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Client Success Story – James and Julia

Client Success Story

 

James and Julia

James and Julia had taken out a home loan several years ago through the financial institution that they did their day-to-day banking with.

Having joined Advise Wise as clients, they were looking for ways to balance their financial lives to achieves both their immediate and their longer-term objectives.

Their existing loan was a basic variable on their home with monthly repayments and the ability to redraw and/or make extra repayments as required.

Goals

Their goals were to balance the repayment their loan as quickly as possible without seriously compromising their life style, and to begin focusing more on their long term savings and retirement objectives.

Actions

  • Change Lender 

Our first step was to assess the broader lending market for alternative options where we were able to identify a more suitable loan for them which included an offset account.

  • Interest rate reduced

By switching the lender and the loan type, the couple were able to save 0.5% per annum on their variable rate, and by utilising a portion as fixed, 0.7% of that component.

  • Employ and utilise an offset account and credit card facility

By having their net salary of deposited into the offset account,  retaining their excess savings each month in this account they reduce the interest payable day-to-day. They are able to further reduce this by using a credit card for their expenses and paying off once per month before the interest period on the card.

  • Salary sacrifice to super

Finally to boost James and Julia’s retirement balance they entered into a salary sacrifice arrangement with their respective employers using the grossed up amount of their monthly saving from refinancing the loan interest rate to boost their retirement savings. Because these contributions can be made before tax they can contribute a greater amount than their net savings on their interest rate reduction without impacting their cash flow.

Outcome

  • Reduce the interest payable on their home loan substantially
  • Potentially save 4 years on the term of the loan
  • A projected $150,000 of combined additional funds in super over 20 years
  • All without any additional capital or cash flow required
By employing these strategies James and Julia have more flexibility with their savings, will pay their loan off sooner allowing them to invest elsewhere and significantly boost their retirement savings for later in life.

The information contained within this website does not consider your personal circumstances and is of a general nature only. You should not act on it without first obtaining professional financial advice specific to your circumstances. Before purchasing any financial product, always consider the relevant Product Disclosure Statement (if applicable) which provides full details of risks, terms and conditions.

Some details (including names) have been modified for privacy purposes and assumptions have been applied regarding future interest rates, investment returns, the client’s circumstances and other financial and economic variables for illustrative purposes – actual outcomes may vary.

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