Objection 1: “I don’t have a big enough deposit”

If you’ve been working hard to save a deposit and feel like it’s never going to be big enough, we have some exciting news for you! Size doesn’t always matter, especially not in this scenario. Being approved for a home loan is not necessarily dependant on how much of a deposit you have, but rather your capacity to repay the mortgage. There are all sorts of options available to aspiring homeowners who don’t have a 20% deposit.

Some lenders still offer home loans for up to 95% of the purchase price. The borrowing criteria can be more stringent than other types of loans, but if you have a clear credit history, stable employment, a solid income, minimal debt and are in a good asset position, you may qualify. Most home loan providers will want to see evidence you’ve saved at least 5% of the purchase price, and you may have to pay Lenders’ Mortgage Insurance with this type of loan – but you’ll have your foot on the property ladder! Speak to us to find out whether this kind of loan could work for you.

Another way to get a foot on the property ladder could be to ask your parents or a family member to be your guarantor. This is when they use the equity in their property as security for your loan. The right time to buy your first home is as soon as you can afford to do so!

Objection 2: “I think the market will downturn”

Whilst the property market does go up and down in cycles, “timing the market” is not as important as “time IN the market”. The sooner you buy a property, the sooner it will be possible for it to start to experience capital growth (which is the term we use to describe how much your property goes up in value whilst you own it).

There is always a possibility that your property will go down in value after you purchase it. However, you need to remember it has only gone down in value ‘on paper’ – you won’t actually lose any money unless you sell it. Market fluctuations are common and it is likely it will have recovered in value by the time you want to sell.

Choosing the right home in the right location can help protect against property market fluctuations and improve your chances of long-term capital growth. When you locate a property you’re interested in buying, we can help you check its capital growth potential with a free property market report – so please ask us.

Objection 3: “I can’t afford a home where I would want to live”

Most people don’t get to buy their dream home the first time around – it’s a goal you can work towards once you get on the property ladder. If you can’t afford to buy your dream home in your preferred location, you could look for something in another location, consider a smaller property that’s more affordable, or opt for a fixer-upper that has potential but just needs a little love. Another option that’s becoming increasingly popular is to rent-vest – rent where you want to live and buy an investment property somewhere else. That way, you can grow your nest egg to enable you to eventually buy the home you want.

There’s no time like the present to chat with us about your plans and finance options. Please get in touch and we’ll explain your borrowing capacity, home loan options and help you get pre-approval on your loan so you can start looking for a property to buy sooner. 

Borrow up to 95% with Lenders’ Mortgage Insurance

Did you know you may not need a 20% deposit to buy a property? Under some circumstances, you may be able to qualify for a loan for 95% of the purchase price. You would have to pay Lenders’ Mortgage Insurance and strict eligibility criteria will apply, but if it allows you to achieve the dream of homeownership sooner, it may be worth it. Talk to us – we’ll explain whether this option could work for you.

Borrow up to 100% with a Guarantor Loan

A guarantor is someone who will provide a guarantee for your home loan, usually a family member (better known as the ‘bank of mum and dad’). This guarantee is usually secured against the equity in their own property. Once you have paid off part of your home loan, or your property has increased in value, you can apply to have the guarantee removed.

Guarantor Loans are a great idea for first home buyers who do not have a full 20% deposit as they save you from having to pay Lenders’ Mortgage Insurance. Some lenders even allow you to consolidate some of your debts – such as credit cards – when you buy your home. Talk to us if you’d like to find out more.

Delay paying your deposit 

If you can’t come up with the cash deposit for your home right now, you may be able to use a deposit guarantee. This is a type of insurance that guarantees the funds will be paid upon settlement. Your money may be tied up in a fixed-term deposit or other assets that you’re waiting to sell. Maybe you’ll be eligible to receive the First Home Owners’ Grant after settlement, but you’d like to use the money from the grant as part of your deposit? A deposit guarantee could help! Talk to us to find out if this strategy could work for you.

Use your super to save your deposit

If you’re trying to save a deposit for your first home, you may be able to use your super to help you save faster. Earlier this year, the Government announced plans to introduce a new scheme that, from July 1, 2018, will allow first home buyers to withdraw any voluntary contributions you make to your super after July 1, 2017. You can potentially withdraw up to $30,000 of voluntary contributions, plus any associated deemed earnings, and put the money towards your deposit. The amount withdrawn will be taxed at marginal rates, less a 30 per cent offset – which means the government will effectively be helping you save your deposit! If you’re a couple, you can both withdraw that $30,000 amount, so it could provide you with a significant deposit for your first home.

But before you start whacking your extra money into your super, be sure to ask your financial planner, accountant, or super provider whether or not you could benefit from this new scheme. As yet, the full terms and conditions of the scheme have not been published, but you can find out more here.

Have someone with experience on your team!

