02 Jul 2014

Can we fix it?

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CBA have this week released their economic forecast expecting interest rates to rise a full 1%  over the next 18 months. With the lowest rates home loan rates you have probably ever seen, is it time to FIX IT? Call Element Finance Fremantle today to discuss the benefits.


Fix your interest rate?

Fix your interest rate?

01 Jul 2014

RBA Rates On Hold

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At its July meeting today, the Reserve Bank of Australia decided to maintain the official cash rate at 2.5 per cent, as predicted by most market analysts. Keeping the cash rate unchanged is in line with the RBA’s intention to create a period of stability on interest rates.
At the start of the new financial year, we can usually expect Australia’s property market to slow down for the winter months ahead. However, the period of stability on interest rates has created a lot of activity in the housing market, with auction numbers in most capital cities remaining high throughout June.
Analysts say that the continuing property market activity is being led by investors who are taking advantage of the low interest rate environment to boost their portfolios. However, the high numbers of properties remaining on the market during this traditionally quiet time of year means there are plenty of opportunities for those looking to make a purchase.
Our loan market remains very competitive, with many lenders still introducing low fixed rates, along with great variable rate options. First home buyers, as well as those looking to refinance and invest, can expect some great deals ahead of the predicted rise in interest rates later this year or early next year. If you’d like to find out how to take advantage of the current low rates to reach your goals this financial year, then talk to us today.

The Reserve Bank appears more downbeat on Australia’s economic growth prospects, suggesting interest rates could be on hold for even longer.

The minutes of the central bank’s June board meeting highlight the RBA’s concern about how the tough federal budget and expected falls in mining investment could impact the economy.

Although March quarter economic growth was stronger than forecast, that was mainly driven by solid mining exports which were not expected to be sustained, the minutes said.

“The expectation of substantial falls in mining investment, below-average growth of public demand and non-mining investment remaining subdued for a time implied that the pace of growth was likely to be a little below trend over the rest of this year and into the next, before gradually increasing,” the minutes said.

Economists said the RBA appeared to be less confident about Australia’s growth prospects, raising the prospect of the central bank moving even further away from hiking rates.

“At the top of the RBA’s concerns appeared to be the sharp decline in mining investment and the fiscal consolidation set to occur,” St George economist Janu Chan said.

“The range of concerns from the RBA and recent indicators suggesting a loss of momentum in the June quarter is suggesting that a rate hike is still some months off.”

The RBA has kept rates at the record low of 2.5 per cent since August.

During its June meeting it repeated its familiar line that “the current accommodative stance of policy was likely to be appropriate for some time yet”.

RBC Capital Markets head of economics Su-Lin Ong said “modestly dovish” minutes maintained the view that the RBA will sit on the interest rate sidelines for a while.

“The RBA’s long-held narrative has been for low rates to assist in supporting the rates-sensitive sectors of housing, consumption, and non-mining investment as mining-driven capital expenditure begins to drag more heavily on activity,” she said.

“In today’s minutes that confidence appeared less so.

“History tells us that during times of uncertainty, the RBA tends to sit on its hands and await further data and developments.

“This is consistent with an extended period of steady cash, which we expect will continue well into 2015 with a modest tightening cycle unlikely to begin before the June quarter.”

CommSec chief economist Craig James said the RBA had played down the recent good GDP growth figures, making it clear that rates are stuck in neutral.

“The Reserve Bank has downplayed a number of factors that alternatively could have lent support to a change in monetary policy stance,” he said.

To ensure your home loan is still competitive, contact an expert mortgage broker from Element Finance Fremantle for a free analysis.

Ready to build or buy now, but haven’t yet sold your old property? Bridging finance could be the answer to keep the ball rolling.

Trying to sell one property and buy another can be quite a daunting and emotional process, especially when the timelines of both projects don’t match up perfectly.

Avoid sale stress

Generally, people can be a bit nervous or anxious, but it’s an education process for them.

