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In the Australian Government on Financial Stability, financial literacy has become increasingly important as our economy evolves. More people focus on becoming financially independent. It plays a crucial role in household wealth accumulation as it empowers individuals to make informed financial decisions, manage debt, and plan for long-term financial security.

“People with higher financial literacy are more likely to save, invest in assets that appreciate, and make smart decisions with their money, leading to higher net worth and wealth accumulation over time,” said business funding expert and small business loan provider  Shane Perry of Fund Spot—one of Australia’s trusted businesses funding source for startups. 

A person can learn about efficient money, debt, and wealth-building management by developing various financial competencies and skills. The core concepts of financial literacy should be known and are listed below.

1. Budgeting

The four primary uses of money in budgeting—spending, investing, saving, and giving—determine the size of the budget. People can better utilise their income and achieve financial stability and prosperity by striking the correct balance among the primary uses of money.

2. Investing

People who want to become financially educated should educate themselves on important aspects of investment. Interest rates, price ranges, diversification, risk-reduction techniques, and indexes are a few elements that investors should become knowledgeable about to ensure profitable investments. People can make better financial decisions and boost their income by learning about crucial investment components.

3. Borrowing

In most circumstances, almost everyone needs to borrow money at some point. Understanding interest rates, compound interest, the time value of money, payment terms, and loan structures is essential to ensuring that borrowing is done efficiently. If the criteria mentioned above are fully grasped, a person’s financial literacy will rise, resulting in more helpful borrowing advice and a decrease in long-term financial stress.

Personal financial management, the most crucial factor, combines most of the elements mentioned above. The above economic mix must be balanced to strengthen and increase investments and savings while lowering borrowing and debt. A person’s level of financial literacy will rise as they thoroughly understand the financial elements covered above.

Being financially educated is a skill that offers a variety of advantages that can raise people’s standards of life by increasing their financial security. The variety of advantages of having financial literacy are listed below:

• The capacity to make wiser financial choices
• Effective debt and money management
• More prepared to achieve financial objectives
• Lowering costs through improved regulation
• Less anxiety and stress related to money
• An increase in moral judgment when choosing investments, loans, insurance, and credit cards
• Creating a planned budget with efficiency

Accumulate Your Wealth Effectively With The Help Of Aussem Mortgage Solutions

Financial literacy is critical to the accumulation of household wealth. Individuals who understand the fundamentals of personal finance, investing, and risk management can make more informed financial decisions, resulting in increased savings and investments, improved credit scores, and overall financial stability and security. Individuals must continue to educate themselves about personal finance and make informed decisions to secure their financial future.

Aussem Mortgage Solutions provides service-based options that can aid in your financial independence. We at Aussem are committed to giving you personalised service in a setting that is convenient for you.

Contact us at info@aussem.com.au for more information.

Bad credit rating making it hard to get a home loan?

1. Get your credit report under control

The first thing you should do if you do have credit problems is get a copy of your credit report – to make sure you are aware of all the problem records you might have against your name.
Knowing exactly what’s in your report means you can then make a plan to sort things out. Debts that are overdue will stay on your file for five years, but the good news is that your credit file can be updated if you pay out the balance of a debt. If you have credit issues then potential lenders will want to know what actions you’ve taken to address those problems, so it’s best to get any defaults paid off so they can see you’ve made good progress.
If any information on your file is not accurate, make an immediate request to have it corrected so it doesn’t continue to affect your home-buying plans. If you think there’s been an error speak to the credit reporting agency and the credit provider involved to get it sorted out

2. Shop around more

If your credit file got a no with the first lender you tried, there are others you can approach; each lender has slightly different sets of boxes to tick. So if one lender didn’t look on your situation favourably, don’t give up – another might well take a different view.

EXTRA HOT TIP: Shopping around is a smart thing to do, but it’s important to remember that multiple credit applications in a short time frame can be bad for your credit score. So, it’s best to be cautious and only apply for one type of credit at a time. Working with someone like us will help you avoid these traps.

3. Explore the world of alternative lending

If your credit history is the only thing holding you back, you might be able to get a mortgage from a non-bank lender with a more flexible lending product.

4. Make sure you are in a situation to afford the repayments

If your credit history is the only thing holding you back, you might be able to get a mortgage from a non-bank lender with a more flexible lending product. The banks tend to have very fixed home loan assessment rules. Once upon a time they were pretty much the only option. Thankfully the world has moved on and now alternative lenders like Pepper Money offer a different approach. They can consider your application on its individual merits and look at a wider range of things not a narrow set

5. Look at alternatives to Lenders’ Mortgage Insurance (LMI)  

If you’re trying to buy a home with a deposit of less than 20 per cent, you’re likely to find you need to pay a fee for something called Lenders Mortgage Insurance (LMI). It covers the lender if you were to miss payments down the line. LMI providers are a separate business and have their own lending rules – so they’ll consider any application as carefully as the main lender. They may turn down a LMI application because of credit history or income source, even when a lender has given an approval.

