Saving up your deposit is the first step in buying a home and when your bank account balance starts to look good it’s easy to get excited. But it pays to be realistic. Exactly how much money is enough? In this article we take a look at some of the upfront costs involved with buying a home to help you set a proper savings goal before you make your move.

The deposit you contribute towards your mortgage is only part of the funds you need to purchase a property. Many first-time buyers assume that 10% of the purchase price will be enough to cover everything, but unfortunately that isn’t necessarily the case. There are many costs involved in purchasing a property, let’s take a look at other things you need to think about as part of your purchase.

1. Deposit on your mortgage

It used to be possible to borrow nearly 100% of the purchase price of the property, and use your savings to cover the other expenses, but these days that’s usually no longer the case. Most lenders require you to have at least 5% of the purchase price to put towards your mortgage. Depending on the home you want to purchase, the lender may even require you to put 10 – 20% of the purchase price towards your mortgage. Have a chat to us about different lender’s criteria to ensure you know what you can afford.

2. Stamp duty

Stamp duty is a cost that varies from state to state and it is calculated against the price of the property you wish to buy. We can help you calculate approximately what your stamp duty costs will be on the price range of home you’re looking at, so talk to us when you’re planning your budget.

3. Lenders mortgage insurance

Unless you have a deposit of 20% or more to contribute towards your mortgage, the lender who is providing your loan will require you to pay lender’s mortgage insurance (LMI). Unfortunately, the cost of this will also vary. LMI is calculated according to how much deposit you have, how much you intend to borrow and how much the home costs to purchase.

4. Borrowing costs

There are a range of different fees that apply to getting a mortgage. These differ from lender to lender and loan to loan, but generally speaking, you will need to allow for things such as application fees, lender valuation fees and a settlement fee. Some lenders also charge for legal supervision at settlement and document processing. Again, ask us what these costs could be with your chosen lender, and we’ll help you to fit them into your budget.

5. Pest and building inspections

Getting a building and pest inspection usually costs around $400, but this will vary depending on the size of the property. It really is worth the expense because it could cost you a lot of money to fix any problems the property may have after you purchase it. By getting a building and pest inspection before you buy, you’ll know exactly what you’re up against and have the opportunity to choose a different property if it looks like you can’t afford the repairs.

6. Conveyancing

You will need to employ a solicitor or conveyancer to legally transfer ownership of the property you are buying. They will also perform all the property and title searches necessary and take care of the documentation. Conveyancers can also explain sales contracts, take a look at your section 32, auction terms and any other legal elements of purchasing a property so that you fully understand what you’re getting into.

7. Insurance

Your lender may require you to take out building insurance on any property you wish to purchase. This is not only an upfront cost, it is ongoing and you’ll need to maintain this cost annually. You have the freedom to shop around amongst the various insurance carriers to get yourself a good price. Once you move in, it is also a good idea to get contents insurance as well. Usually the two can be bundled together so you can save on purchasing them individually.

8. Moving-in costs

Many people get so excited about getting their first home they forget to calculate their moving in costs and include them in their budget. Remember that you may need to hire the services of a removalist to move in your stuff, and that can be expensive! There’s also likely to be items of furniture you’ll need to buy and most people want curtains and blinds at the windows.

You’ll also need to pay to have your utilities connected. These may include telephone, internet, gas and electricity.

9. Contingency funds

Last but not least, it’s important that you have some funds put aside for any unexpected expenses. Of course, it’s difficult for us to predict what these may be, but you never know when you might encounter a problem. Perhaps you’ll have a blocked drain that requires a plumber, or light sockets that don’t work and require an electrician. It’s all part of the fun of owning a home!

Although this may sound daunting, remember, we’re here to help you budget to purchase your property and help to make sure there are no hidden surprises. If you’re getting ready to purchase a home, please don’t hesitate to give us a call for a chat. We’ll help you determine whether you’ve saved enough money to cover your deposit and all your expenses. We can also help you get pre-approval for your home loan so you can get started on searching for your dream home! Please call us today.

Are you an experienced accountant that regularly works with property investors? We need to hear from you if you are comfortable discussing and assisting clients with some of the following:
Taxation returns for investment property holders
Debt minimisation strategies
Asset protection via trusts and other vehicles
Tax planning
Assisting with record keeping
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Element Finance are keen to establish a reciprocal referral relationship with a reliable and knowledgeable accountant. If you want to hear from a lot more investors and would also like to have confidence your clients’ finance is always done right, get in touch now, we need to talk.

Happy New Year! We hope that you and your family enjoyed a very relaxing holiday break and managed to get into the great outdoors to enjoy this lovely summer weather.

Are you ready for another fantastic year in our property markets? 2015 was a fast and furious year that favoured property owners and sellers in almost every capital city. However, many analysts are predicting that our property markets will improve for buyers this year, with conditions starting to look much more favourable for first home buyers and owner occupiers.

