What Is Salary Sacrifice Mortgage and How Can It Benefit You?

Employees can always work something out with their employers to lower their taxable salary and make life a lot easier. Salary sacrifice is one of them. The good news here is that it does not only lower your taxable income, it will also help you afford a house, specifically through the help of a salary sacrifice mortgage.

What is salary sacrifice?

Salary sacrifice is an arrangement between employers and workers wherein they both agree to package the salary of the employee and replace a certain part of the income with fringe benefits that may not be taxable.

Employees prefer this payment scheme so they will be able to reduce the amount of tax that will be deducted from their salary.

What happens here is employees will not receive their salary in full. Instead of getting the whole amount, they will get only part of the salary and other items like electronic gadgets (cellphones, laptop, etc.) and in some cases car leases.

Why package your salary?

Some people, on first glance, may think that salary sacrifice is not going to be beneficial. Based on the term itself, sacrificing your salary may not be the most practical thing to do because that would mean you’d receive a smaller wage.

That may be so, but salary packaging can give you several benefits. This is why a lot of people are choosing to forego a part of their wages. They know that they are going to get something that is going to benefit them in the long run.

A simple answer to this question is employees stand to get something that has more value in the future with less contribution.

What are the benefits of salary packaging?

Salary sacrifice or packaging can be beneficial to any person simply because it helps lower taxable income. This can also help someone stash more money, say a retirement fund, for the future.

There are two main benefits to salary packaging: fringe benefits and superannuation.

Fringe benefits are payments made to an employee that can be anywhere from services to privileges. For example, an employee can get a car that can be used for private purposes. Employers can also provide assistance by paying off any expense employees incur like tuition fees, medical costs, or getting a home loan.

What can salary packaging do to help you take out a mortgage?

Salary sacrifice can be applied when taking out a mortgage. A salary sacrifice mortgage is always a possibility for employees who want to have their own home. Instead of getting an electronic gadget or a car, you can choose to package your home loan. This can also help you reduce your tax bill. Your employer will pay for the loan. It’s that simple.

Challenges people with packaged salaries encounter

There are some people who find it a little difficult to get approved for a mortgage because they have packaged salaries. Some lenders refuse to approve loan applications because they do not think that the borrower has the ability to pay off the loan.

There is one thing you need to know: you should not find it hard to borrow money just because you have a packaged salary.

You can find lenders who will gladly award you a loan even with this payment plan.

How do you take advantage of a salary sacrifice mortgage?

For you to take out a loan with a packaged repayment, you need to start with your employer. Talk to your human resources department and find out if you can qualify for a salary sacrifice mortgage. They will tell you if there are potential problems due to the expenses you have already packaged.

It would also help if you seek out a mortgage broker. Mortgage brokers know this stuff. Their experience, skills, and knowledge will be advantageous for you. Whatever your situation is, a mortgage broker will always help you find a way to enjoy the benefits of packaging your mortgage repayments.


95 Home Loans Can Help You Buy A House Even With Little Money for Deposit

Everyone knows that before one can buy a house, a certain amount of money for deposit is required. When applying for a loan, lenders will also require borrowers to show proof that they have some cash to cover the deposit.

This is why a lot of people who want to buy a house save up enough money first so they can pay for the down payment. Typically, a borrower will need to save at least 20% for the deposit.

However, not a lot of people have that kind of money. Some only have a few dollars in their savings account. Does this mean these people will not be able to borrow money to buy a house?

Wrong. Today, even if you only have 5% deposit, you can already apply for a home loan because lenders have made 95 home loans available to interested home-buyers.

This type of home loan is the next best thing to no deposit home loans, which are no longer in Australia. This is actually a great deal because most lenders are only willing to loan up to 80% LVR. Anything higher than that is already considered high risk.

So does this mean 95 home loans are risky?

Not really. While it is true that loans that are 80% of the property value are risky and would therefore come with a high interest rate, 95 home loans are less likely to be made available to high-risk borrowers. Why?

Before we get to that, let us discuss why loans with 80% LVR are considered risky. Lenders have become very strict when it comes to lending money because they are trying to minimize the high number of people who default on their loan. When people default (not pay) their monthly mortgage payments, the lenders incur a loss.

To avoid that, they have implemented stricter rules in loaning people money. Generally, those who apply for a mortgage insurance need to prove that they have the ability to pay off the loan and that they are financially responsible.

Borrowers need to provide documents that would prove they have stable employment and at the same time show lenders that they are responsible when it comes to their finances. This is evidenced by their credit score, which is a very important requirement in obtaining a loan.