A different way of doing this is rather than using a third-party mortgage insurer, some lenders – like Pepper Money – can offer a Lender Protection Fee (LPF), which gives them the flexibility to assess your loan without having to get outside approval from LMI providers. If you’d like more information, talk to us today about how we may be able to put you in touch with a lender that can help if the major banks say ‘no’ to your loan application. 0432297651.

Are you looking to secure a mortgage on your dream home or investment property in 2023?

While mortgages are one of the most significant purchases you’ll make in your life, there are many ways to streamline the process and save money.

Still, mortgage mistakes are often made by borrowers despite many ways that they can be avoided. Whether you’re just getting started in the property market, or looking to add to an existing property portfolio, it pays to be educated.

So if you’re looking to secure a mortgage without any added headaches (or financial mistakes) here’s what you need to know.

Start By Figuring Out What Type of Borrower You Are

Before borrowing any money for the purchase of a property, questions should always be asked first.

You must determine which borrower type you are first.

This can be done by looking at the circumstances of your life. Taking into account whether you are buying a home for the first time, investing in a new home, or even refinancing will reveal a borrower type and will lead you to question what the goal you plan to accomplish is.

In 2019, the mortgage market is currently full of mortgage products. Your chosen broker should be able to find a product to suit your needs if you know your borrower type.

The following six mistakes are ones that are often made by borrowers.

1. Sticking With A Bank And Forgetting The Mortgage

You should never force yourself to only use products from one lender, and you shouldn’t forget to review your mortgage regularly. Robinson Accounting, an accounting team who have experience managing the finance of home buyers, says that loyalty to one bank is something that people think they have to practice. Often times, these banks may only have a limited selection of products.

They explain “brokers on the other hand, have a wide variety of products that can be useful for your particular situation. Finding out just how competitive your mortgage is in the current market is something that should be done regularly.”

Lenders will often have different costs for refinancing, but it can be possible to get a lower interest rate and get that money back as time passes.

2. Going With A Mortgage Just Because of The Interest Rate It Has

Interest rates for home loans are looking pretty attractive these days. The rates are lower now than they’ve ever been, but that doesn’t mean you should instantly jump on them. There is a downside associated with simply selecting a mortgage that looks better than the others.

The circumstances for which the loan needs to be applied and the loan’s features are the most important things to think about. For a better comparison of mortgage interest rates, comparison rates should be looked at because they include fees, discounts, and other rates.

3. Not Taking The Time to Prepare

When it comes to mortgages, those who have knowledge and their paperwork in order have all of the power.

Around 16,000 brokers are part of the mortgage broking industry, and those who have a faster and easier time getting a mortgage are often the applicants that have well organised documents.

That paperwork with all of your financial details should be ready when applying for a mortgage.

The value of preparation is emphasised by entrepreneur Pearl, who runs cake making business Pearl’s Creations. She explains, “my home is also my place of work. For this reason I had to make sure the process of finding the right property and applying for a mortgage did not receive setbacks – otherwise I risked setting back my business. By asking your broker upfront how much paperwork you’ll need, you can avoid any last minute missteps.”

4. Ignoring The Structure of A Mortgage

There are some mortgages that are simply bare bones with no additions. Others come with additional content, such as credit cards, redraw facilities, and even offset accounts.

You have to choose a product that fits your needs. The broker or bank who is guiding you can help you choose between interest only and interest and principal structures.

Choosing the wrong structure is a common mistake that can affect tax deductibility in more ways than one.

5. Going With A Fixed Term Without Knowing If It’s Needed

If you have to break a fixed-term interest rate mortgage for any reason, you may be faced with costs in the thousands. Only get a fixed-term mortgage when it necessary.

For those who need to stick within a certain budget, fixing the interest rate of a mortgage will be a preferred option. For some, it is a good choice, but for others, it’s not a wise decision, because a period of five years is a long time to be stuck on a fixed term.

6. Going in Without Getting A Pre-approval Done

When borrowing money for a property purchase, it shouldn’t be assumed that a pre-approval has already been given unless the lender specifically writes it.

Although borrowing calculators and other tools can be used to create borrowing figures, banks will want to know more before they lend out their money.

Chiropractor Keith Maitland recommends factoring in your income to ensure your pre-approval process is a success. He says “your income will impact both your pre-approval chances and your ability to successfully pay your repayments, so it should be central to your mortgage process. If you have a promotion in the future it may even be worth your while to wait until your income changes if it helps your application process.”

Did we miss any valuable mortgage mistakes to avoid in 2023?

Write in the comments below about any mortgage mistakes you’ve made in the past and how to avoid them.

Author Bio

Fiona White is an Australian freelance writer and Sydney-based university student. As an accounting student, she has a passion for learning about global changes in business culture and specialises in entrepreneurship and innovation-related topics. When Fiona isn’t at her desk, you’ll find him exploring National Parks.