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If and when you are looking for finance, try to look past the banks ‘lowest interest rate’ marketing ploys as it is usually those mortgages with the low interest rates that will actually cost you more over the term of the loan, not only in fees but also the most important factor being TIME!

I often ask my clients, would you prefer a home loan at 6.99% over 30 years or a home loan at 7.95% over 17 years? I’d much rather be Debt Free is 17 years rather than 30 years – wouldn’t you?

Banks have trained you to think that if you ask the golden question – “What’s the lowest interest rate”, that is equivalent to you asking for the ‘Best deal’… However, this is
not the case, as the banks use the ‘low rate’ to hook people on these FAT PROFIT ridden 25 or 30 year Home Loans. They know that by getting you in on a so-called ‘low’ rate, the banks will be getting more than their fair share of profit out of you, over the long and expensive 30 year term!

Did you know that you will pay back MORE than double what you originally borrowed from the
bank with a 25 or 30 year P & I loan ?

Based on the last 7 years I have spent in the finance industry, if I could offer you only one piece of advice - it would be: “Look at the STRUCTURE of your home loan".

What I mean by that is, make sure you look at a loan which allows you the freedom and flexibility to actually get your income working for YOU on YOUR loan. By getting your income working for you on your loan, you will be able to save thousands of dollars in
interest payments as well as get debt free quicker!

No, I’m not talking about the Line of Credit (Equity Line) which turns into a massive headache just like the credit card that is attached to it. This type of loan makes it easy for you to spend MORE than what you earn. It not only allows you to spend more than what you earn, it magnifies the negative effect and your repayments actually INCREASE each month as your Debt level increases.

Every week I refinance clients off of Lines of Credit, especially when the clients have unfortunately chewed up all of their equity, and have their loan balances just sitting under the facility limit. This loan is a trap which will expose you if you lack self discipline (95% of Australians) and sound money management.

What I’m talking about is getting a home loan facility where you are actually guaranteed to Pay Less each month in repayments, yet you will still be Debt Free Quicker.

And now you’re asking yourself “Why hasn’t the bank told me about this”… Think about it… The longer you’re in debt, the more money the banks make. The more money the banks make, the higher their profits. The higher their profits, the happier their share holders are and the higher the share price rises. The higher the share price, the higher the value ($) of the bank!

So why would any bank want to show you How To Get Out of Debt Quicker? They clearly don’t and they won’t – it is not in their best interests!

Whereas my mindset is different – I’m a very BIG believer in Debt Reduction AND then Wealth Creation! Now the banks certainly don’t give you any strategies on wealth creation….do they?

It’s pretty simple if you think about it – The Quicker I reduce your Debt, the Quicker you have more Equity to start creating Wealth. And guess what you’ll need to start creating wealth – an investment loan! Luckily, that is where I (your financial consultant) get paid again. So the quicker I can get your debt down, the quicker I get paid again….

Now that is what I call having a vested interest in your success – the better you do, the better I do! That’s the way it should be….and best of all, you get to use Crown’s Debt Reduction & Wealth Creation program for FREE - we get paid by the lender!

Scott Parry
Director
Crown Lending
1300882981

Well hasn't it been an interesting week !!

The events of September 15 2008 in the USA markets are unprecedented in recent memory.
We are seeing more and more proof that the current investment model in America was not built to withstand a credit crunch, the likes of which we are currently experiencing.

The Dow Industrials index fell 449 points (or 4%) over night, as the US Government's $85billion bailout of American Insurance Group (AIG) amplified fears about the stability of financial markets and major financial institutions.

In an attempt to calm world financial markets Federal banks in the US and Europe are pouring liquidity into their respective markets. The Bank of England has agreed to extend its emergency lending program to counter worsening market conditions while the US Federal Reserve issues additional treasury bonds to increase liquidity within the market. We are now witnessing further consolidation within the financial sector as investment banks merge with commercial banks which hold substantial deposits. Lloyds of London have today acquired HBOS (who own Bankwest) and Morgan Stanley is investigating the possibility of merging with Wachovia Bank. Overnight Barclays Bank agreed to purchase Lehman Brother's North American Trading business as well as Lehman's New York headquarters for an estimated $2 billion.

