Interest Rate News

At its July meeting, the Reserve Bank of Australia (RBA) decided to leave the cash rate on hold at 1.5%, where it has remained since August 2016. Most economists now believe the RBA will leave the cash rate on hold until next year, and some are even predicting it will be 2020 before we see a change.

Meanwhile, lenders have been making changes to interest rates outside of the RBA’s decision. Several lenders raised interest rates marginally last month, citing funding costs as the driver.

If you haven’t had a home loan health check in a while, it’s important not to be complacent. Check in with us and we’ll compare the market to determine whether your mortgage still stacks up.

Property Market News

Dwelling values fell by -0.29% across the combined five capitals in the month to June 30. In Melbourne, prices fell -0.41%, while Sydney saw prices decline by -0.33%. Perth experienced a decline of -0.53% and Canberra -0.30%. Darwin experienced the largest monthly fall, with home values decreasing -1.12%. Hobart, Brisbane, and Adelaide all experienced very marginal increases.

Auction volumes have declined in recent weeks, although they are still quite strong for this time of year. In the week ending June 30, Victoria had 873 scheduled auctions and cleared 61% of stock. In New South Wales, there were 726 scheduled auctions, and 56% of properties sold under the hammer. Queensland had the third highest volume – 226 scheduled auctions, but only 32% of properties sold.

In South Australia, the clearance rate was 58% for 75 scheduled auctions. The ACT held 43 auctions, and achieved a clearance rate of 66%, while things were quieter in Western Australia – 38 scheduled auctions and a 22% clearance rate. The Northern Territory had only one auction and the property sold, while neither of the two properties to go to auction in Tasmania were sold.

Winter is a great time to purchase property, as there could be fewer buyers to compete with. What’s more, because the winter months are generally slower in the housing market, vendors may be more willing to negotiate on price. Remember, we offer finance solutions tailored to your specific financial situation and goals, so please speak to us at Element Finance about your finance needs, and if you’re in the market to buy a property, talk to us about pre-approval on your loan today.

Why refinance?

Refinancing your loan allows you to access the equity in your property. Equity is the proportion of the property you own – for example, if the property is worth $500,000 and you owe $200,000 to the bank, then you have $300,000 in equity.

Savvy property investors use their equity for a variety of different purposes:

• To renovate and add value to an investment property
• As a deposit for their next investment property
• To fund their lifestyle and living expenses.

Another popular reason to refinance is to secure a more competitive interest rate or a loan that better suits your needs. There may be loan features that can improve your interest savings or cash-flow, like offset accounts and redraw facilities. It pays to talk with your mortgage broker and reassess your property investment loans regularly, to ensure you’ve got the right loan to maximise your financial benefits and tax advantages.

Key considerations

1) Market value and equity
Generally, the right time to refinance your investment property is when the equity has grown sufficiently to take the next step in your investment strategy, or to fund your renovation plans. To get an idea of the value of your property, and how much your equity has grown, you’ll need to compare public sales data for similar properties in the area. Ask Element Finance for a free suburb and property profile report with the latest on-the-market information.

You could also ask real estate agents for an estimate (make sure you hit up at least three different agents) or pay for a professional property valuation. Keep in mind that a lender’s valuation will be on the conservative side of any estimates, and a formal valuation will be required by the lender before they will allow you to refinance.

2) Consider the costs
Switching lenders and refinancing your investment loan can help you achieve your goals, but there are costs involved. These may include break fees or discharge fees, establishment fees for your new investment loan, and valuation fees. Speak to Element Finance and we’ll run you through the costs and help you decide whether refinancing is worthwhile right now, or if it may be better to wait until your equity has grown further.

3) Investigate how the market is performing
Part of the decision about whether to refinance will depend on how the property market is performing for your investments. National dwelling values have been falling in many capital cities in recent months, while regional dwelling values have been edging higher. That may mean the location of your investment property will be a key consideration when deciding to refinance.

It’s important to be aware that if do you refinance after your property’s value has decreased, you may be facing negative equity territory. This is when the value of your investment falls below the outstanding balance on the mortgage. In this situation, it may be better to wait until the market recovers before you refinance.

4) Other considerations
The investment lending landscape has seen many changes in recent times. In April, the Australian Prudential Regulation Authority (APRA) announced the 10 per cent limit on bank lending to property investors (in place since 2014) would be removed for lenders that could demonstrate prudent lending. As a result, we’re seeing interest-only investment loans becoming easier to obtain, and interest rates being reduced by some lenders. That means now may be a good time to reassess your investment strategies and refinance requirements.

Talk with your mortgage broker first
If you’d like to access equity to grow your investment portfolio or renovate, or you just want to know you’re getting the best deal, it’s worth having a chat with your mortgage broker. You’ll find we are a wealth of information – and it’s always best to make a fully informed decision. If the time is right for you to take the next step in your investment journey, we’ll help you find the right refinance option to help you achieve your goals. Call Element Finance today!