This is largely due to a reduction in property investment activity in response to the tightening of controls on investment lending by the Australian Prudential and Regulatory Authority (APRA) in June last year. Activity from foreign property investors also slowed in the last quarter of 2015.

Both of these factors have contributed to reduced competition for properties. This has caused a slow-down in rapid rises in home values around the country, but particularly in Melbourne and Sydney where markets were running hot all year.

Sydney home values increased by 11.47% during 2015, but they were down by 2.37% for the final quarter. Melbourne values were up by almost 11% for the year, but fell by 1.70% for the final quarter.

Other capital cities saw more modest movements in home values for the year. Brisbane/Gold Coast saw a 4.57% rise in home values and Canberra saw home values increase by 4.09% for the year. In Perth, home values decreased in 2015 by 3.73% and Darwin also saw home values fall by 3.63%. Hobart also showed a marginal decrease in home values for the year of 0.72% and Adelaide showed an overall decrease of 0.13%.

During December, there was still a great deal of activity going on in most states. Auction numbers were surprisingly high for that time of year, however clearance rates were much lower and many more properties sold prior to auction than was usual for the year.

With many people only just returning from holidays, we can expect property market activity to be continue to be quiet for the remainder of January. However, with interest rates remaining at historical lows, and further rate cuts looking likely in 2016, we can expect general property market activity to be busy again this year, with large auction numbers already on the horizon for February and March.

Whether you’re a first home buyer, looking to refinance or are planning to invest in property this year, we’re here to help you formulate your plans and access the right financing for your needs. We look forward to assisting you to achieve your goals in 2016, so please don’t hesitate to give us a call to get started today.

A home loan isn’t just a debt, it’s a great financial tool that you can use to build wealth and facilitate your lifestyle. That’s why few people keep their original home loan for the life of the loan – it pays to keep it up to date to meet your needs as circumstances change.

Refinancing your home loan means replacing it with one that better suits your current needs – and it’s something you may consider for a variety of different reasons. Here are the top four reasons why you might consider refinancing your home loan.

1. To save money on your home loan repayments

The top reason why people talk to us about the possibility of refinancing their home loan is because they may now be eligible for a better interest rate. Cutting back on the interest you pay could reduce your repayment amount and save you a considerable amount of money over time.

When you first apply for your home loan, your financial circumstances are one of the factors that influence the home loan interest rate available to you. As your personal situation improves over time, you may be able to refinance to get a better interest rate.

Additionally, you can often get a better interest rate by switching lenders. For example, the big four banks recently made a move to raise interest rates outside of RBA movements. However, not all lenders raised rates at the same time, with many of the smaller lenders keeping their rates between 0.20 and 1 percent lower than the bigger lenders.

If your lender raised your rates recently, now may be a good time to ask us to shop around for a better deal that could save you money.

2. To access your equity

Property investment is currently one of the most popular ways of building wealth for your future. Whilst saving the deposit to purchase a second property may be difficult for many, rapid rises in property values in recent years have provided an opportunity to refinance in order to access some of the equity in their homes to use as a deposit instead.

The equity in your home is calculated by subtracting the amount you owe from the current value of your home. In order to refinance to access your equity, you will need to have your home valued to determine its current value.

Accessing your equity will increase the amount you owe on your original property and increase your mortgage payments. However, if you use the equity to make a property investment, you will have the opportunity to capitalise on home loan value increases on two properties over time and this has the potential to help you increase your wealth in the long run.

Other uses for a lump sum in cash are literally endless – you could use your equity to buy your family a boat, a caravan, the overseas holiday you’ve always wanted or even use it to invest in a business or stocks and shares. However, we encourage you to act responsibly and only access your equity for lifestyle reasons if you can genuinely afford it. That means talking to us to help you discover your real financial position and if accessing your equity is a good idea for you.

3. To renovate or extend your home

Renovating or extending your current home to meet the needs of your growing family or changing lifestyle is often a better option than purchasing an entirely new home. By renovating or extending, you will be able to create the home that exactly meets your needs and if you’re careful about the improvements you make, perhaps even increase its value at the same time. Even though you will need to access your equity, you may be able to improve the value of your home to offset this cost.

Maintaining the value of your largest asset is important. So even if you don’t want to extend your home, keeping it up to date and in good repair is something you should consider periodically. If your home could do with an update, don’t hesitate to talk with us about refinancing to renovate.

4. To consolidate debts

Your home loan interest rate is probably the lowest form of interest you will need to pay on any loan in Australia. Credit card interest rates can be as much as four times higher than your home loan interest rate and this can make credit card debts difficult to pay off. Other expensive debts like car loans or personal loans can also prove to be a drain on your finances.