The events of the past few days have only further highlighted that a sustained period of credit contraction is upon us. What we are now seeing is a systemic banking system crisis in the US. Stuart Fagg at ninemsn money comments that 'Australian banks did not join the rush into mortgage-backed securities with the same fervour of some of the US and European banks. The chances of Australian banks sustaining the losses of the size we've seen in the US are extremely slim'. With less borrowing taking place (due to the increased cost of credit) the road to economic recovery will be a slow and drawn out process.

While we are literally watching stock prices move on an hourly/daily basis, we must remind ourselves of the investment cycle and nature of investing. The returns seen over the 2003-2007 period were not only substantial but completely unsustainable.

Shane Oliver, Head of Investment Strategies at AMP Capital partners believes that 'we may see further downside in the next month or so, but our assessment is that a longer term
bear market in shares is unlikely".

The fundamentals of many Australian companies have not changed significantly over the past few weeks. The main driver of the market at present is fear, anxiety and panic rather than research, analysis and fundamentals. The average bear market (since 1970) has lasted 14 months; we are currently 11 months into this downward trend.

The average annual bear market loss is 29% and we are currently down over 30%. Conversely the average bull market duration since 1970 has lasted 42 months at an average gain of 27.5%.

Sources:
Alexandra Twin - CNNMoney.com
Byron W. King - The Daily Reckoning Australia
Marcus Padley - marcustoday.com.au
Shane Oliver - Head of Investment Strategies - AMP Capital Investors
Stuart Fagg - money.ninemsn.com.au
Tom Bignill - Head of Equity Markets - Next Financial Ltd

If you have any questions, thoughts or fears I'd be happy to help out and try to answer them for you.

All the Best,

Scott Parry
Director
Crown Investment & Financial Services
1300 889 310

I'm sure we've all at some stage had a brilliant idea or two 'in theory', only to find the reality of it all turns out nothing like we imagined.

Much the same can be said about many mortgage products and associated 'debt reduction strategies' here in Australia. Typically the banks bombard our newspapers and televisions with 'new ways' to 'slash years' from your home loan terms. The methods that facilitate these changes, and the mathematics supporting their claims often fall into the category of 'good in theory, not in reality'. Why?

It basically all comes down to the fact that we as Australians will ALWAYS spend whatever money we have direct access to.
Case in point is the classic 'Home Equity Line of Credit' style of loan. Citibank brought these home loans to market over 15 years ago with the potential to erase many years off the average home loan term because borrowers incomes are banked directly into the loan, and hence reducing the amount of interest payable on a daily basis.

While this works for a small percentage of people (mainly people who work on the mines), the majority find the temptation of having access to the 'revolving line of credit' too great. Most of us often make 'impulse buys' such as plasma TVs, and ultimately end up spending more than what we've earned..... Sound familiar?

Adding insult to injury, loan consultants pitch the attractive and convincing arithmetic (theory) of a Line of Credit via fancy graphs, and after having persuaded Joe Average, leave him and his new found temptation for a motorbike or golf clubs, and are never again seen to help with the on-going need for budgeting! Why do they knowingly let Joe fall into this spending trap?

Banks have shareholders to appease, and multi-billion dollar profits to maintain and grow. Of course they'll never admit it, but the reality is they want you in debt with them for as long as possible, and therein lies the conflict of interest. You want to accelerate your debt reduction, but they don't.

So, for a financial relationship you can actually trust, you need to side with a lender with whom you have a mutual goal - you being debt free as quickly as possible. But is this a REALITY? Yes.

To find out more, have a chat with a Crown Lending broker on 1300 882 981.

With Australia’s credit card debt climbing to $41.156 billion back in September 2007, there’s some serious concern over the long term effects of this level of personal ‘bad’ debt.

