Additional Lender Scrutiny During the COVID-19 Pandemic and Beyond.

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The Covid-19 pandemic has seen widespread change to our economy and how businesses are able to operate. With restrictions put in place for dental and other allied health practices, many have opted to temporarily close their doors as a precautionary measure.

Taking these events into account has seen lenders review how they assess finance applications. Rather than purely looking at historical data to assess an application, lenders are now seeking a deeper understanding of how a practice has been or could be affected by Covid-19. Applications now require additional information around the changes Covid-19 is having or could have on a medical practice over the in the next 12 months and what strategies are in place to deal with any adverse changes that may occur.

Certain lenders have withdrawn from the medico lending space by no longer offering lenders mortgage insurance waivers and applying their standard assessment metrics where they previously offered more flexible assessments and rate reductions based on the characteristics of a medical professionals application.

It its likely these changes will remain in place for the foreseeable future as the longer term impact of Covid-19 on business in the medical and non-medical space is still unknown.

Medico Finance Australia continues to work through these changes by liaising with practice owners, accountants, business advisers as well as negotiate with lenders to ensure that any personal or business finance applications are prepared with the necessary mitigants in place to have the highest chance of success.

Using an Offset Account to Pay Your Mortgage Off Sooner

by with No Comment Home LoansHome Loans for DoctorsMortgages
Showing guy using credit card

An Offset account works just like any other transaction account, except for one fundamental difference. The balance of the offset account is reducing the total amount of interest on your mortgage thus reducing the life of your loan. The interest on your loan is calculated on the loan balance minus the balance of the offset account.

For example, if you have a mortgage of $650,000 and you were holding $150,000 in your offset account you would only be paying interest on $500,000. If this was a 30-year loan term and your interest rate was 5% you would reduce your loan term by over 8 years and save $343,376

A common method of maximising the benefit of your offset account is called a “credit sweep”. It’s relatively simple to set up and could save you tens of thousands of dollars over the life of your loan.

Here’s what you need to get started;

  1. A mortgage with a 100% offset facility.
  2. Arrange to have your salary paid into this account.
  3. A credit card with an interest free period longer than your income frequency.

The next step is to use your credit card’s interest free period to pay for all of your living expenses. This keeps the balance of your offset account as high as possible.

Clear the credit card from the offset account each month. An ideal way of making sure this isn’t missed is to set up a direct debit from the offset account to the credit card.

By holding your income in the offset account for as long as possible, you will have reduced the amount of interest you’ll be charged on your home loan, and by clearing the credit card before the interest period starts, you won’t have paid any interest on the card.

It’s having your cake and eating it to.

Tip; Have the limit of your credit equal to, or less than your monthly income minus your mortgage repayment. This will help to ensure you don’t spend more on the credit card than you can repay at the end of month which will help you to avoid incurring any interest on the credit card.

Disclaimer: This is general information and should not be taken as personal advice. Please contact your Medico Finance Australia finance specialist on 1300 115 740 or info@medicofa.com.au  if you would like to discuss your specific situation.