However, when faced with the challenge of fitting years of accumulated stuff into a space that’s a quarter the size, it’s easy to come undone. In this article, we’ve put together some cool ideas for maximising every inch of your new small space home, to help you make it more liveable and drive up its value.

Get creative with storage

Before we even start talking about cool storage ideas, you’ll want to get tough on yourself and get rid of the stuff you don’t need. Consider a garage sale or selling it on eBay.

Once you’ve paired it back to the things you can’t live without, you can start thinking about incorporating clever storage solutions into the design of your home. Stairs are a hidden bonanza of wasted space that you can reclaim in a variety of different ways (check out these imaginative ideas on Buzzfeed).

Another great tip is to use space vertically, not horizontally – that means thinking of creative ways to make use of your wall and ceiling space instead of the floor. For example, try creating personality with floating wall shelves.

Use your furniture as extra storage Multifunctional furniture is also a great idea – look for a coffee table with a shelf under it for books, or one that converts into a desk. There are plenty of beds and sofas available with hidden storage underneath, and you can position attractive storage baskets to hide your clutter. Want to get even more creative? Consider a vertical wall bed that transforms into a revolving bookcase. Or this wall bed that converts into a home office or study.

Grow up!

If you love your garden, think vertical! There are plenty of fun ideas on Pinterest for small spaces and balconies, from pallet herb gardens to exotic-looking cactus displays. Click here for inspiration.

Conceal the laundry

Why not tuck your washer and dryer away inside a kitchen cupboard and reclaim the laundry for a different use? You might even like to include a fold-out drying rack and ironing board into the design for ultimate efficiency. Another option is to combine your bathroom and laundry into one, so that you can optimise the use of the plumbing.

Recess where possible

You could remodel the toilet and go for a wall-hung throne. By concealing the tank in the wall, you’ll save space and achieve a more modern look. When it comes to the bathroom, recessing cabinets and installing a pedestal basin will free up room. Another tip is to use neutral colours and larger mirrors to create the illusion of space.

Call us about financing your reno!

Renovating can do wonders to improve the liveability of a smaller home and boost its value – we hope these ideas help with your plans. If you’d like to know how you can finance your renovation dreams, please get in touch. You may be able to refinance and use the equity in your home, or you may benefit from a home loan with features such as a line of credit. There are all sorts of other finance options available, so talk to us at Element Finance and we’ll help you set the wheels in motion for your renovation project.

Taking on a boarder could be a viable way to help you pay your mortgage, but it won’t all be beer and skittles! If you’re going to take in a boarder, there are some very important implications to consider first, as we explain in this article.

The pros of having a boarder

• • Additional income
  • You can offset your household costs
  • Potential tax deductions for property expenses
  • The social factor.

The cons of having a boarder

• Loss of privacy
• Extra responsibilities as a live-in landlord
• The income may push you into a higher tax bracket
• You may be subject to Capital Gains Tax (CGT) when you sell
• Many lenders don’t take rent from roommates into account when assessing whether you can afford a home loan.

Legalities to consider

The money received from your boarder will generally be considered accessible income by the Australian Taxation Office (ATO), and you must declare it on your tax return. You may be able to claim deductions for expenses associated with renting out part of your home, such as interest on your mortgage. However, if you rent to a relative at a discounted or less than market rate, it can affect what you can claim. In some instances, payments from a family member for board or lodging may be considered a domestic arrangement and not rental income, so you may not be able to claim tax deductions.

You won’t have to pay Goods and Services Tax (GST) on the rent you charge, nor will you be able to claim GST credits. However, when it comes time to sell, you may not be entitled to the full main residence exemption from Capital Gains Tax (CGT) – generally you don’t pay this when you sell the home you live in. You can find more details via the ATO website, however, it’s wise to speak to your accountant about the financial implications before proceeding.

Precautions

It’s also important to familiarise yourself with your rights and responsibilities, and those of your boarder. Contact your local tenancy authority for advice. You’ll also need to follow the rules about lodging the bond with the residential tenancy authority in your state or territory.

Having a solid contract or tenancy agreement in place will help protect you, should things go wrong. The agreement should stipulate exactly what’s included (e.g. furniture and parking), when and how rent is due, details about notice required and room inspections, and bill arrangements. Also, consider your insurance needs. We partner with some of Australia’s leading insurance providers, so please ask us for help.

When interviewing candidates, be sure to ask plenty of questions and request references from previous landlords (even if it’s someone you know). Being clear from the start will help you avoid issues down the track. Talk openly about your expectations about things such as:

• privacy
• paying rent
• noise
• cleanliness
• overnight guests
• Lastly, before they move in, fill out a condition report and take photographic evidence.

Becoming a live-in landlord can help you pay off your mortgage and cover living expenses, whilst also allowing you to claim tax deductions in some instances. However, there are important implications to consider, which is why it’s so important to consult your accountant or financial planner first. If you’d like to know more about your finance options for purchasing your home, please speak to us at Element Finance. We can help you find a home loan that suits your specific financial needs and goals – and perhaps make it affordable without Cousin Jimmy’s contributions!