Furthermore, with mortgage interest rates now having climbed to around 9%, many economists believe credit cards are also increasingly being used to mask the resultant ‘mortgage stress’. This is because the average families disposable income can’t keep pace with the increased cost of living, and very few have the money management skills required to plan ahead and quickly adapt. Instead, they turn to the ‘plastic fantastic’ to cope with the change - not a good habit when credit card interest rates are around 18%!

Psychologically, the use of credit to purchase goods and services becomes an easy option as it’s ‘out of sight, out of mind’, and can be dealt with at a later stage. More than just a fundamentally bad approach to money management, research by Dunn & Bradstreet has shown the average Australian will actually spend between 14% and 18% more when purchasing with a credit card as opposed to using cash.

With all this in mind, there’s clearly good reason why many advisors and money experts profess the shredding of credit cards. Now more than ever though, the most common contention households will make of this, is that they require the facilities provided by Visa, Mastercard and others, to increasingly pay for goods and services online or over the phone.

Fortunately, the solution is now common amongst most of the banks, with Visa and Mastercard providing ‘debit cards’ that provide all the usual and convenient facilities, but use the holders own ‘saved’ bank funds, hence avoiding the allure of the aforementioned pitfalls.

Armed with one of these debit cards, and a trusted financial coach to guide them from the credit wilderness, the average Australian can realistically pave their way to a sound financial future, and an understanding of valuable money management methods.

'First home buyers' today could be forgiven for thinking that with the emergence of ‘no deposit 100% loans’, that they can get themselves into the housing market on a strong wage with little or no savings! Beware....

Even with the availability of the First Home Owners Grant, most will be surprised to find that, depending on which state they live in, they still need to provide some funds before settlement.
Shown below, is an example of the upfront costs a first home buyer in Victoria, with no deposit, could pay on a property value and loan of just $250,000:

* stamp duty on the property value: $10,660.00
* stamp duty on the loan amount: $0 (not charged in Victoria)
* mortgage registration fee: $92.40
* transfer fee: $728.00
* solicitors fee: $490.00
* valuation fee: $240.00
* settlement agent fees: $800 (Usually between $600 - $2,000)
* loan application or establishment fee: $750.00 (Rarely $0 on 100% loans)
* lenders mortgage insurance (LMI), or, an upfront fee in lieu of LMI: $7,500.00
* first home owners grant: ($10,000.00)

As you can see, even on a relatively small loan, the total amount of fees and charges is a whopping: $11,460.40 – and that’s after deducting the grant!

So if you’re a house hunter tempted by the notion of ‘no deposit’ loans, make sure you do your homework first by speaking to an industry professional about the real costs, and the processes involved. But most of all question, and be wary of the big banks advertising lures to these products. They’re often more focused on the quick transaction of finance, and aren’t interested in providing the guidance through the complex process of home purchasing, and all the costs involved.

What is clearly apparent within the finance and mortgage industry, is the overwhelming amount of brokers, advisors, lenders, commentators, experts and organisations, all vying for your attention to their wisdom and wares. Some loudly profess, claiming years of experience, and others have finely tuned & targeted marketing ploys; yet not a single one of them can, or ever will, bottle up and dispense in writing, the power of trust that can only be inspired from having someone sit down and really LISTEN to you. It's this one thing that slick advertising can never do, & it's the key to lasting, successful
relationships. It's also what you, the client, should be resolute about when canvassing your own potential 'trusted advisor' - not glitzy and persuasive advertising campaigns.

Too often vendors fall into the trap of telling prospective clients what they've got to sell, rather than asking them what they want. As a discerning client, the fundamental question you should be asking yourself is: "Do I genuinely believe this vendor has my best interests at heart?" If you're convinced they've listened to you, you have the beginnings of a relationship that should not only blossom, but harbour a mutual respect that will facilitate open, honest communication, and the realisation of your pre-determined goals, sooner.

There are many advantages that an alliance like this can yield, yet the ultimate benefit to you is, peace of mind. Everyone deserves this when it comes to their personal finances, yet very few can go to sleep each night, comfortable in the knowledge that their advisor is
dedicated to working with them tomorrow, the next day, the next week, the next month, and into the foreseeable future.

Were you listened to?

And are you getting the peace of mind you deserve?