MyBudget MoneyTalks Blog

Tammy on 9 News Adelaide
Tammy on 9 News Adelaide
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The Hidden Costs of Buying a Home — Revealed!

When it comes to buying a house, the deposit is just the beginning. Legal fees, stamp duty, bank and insurance charges, not to mention moving costs, can all add up to tens of thousands of extra dollars on the average home purchase.

Why do lenders talk about a 20-percent deposit?

Twenty-percent is the magical deposit amount where banks will lend to you without adding on an extra margin, called Lender’s Mortgage Insurance (LMI) to reduce their risk. Canstar explains, “Lender’s Mortgage Insurance is a condition of home loan borrowing where your mortgage lender may require you to make a one-off payment to protect them (the lender) against the event where you (the borrower) might fail to make your home loan repayments.” To avoid having LMI added to your repayments, you need at least a 20 percent deposit which, depending on the property and location, could be a hefty six-figure sum.

Budgeting for emergency savings

Savings: how much is enough?

As people take control of their finances and their savings start to grow, they often ask us how much they should keep in their emergency fund. There’s no hard and fast rule on savings—it really depends on how much you earn, how much you spend, your priorities, your other financial commitments, and your general view on life.

But as a minimum, no matter your salary, you should be saving at least $100 per month. This is useful for emergencies and to fall back on if a bill arrives that’s higher than expected. It also provides a buffer that keeps your budget intact. That’s why every budget we design at MyBudget includes a savings plan.

A person who has no or very little savings is walking a thin line. What happens if they lose their job or their car needs expensive repairs or they can’t work next week because their kid is sick? Most people in this position end up using a credit card or fast cash loans to make ends meet. This is how the debt spiral starts for many people.

In general, the more savings the better. Once you’ve reached your emergency fund savings goal you can then decide what to do with your extra savings—top up your super, invest in shares, open a term deposit, pay down your mortgage faster, take a well-deserved holiday etc. How you invest your savings will be influenced by your priorities and by, what financial advisors call, your risk profile.

A good goal is to have at least one month’s salary in savings. An even better position is to have six months. To keep your emergency fund safe and out of reach (“break glass in case of emergency!”) you might think about keeping the money in a term deposit. The banks are currently looking for cash which is why we’re seeing some decent term deposit rates. Shop around to find a term that suits you and your needs. Make sure you understand the penalties or conditions should you have to withdraw funds before the maturity date.

Save money on your power bills

Power brokers: you might save hundreds

In an Advertiser article last week, experts predicted that South Australia will soon have the most expensive electricity in the world, followed closely by other Australian states. The article said that since the state’s electricity assets were privatised, the average household electricity bill has more than doubled from $770 to about $1600.


In another Advertiser article, it was reported that power prices are now the biggest financial worry for South Australians, even more so than petrol, groceries or debt reduction.


Why have our utility prices gone through the roof since our public power assets were privatised? By giving consumers choice and putting power providers under competitive pressure we were supposed to see lower prices and better service.


Instead, power companies have been reluctant to  properly maintain and develop the infrastructure that keeps our power connected. Some say it’s because of uncertainty about renewable energy schemes and carbon emission policies.


Whatever the underlying cause, you and I are paying for it.

There’s no better time than right now to exercise your consumer muscle. We’ve seen MyBudget clients save hundreds of dollars a year—sometimes more—by shopping around for the best deal on utilities. How you use that extra money is up to you: savings, debt reduction, Christmas presents, increased living expenses…

Let someone else do the legwork… Utility broking services are free for consumers. They make their money by earning a commission from suppliers.

You can find utility brokers on the web by Googling terms like “electricity comparison” or “power compare rates.”

Most broking sites provide a short questionnaire which leads to a recommendation for the best deal for your power usage pattern in your area. Make sure you have a few of your most recent bills in front of you so that you can answer the questions accurately.

We’d love to hear how much you saved by reviewing your utility service or changing power providers. Please post the amounts on the MyBudget Facebook page!


Cutting Debt Percentage Sign

Home loan rate cuts: how to budget the savings

In December, the big four banks passed along the Reserve Bank’s interest rate cuts to their customers. For the average mortgage holder, the saving represents around $50 a month.

People often ask me what they should do with the extra money and I always answer that it comes down to their particular priorities and circumstances.

Do you have any high-interest debt?

This is great opportunity to make a dent in any outstanding balances on your high-interest credit cards, charge cards or other loans. Consider this: Paying $100 a month, it will take more than four years to pay off a $3,500 credit card balance. Apply an extra $50 to your monthly payment and you’ll have the same balance down to zero in two-and-a-half years.

Do you have sufficient emergency funds?

Overuse of credit is often linked to a lack of savings. Without an emergency fund to fall back on, even small life changes and unexpected bills can lead to financial stress. If this sounds familiar, use your mortgage surplus to start building up your emergency savings. Have the money disbursed directly from your pay into a separate savings account or a redraw or interest offset facility attached to your mortgage (see below.)

Want to pay off your mortgage faster?

If you keep paying the extra money towards your mortgage, you’ll very likely take years and tens of thousands of dollars off your mortgage.

Many mortgages include a redraw facility that allows the mortgage holder to draw against surplus payments when a need arises. This is a great way to build up emergency funds while paying off your mortgage more quickly. A mortgage offset facility is similar—the balance of your offset account is subtracted from your mortgage balance, hence reducing the amount of mortgage interest you pay.

Saving for something special?

If you’re saving for something special, your offset/redraw facility is the place to do it. While you save for your holiday, car, new sofa, home renovations or whatever else, you can reduce the interest costs on your mortgage.

If your mortgage doesn’t include a free redraw/interest offset facility (in which case, it might be time to shop around for one that does), open a special savings account to save for your long-term goals.

Interest cuts are a good reason to review your budget

MyBudget clients can speak with our customer service team to review their budget and goals at any time to determine the best way to utilise surpluses. Your goals and priorities are important to us—we love helping you to achieve them.

Review your mortgage at the same time

If your bank hasn’t passed on the Reserve Bank cut, it’s definitely time to shop around. While rates are low, this could also be the perfect opportunity to consider fixing your mortgage for a period of time. Talk to your bank or mortgage adviser, or give MyBudget a call if we can refer you to one of our partner companies for a mortgage health check.