21 Sep 2023 Podcast: Q&A – Interest Rate Update and Mastering Debt Consolidation

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Wondering where interest rates are headed?

This Q&A episode is for you.

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Join Evelyn for a Q and A that covers market movements, and also get answers to your pressing questions from last week’s episode on debt consolidation.

Plus, snag our bank call script for those “let’s chat, Mr. Banker” moments!

Tune in now.

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There’s plenty more great content to come … so make sure you subscribe now on Apple Podcasts or Spotify so you don’t miss a thing.

You Have My Interest is brought to you by Everlend, a mortgage and finance broking firm built for the purpose of educating and empowering you to make informed financial decisions tailored to your wealth goals. Find out more and book in your free initial consultation at ​​https://www.everlend.com.au/

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Find out more about You Have My Interest at everlend.com.au/podcast and connect with us at podcast@everlend.com.au

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Please find a Podcast summary below with the interview highlights:

Evelyn discusses self-managed super fund (SMSF) lending, providing an overview of its intricacies, updates on interest rates, and practical client scenarios. Here’s a summary of the key points:

Interest Rate Update

  • The Reserve Bank of Australia (RBA) cash rate remains steady at 4.1%.
  • Recent weeks have seen slight decreases in fixed and variable rates (0.1–0.2%), indicating some stabilization in the market.

Understanding SMSFs

  1. What is an SMSF?
    • A superannuation fund managed independently rather than through an industry or retail fund.
    • Typically requires a minimum fund balance of $250,000–$300,000 to justify its high annual fees (approx. $3,000–$6,000).
  2. Benefits of SMSFs:
    • Customized investment strategies tailored to personal goals.
    • Allows diversification across shares, property, and other asset classes.
  3. Key Restrictions:
    • Can only purchase investment properties (not owner-occupied).
    • Limited recourse borrowing arrangements (LRBAs) prevent re-borrowing against the asset.
  4. Considerations:
    • Compare SMSF property returns (rental income + capital growth) to other investment options like shares.
    • Engage a qualified financial advisor to determine suitability.

Client Example: SMSF Lending

  • Clients: A married couple (ages 40 and 35) living in the Northern Territory, with PAYG incomes and three existing investment properties.
  • Strategy:
    • Pre-approved for up to $450,000 in their SMSF.
    • Purchased a $393,000 property with a $300,000 loan from Latrobe, a leading SMSF lender.
    • Opted for a principal and interest variable rate loan (7.49%) to focus on debt reduction.
  • Reason for Choosing Latrobe:
    • Reputable and experienced in SMSF lending.
    • Competitive rates compared to other niche lenders like Liberty and Think Tank.
  • Financial Summary:
    • Monthly loan repayments: $2,095.
    • Expected rental income: $1,733/month, creating a manageable shortfall covered by SMSF contributions.

Advice and Outlook

  • Evelyn emphasizes the importance of specialist financial advice when considering SMSF strategies to ensure compliance and suitability.
  • SMSF lending can be an effective tool for diversifying super investments, especially for clients with significant funds and long-term growth goals.

Evelyn concludes by inviting questions and offering support, noting the complexity of SMSF structures and the value of collaboration with financial planners. She also hints at future discussions about SMSF trust arrangements and other detailed aspects of SMSF lending.

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