helping you avoid all the bumps in the road.

An Adviser Disclosure Statement is available free and upon request.

KiwiSaver in your online banking: is it worth it?

Is viewing your KiwiSaver online at the bank worth changing provider for? Sure, getting an eagle-eye view of your finances in one place seems like a no-brainer – but is it really as convenient as it sounds?

Here’s why transferring your KiwiSaver money to the bank may not be the right move for you.

Reading too much into the short-term swings

Markets can fluctuate and change rapidly, with lots of highs and lows. But KiwiSaver is a long-term investment. That’s why it’s important to aim for the horizon: you’re in it for the duration, and so whatever happens in between, if you have a good plan in place, the scales should tip in your favour over time. Then, why check your KiwiSaver balance every week?

What if your balance drops?

Your KiwiSaver balance may change from day to day – sometimes for the better, sometimes for the worse. Watching these ups and downs unfold in real-time, day in day out, can create anxiety for many people. It may even lead you to make a rushed decision about your funds. As a rule of thumb, it’s a good idea to review your KiwiSaver performance every six months, if not annually. That way, you’re more likely to see a positive return.

Your KiwiSaver may not grow as fast as you’d like

It takes time (usually, around three months) for your KiwiSaver contributions to reach your account: in fact, after your employer pays them, they go to the IRD first; then, and only then, they’re paid into your fund. Once again, this is another reason why having your KiwiSaver in your online banking may not be the best idea.

 

Of course, having 24/7 access to your balances and transactions is a great way to keep your finances in check. But keep in mind that growing your KiwiSaver fund takes time and patience.

If you’d like to maximise returns, the most important step is to make sure that you’re in the right fund for your age, long-term goals and attitude to risk. As KiwiSaver advisers, we can help you explore your options in detail – now and over time.

An Adviser Disclosure Statement is available free and upon request.