Someone who passes these qualifications is going to get a loan very easily. They are most likely to get a good deal. They do not need to have a very impressive record. As long as they can prove they can pay off the loan, then they are good to go.

Typically, lenders approve up to 80% of the purchase price. The remaining 20% has to be shouldered by the borrower by paying for the deposit. A certain percentage of that money has to be genuine savings. On top of that, the borrowers will need to pay LMI to serve as insurance for the loan.

Those who do not meet most of the requirements are either going to be refused a loan or given one that has a higher interest rate. This is because they are considered hi-risk borrower or someone who is most likely to default on a loan.

So the higher risk you pose, the higher interest rate you are going to pay, and the higher amount of deposit you will need to shoulder. Normally, the bigger loan you get, the higher the rate as well.

So does that mean 95 home loans will also have a higher rate?

No. Here’s why:

Lenders can only lend so much money. They would not want to give large sums of money to people and risk incurring losses. Logically, if they were going to approve loans that have 95% LVR they are going to make sure that these are awarded to select people–those who have extremely impressive credentials. These are people who can definitely afford the loan; those who pose very little, if none, risk. And because of that, these loans are not going to have high interest rates.

And because only 5% of the property price is left, it’s easier to pay for the deposit. This is why those who do not have a lot of money meant for a deposit can qualify for this kind of  loan.

Tips on Acquiring Home Loans and Staying Away from Future Problems

Buying a house is one of the biggest financial decisions you will make in your life. Since this is a huge thing, you have to make sure you do it right. The fewer mistakes you make the better.

You surely do not want to be haunted by these mistakes in the future. One of the few things you can do to make sure you have a house a lot less worries is to find the right home loans.

You need to take out a mortgage before you can buy a home. Unless you are very rich and have the full amount to pay for a house, you will need to seek help of lenders.

Lenders can be both bank and non-bank. These financial institutions are your keys to becoming legitimate homeowners.

So how do you take advantage of  home loans?

Upon finding a lender, you will need to fill out a mortgage application. This is what lenders are going to use to determine if you are eligible for a mortgage. If they find you worthy of getting a loan, which means you meet all the requirements, then you will be awarded with the money you need and you can now proceed to buying the house.

It sounds easy, right?

It is, if you do the right things. The only problem is a lot of borrowers make significant mistakes that cost them a lot. Eventually, these mistakes can get hem in trouble. Thy may soon find themselves not able to afford the monthly payments and end up getting foreclosed on.

This is definitely a major problem and unless you take the necessary steps in obtaining a mortgage you will soon find yourself in trouble.

The following tips should help you have a more convenient and productive time in getting home loans:

Don’t think that the best mortgages are the ones with lowest rates

These may look very good at first. Who doesn’t want to get low rates, anyway?

Don’t be easily swayed by these immediately because most loans that have the lowest rates typically won’t allow you some rooms for adjustment. For example, loans with extremely low rates may not make it possible for you to make extra repayments when you can to reduce your principal.

Sometimes, it is better to go with relatively higher mortgage rates simply because they can offer you more opportunities to expedite the repayment and even save more money.

Do not forget to shop around

When looking for home loans, it is important that you consider all your options. That means do not settle with the first lender you see. If you are looking for the best mortgage with competitive rates, then you will need to search for it.

There are lots of bank and non-bank lenders who can offer you really good deals. It only takes little effort. Getting help from the best mortgage broker can also benefit you a lot.

Make sure that you are ready

For your mortgage application to get approved, you have to meet the requirements set forth by lenders. Remember that lenders are going to make sure that only those who are financially capable and responsible with their finances have the best chances of getting a mortgage.

That means you need to have a stable employment and a favorable credit score. These two things are very important because these can determine if you will be able to repay the loan once the money is lent to you.

Today, there are different types of home loans available for every type of worker. Nowadays, even those who do not have permanent jobs and the proper documents may still be able to take out a mortgage.

You can also check your score online using a credit score calculator. This is important because this can help you determine if now is the right time to apply for a mortgage. If your score is low, then you can delay your application and focus on improving your credit. That way, you’ll know you have a better chance in getting approved in the future.

Have some money stashed in the bank

A mature savings account will benefit you. Lenders look at this as an indicator that you are financially responsible and will be able to pay off the loan. Additionally, those who have savings may be allowed by certain members to skip mortgage insurance payment.

Save up for the deposit

Lenders do not typically lend borrowers 100% of the property value because it is risky. Most of the time, home buyers will need to have enough money to cover the 20% down payment. Not having enough cash to cover this may lead you to getting very high interest rates.

So take your time and save up for a house. It is not very practical to immediately buy a house even when you do not have the deposit. You will be able to obtain home loans that have wonderful rates when you have a deposit.