23 Sep 2019
Spring has arrived and we are supercharged for a bumper season in the property world. Dwelling values have been creeping up in many markets and auction clearance rates have been higher recently too. Interest rate reductions and changed lending rules have fuelled increased buyer activity, though stock volumes remain low. Overall, the housing recovery looks set to continue.
Interest rate news
At its September meeting, the Reserve Bank of Australia (RBA) decided to leave the official cash rate on hold at 1% pa. The move follows rate cuts in June and July.
While this month’s decision was widely anticipated, economists say there could be more cuts by the end of the year, potentially starting in October. Recently we’ve seen some lenders slash fixed interest rates on both owner-occupier and investor loans.
Given rates are on the move, now is the time to review your finance. It may even be worth considering fixing your home loan – speak to us about your options!
Home value movements
Property prices are continuing to rise, up 1.03% across the combined 5 capital cities in August. Prices in Sydney and Melbourne continue to trend higher. Sydney recorded a month-on-month change of 1.57%, while Melbourne’s property values grew by 1.40%. In Canberra, prices increased by 0.79%, while in Hobart they rose by 0.51%. Brisbane saw modest growth (0.2%), while Perth and Adelaide experienced falls of 0.51% and 0.24% respectively.
In recent weeks, we’ve seen auction clearance rates soar in many markets. In fact, auctions across Australia’s capital cities reached a two-year high in August.
Property market activity
Ready for a spring property purchase?
If you’re considering buying this spring, speak to us about organising your finance. Given that stock volumes are low, there’s bound to be strong competition amongst buyers, but having pre-approval in place may give you a competitive edge. Get in touch today so we can get it sorted!
04 Sep 2019
Do you know what happened after the Reserve Bank cut the cash rate in June? Tens of thousands of Aussies took the Treasurer’s advice to “shop around and get the best possible deal”. Mortgage brokers around the country have recorded spikes in their home loan, investment loan and refinance borrower enquiries following the announcement.
The moral of the story? Now is the time to review your home loan. Here are four signs you may be overdue for a check-up.
You’ve been with the same lender forever
Interest rates are at historic lows and competition between lenders is high. That means there are plenty of red-hot deals out there, particularly given the recent cash rate cuts.
If you’ve been with the same lender for years, chances are you’re probably missing out on a better deal elsewhere.
You have no idea what a redraw facility or offset account is
Most home loans nowadays come with money-saving features like offset accounts and redraw facilities. These tools allow you to save in interest and potentially pay off your loan sooner.
How they work
With this set up, a transaction account is linked to your mortgage. Any money deposited is offset against your loan balance, reducing your interest payable. Example: you owe the bank $400,000 and you have $50,000 in the offset account. Interest will only be calculated on $350,000.
With this loan feature, you can make extra repayments on your mortgage and save on interest. Best of all, you can still access the funds in future should you need them.
Your personal circumstances have changed
What’s changed since you took out your mortgage? Are you earning more money? Have your living expenses changed? Do you have different financial goals?
All of these elements need to be taken into consideration when choosing the right home loan for your needs.
You’re drowning in debt payments
If you’re struggling to cover multiple debt repayments, debt consolidation could be the answer. This strategy involves refinancing your mortgage and using some of your equity to pay off the other debt.
The benefits are:
- Home loan interest rates are lower than other types of credit
- You’ll only have one repayment to meet
- You can spread the repayments out, so that they’re more affordable
- You may be able to make additional repayments and knock off your debt sooner.
While debt consolidation is not right for everyone (in some instances, you may end up paying more in interest over the course of the loan), it’s at least worth investigating.
Like to know more?
If the alarm bells are ringing, we can review your home loan and outline whether it’s still right for you. You may be better off with another loan that ties in with your current financial situation and goals. Please reach out – you have nothing to lose and everything to gain.
The busy Spring property season is just around the corner and you know what that means? Whether you’re planning to buy or sell, NOW is the time to start getting organised. Here’s how.
Tips if you’re planning to BUY this Spring:
Get your finance sorted pronto
There’s no point starting the property hunt until you know how much you can borrow. Talk to us and we’ll explain your borrowing power.
If you haven’t already done so, it’s also a good idea to get pre-approved for finance now, so that you don’t miss out on your dream home once you find it. For most lenders, pre-approvals last 3-6 months.
Do your research
Whether you’re a first home buyer or you’ve been around the block, it’s important to do your homework.
- Narrow down the suburbs you’re interested in and research the market value of your desired property type
- Check government websites for projects that may influence the capital growth potential
- