“This can significantly reduce how much they will let you borrow.” “If you are applying for a home loan, lenders may count your salary sacrifices as an expense,” she said in an explainer video. Salary sacrifices can affect how much you can borrow, according to Desiree Pasic, finance broker at Bee Financial Savvy. Does salary sacrificing impact your home loan application? You will need to talk and negotiate with your employer if you want these benefits protected. Your salary-related benefits may likewise change, including holiday loading and overtime, as you will be earning less income. Salary sacrificing also reduces the amount of superannuation your employer is required to pay, so it is advisable that you evaluate the potential impact of the agreement on your retirement savings. Once an agreement is in place, you will no longer have access to your sacrificed wage as it will be automatically deducted from your pre-tax salary and paid directly to your lender. However, salary sacrificing your home loan also has potential pitfalls. What are the drawbacks of salary sacrificing your mortgage? The money you can save can be spent on other expenses or you can use it to make extra mortgage repayments, allowing you to pay off your loan faster and reduce the amount of your interest payments over the life of the mortgage.Īnd because loan repayments are sent directly to your lender, you do not need to personally undergo the monthly repayment process, minimising stress and freeing up time for other important activities. This will seem that you are earning less income, which means you also will be paying less income tax every year. When you enter a salary sacrificing agreement for your mortgage with your employer, part of your pre-tax income will be paid straight to your lender. What are the benefits of salary sacrificing your mortgage? Different terms, fees or other loan amounts might result in a different comparison rate. Warning: this comparison rate is true only for this example and may not include all fees and charges. *The Comparison rate is based on a $150,000 loan over 25 years. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. All products will list the LVR with the product and rate which are clearly published on the product provider’s website. Some products will be marked as promoted, featured or sponsored and may appear prominently in the tables regardless of their attributes. However, the ‘Compare Home Loans’ table allows for calculations to be made on variables as selected and input by the user. Super contributions not covered by this scheme, however, cannot be withdrawn and used to pay for your home.īuying a home or looking to refinance? The table below features home loans with some of the lowest interest rates on the market for owner occupiers.īase criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. Under this scheme, you can make contributions to your super not exceeding $15,000 per financial year and $30,000 overall. If you are a first home buyer, you can also sacrifice part of your salary into your superannuation that you can use as a home deposit through the First Home Super Saver Scheme. Some sectors – including public and private hospitals, not-for-profit organisations, and charitable institutions – are entitled to an FBT exemption or rebate, making salary packaged benefits more cost-effective to implement. This is the reason why you need your employer’s approval for this kind of arrangement. However, your employer may be required to pay fringe benefits tax (FBT), which is often paid for the benefits their employees receive. This means you will also be paying less taxes. Using your pre-tax salary to cover for these expenses will enable you to minimise your taxable income because as far as the ATO is concerned, you are earning less. These expenses may include your super contributions, mortgage repayments, car loans, childcare spending, and health insurance. Salary sacrificing, also referred to by the Australian Taxation Office (ATO) as salary packaging or total remuneration packaging, is an arrangement between you and your employer that allows you to use part of your pre-tax salary to pay for certain expenses. Your Mortgage answers five of the most common questions people have about salary sacrificing their mortgage. Salary sacrificing can be a cost-effective way of paying off your home loan, but there are limits on who can avail of this benefit and how much they can access.
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