Our final suggestion is to have someone in your corner who knows the game and how to play it. As your mortgage broker, we’ll do everything we can to help you secure finance for your first home. We know all the lender requirements for every loan and can help keep the application process simple, so please get in touch and have a chat with us about your property purchasing plans and financial goals. We’ll also be here to support you after you make your first home purchase – our long term goal is to help you build wealth for your future through property – so rest assured you’ll always be in safe hands with us as your credit and finance partner!

This month, the Reserve Bank of Australia kept the official cash rate unchanged at 1.5%. The RBA’s decision to hold the cash rate was widely anticipated by economists. In September, some of the major banks lowered interest rates on fixed rate loans, so it could be a good time to speak to us to see if this option works for you. Overall, interest rates remain low and there are some very competitive products out there, so call us if you’d like us to check your home loan features and rate!

Property Market News

Dwelling values increased in all capital cities except Sydney and Darwin last month. Hobart led the way, with a month-on-month change in dwelling values of 1.71%. In Melbourne, values rose 0.86%, while in Canberra they were up 0.56%. Brisbane saw increases of 0.28%, and Perth experienced 0.08% growth. Adelaide was slower, with an increase of 0.03%. In Sydney, home values decreased by 0.13% and in Darwin they fell 0.68%.

While auction activity was strong earlier in September, it dropped off during the final week of September (week ending October 1). In Victoria, there were only 137 scheduled auctions, with 89% of properties selling, while in New South Wales, 690 auctions were held and only 67% of properties sold. That’s a big drop in volume compared to the previous week (ending September 24), when both states had a combined 2,672 properties go to auction and clearance rates of 74% for Victoria and 70% for New South Wales. Perhaps everyone was just too busy watching the footy Grand Finals!

In South Australia, 78% of the 45 properties scheduled for auction went under the hammer in the week ending October 1. The ACT held 45 scheduled auctions and achieved a clearance rate of 76%. Western Australia had 17 scheduled auctions (67% clearance rate) and Queensland had 306 scheduled auctions, with a 39% clearance rate. The Northern Territory had 6 scheduled auctions (25% clearance rate), while Tasmania only had one property go to auction, and it sold!

Spring is traditionally the most popular time of year for vendors to sell, and with more competition out there, you may score an attractive deal on the property of your dreams! So please give us a call to talk about your spring property plans, we’re here to help you find you a mortgage that is tailored to suit your financial circumstances and goals, and we’d love to help!

Besides providing a cosy nest of your very own, buying a property can potentially open up a world of wealth building opportunities – for your long term benefit! Whether you’re buying your own home or an investment property, home ownership could be a good move to help you get ahead financially. So get ready to start feathering your nest! Here’s a few reasons why real estate can be used as a powerful wealth generator.

Capital growth potential

Real estate has real potential to increase in value over time – this is called capital growth. That’s because the supply of housing is often insufficient to meet demand, supporting growth in values.

Whether you’re buying your home to live in yourself, or you’re buying a property as an investment to rent out to tenants, capital growth is going to be very beneficial to your financial situation. If the value of your property increases, you could potentially make a nice profit when you sell, particularly if it’s your own home. Alternatively, you could access the capital gains (known as equity) as you go along by refinancing your loan – effectively using the property as a money tree.

Make more investments

Money tree you say! We all know that money doesn’t grow on trees, so how does that work?

If you refinance your home loan you can access your equity, which gives you funds that you can spend how you like. If you’re focused on building wealth, you may wish to use it as a deposit for an investment property. Once some time passes and your equity builds in that property too, you could refinance your loan again and use those funds as a deposit for your next investment, and so on. In this way, your nest egg could potentially keep growing and growing.

This is just a broad outline of how property investment works. We recommend that you talk to a professional financial planner to help you formulate an investment strategy that’s right for you. Just ask us if you’d like a recommendation.

Tax perks

As mortgage brokers, we’re not tax advisors or financial planners. But generally speaking, property investment is a very popular form of investment, mainly because the Australian Taxation Office supports it with tax benefits.

One popular strategy is to ‘negatively gear’ your investment property to reduce your taxable income. Negative gearing is when the expenses associated with owning the property (including interest on the loan borrowed to finance the property) are greater than the income it generates. You can claim any net losses against your taxable income and in this way, reduce the tax you’ll have to pay on the money you earn in your job or by other means – all whilst your property investment makes capital gains. Once again, talk to your accountant and financial planner to be sure that a negative gearing strategy is right for you.

Speak with us about your property plans!

Buying real estate could be a smart move for you financially, whether you’re buying a home to live in or are investing in property to rent out to tenants. We’re here to help you maximise your financial position and obtain a loan that’s suitable for your purposes and goals. Talk to us about how buying a property could benefit you – we’ll help you to determine your borrowing capacity, get pre-approval on your loan and can even help you with insightful property data to assist you with locating and purchasing the right place. Just give us a call and we’ll be happy to chat with you about your plans.