If the value of your home has increased over the last couple of years, it may be worth considering accessing some of the equity in your home to pay off your more expensive debts. This could dramatically reduce the amount of interest you have to pay on your overall debts each month, offering you some financial relief and helping you to enjoy a more comfortable lifestyle.

It’s a far better idea to be in a position to save money each month rather than waste it on expensive credit card interest repayments. By refinancing to consolidate your debts, you could possibly find yourself in a position to save money to make other investments or even pay off your home loan sooner. Ask us to help you crunch the numbers to see if using your home loan to consolidate your debts will be a good idea for you.

Ask us if refinancing is the right move

If you have plans or goals for your future then remember, your home loan can be used as a financial tool to help you reach them. We’re here to help you make the most out of your home loan, so please don’t hesitate to give us a call for a chat about what you want to achieve and how refinancing your home loan could help to get you where you want to be. We’re always happy to spend the time with you to help you make the right decisions to reach your financial goals, so please call us today.

Property investment has always been popular in Australia. However, like all forms of investment, there are loads of variables involved and it’s easy to make expensive mistakes. Building wealth through property investment can be a lot of work – particularly if you’re new to property investment and are not aware of exactly what’s required. In this article, we outline some of the common mistakes made by first time property investors so you can plan ahead to avoid them.

Not doing your homework
Many people make the mistake of buying a property simply because they like it, or think it is a bargain. But not every property makes a good investment. When you find a property that you might like to purchase, it is very important that you do your research to ensure it will give you the return on your investment that you will need. Ask yourself these questions, and importantly, take the time to research the answers carefully:

• Will it be easy to find tenants/will the property be in high demand?
• What rental income can I expect?
• Does the property have strong capital growth potential? Is it in a growth suburb?
• Am I paying the right price? How long will I have to hold the property before I can make a profit by selling it?

Not factoring in all of the costs
Cash-flow is a very important factor when you plan to invest in property – and it’s the area where many first-time investors come undone. It’s not only important to factor in all the costs of buying the property, you must also factor in all the costs of running the investment and maintaining it from the outset.

When you research the rental income you can expect from a property, you will first need to know exactly how much rental income you will need to cover the costs of holding it. The actual costs will vary from property to property – if you purchase a new home, for example, you will not need to factor in much by way of maintenance costs at first. But if you purchase an older property, you will need to make an estimate of what work is going to be needed and when, and how much this will cost and factor that into the budget.

Ask yourself these questions:
• Will the rental income be enough to cover the costs of a property manager, advertising for tenants, regular general maintenance, council rates, building insurance and landlord’s insurance?
• How will I cover the costs of large repairs – say if the hot water system needs replacing quickly?
• How will I cover the costs when the property is untenanted and there is no rental income? How long is the average vacancy time in this area? How long will I have to budget for?

Not getting the property management right
A property manager is the liaison between you as the landlord, and your tenant. First time investors often believe that managing their own property will save them money. However, it should be remembered that your property management costs are usually tax deductible and few people have the skills to not only find tenants quickly, but choose the right ones.

Property managers find your tenants, vet them by performing credit checks and then collect the rent every month. They deal with tenant requests, organise regular maintenance and pursue action when disputes arise. They keep track of rents in your area and make sure your rent keeps pace with the market.

In short, a good property manager will help you maximise the return on your investment and save you from many sleepless nights. However, some property managers are better than others, and fees vary. You should carefully research your property manager before engaging them – ask around, check references and make sure they have the resources to do a good job. If you need help with this, ask us for a referral.

Not talking to a tax professional
Did you know that you should obtain a depreciation schedule as soon as you purchase the investment property, preferably at settlement? Not many people do. It’s a document that helps your accountant determine how much you can claim back on tax each year.

One of the major mistakes people make with investment property is not planning ahead to make the most of their tax deductions. In order to ensure you understand what you can and cannot claim, you need to talk to a tax professional and/or accountant early on in the process. Getting it right will help to ensure you come out ahead and enjoy substantial savings. Getting it wrong will cost you money you may never get back. We have many expert contacts in this area so if you need a quality referral to an accountant, please get in touch.

Getting the finance wrong
Before you commence your property investment journey, it is wise to make a plan about what you want to achieve – your financial goals for the future. We recommend you sit down and talk to us about getting the right financing to achieve these goals. Taking a haphazard approach to financing your first, and then subsequent investments, could cost you more money, limit the amount of investment properties you can acquire and even be a recipe for disaster if something goes wrong.

We can’t stress enough how important it is to formulate a plan before you begin, and talk to us about your financing before you even consider making a property purchase. We will help you set up the financing arrangement that is most advantageous to you – considering your goals and your personal financial circumstances.

If you’re thinking about making a property investment, why not talk to us? We are happy to take the time to discuss your plans, get you pre-approval for your financing and introduce you to a team of other professionals who can help you to avoid these expensive mistakes above! Give us a call – we’re here to help.