One of the services that Element Finance Fremantle have offered clients in the past is assistance in applying for bridging finance, despite the fact that they don’t financially benefit from handling them. A bridging loan is usually just an extension of the loan amount on a regular home loan, and it can cover the purchase price or construction costs of a new property while your old one is selling.

Most lenders offer a period of interest-only repayments on bridging loans, allowing borrowers to get into their new home sooner without having to start paying off a full mortgage before selling the old one.

The team at Element Finance Fremantle are also well accustomed to negotiating rates with banks to get appropriate deals for their clients so they don’t necessarily need to refinance to make savings when interest rates fall.

They use their knowledge and other banks’ rates to drive rates lower. So occasionally, clients don’t even have to change their bank. Credit advisers can often just negotiate a better deal to keep the banks honest.

Call or email Mike at Element Finance Fremantle now to help you find you the best deal with the least headaches. (08) 6323 2350 mike@elementfinance.com.au

23 May 2014

Lending & Tax Time: Jargon Explained

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Well, the tell-tale signs that we are near the end of the financial year are upon us! Advertisements for EOFY sales are everywhere we look, search parties for those mislaid receipts, and the usual tax time property jargon such as “depreciation” and “negative gearing” being bandied around the water cooler.

Real estate at tax time has its own language and terminology which can be very confusing, particularly if you’re new to the investment process. Element Finance Fremantle has put together a guide to the key phrases used at this time of year when we are thinking about your property investments, and what that means for your tax!

Capital Gains Tax (CGT)
A capital gain, or capital loss, is the difference between what it cost you to acquire an asset and what you received when you disposed of it. Selling assets such as real estate is the most common way you make a capital gain or capital loss. In other words, you make a capital gain when you sell a house for more than you paid for it.

You pay tax on your capital gains. So, when you make money from the sale of a property, it forms part of your income tax and is not considered a separate tax.

Most real estate is subject to CGT. This includes vacant land, business premises, rental properties, holiday houses and hobby farms. Your ‘main residence’ (family home) is generally exempt from CGT unless you rented it out for a time or it’s on more than two hectares of land.

If you are a property owner, capital gains tax may become an issue when you make a profit from selling your property. But there are a couple of standard exemptions which could assist. For more information, we can help you with a referral to an accountant, or visit the Australian Tax Office website.

Negative Gearing
The term ‘negatively geared’ sometimes causes confusion, especially among people new to the intricacies of property investing. Negative gearing occurs when the costs of owning a property – interest on the loan, bank charges, maintenance, repairs and capital depreciation – exceed the income it produces. Simply, at the end of the day, the investment property in question will run at a loss and you need to make up that shortfall from your own pocket.

Negative gearing can be used as an investment strategy in order to reduce your taxable income, maximising available tax benefits. If the property becomes cash flow positive (see below), this profit is added to your taxable income and you may have to pay more tax depending on the structure of your investments.

Like the name suggests, depreciation is the decrease in value of an item over time. An example of a depreciating asset is your car, which is said to reduce in value a great deal from the time you drive it out of the dealership.

When it comes to investment properties, depreciation can certainly work in your favour. If your investment property depreciates, you can claim against the decreased value of your investment. Negative gearing and depreciation allowances are popular ways to reduce your tax liability. There are various rules around this in all States, so please speak to a professional, or we can get you in touch with the experts!

Cash flow positive
The reverse of negative gearing, your investment property is considered to be cashflow positive if your income generated from the property is greater than your outgoings – after you’ve taken into account tax deductions. Tax deductions include things like interest paid on your loan, depreciation, maintenance and service costs.

Equity is the difference between what your residence or investment property is worth and how much you owe on it.

Put simply, if your property is worth $300,000 and you still owe $100,000, you have $200,000 in equity. Over time, as you reduce the amount you owe on your home or the value of your home grows, your equity increases. Equity is a very good thing to have as it can be used to leverage further property purchases without your having to save a new deposit.

Of course there are lots more real estate and legal terms you will come across at tax time and when investing in property. We recommend you seek professional advice. Contact us to learn more on 6323 2350 or mike@elementfinance.com.au

Tax jargon explained

Tax jargon explained


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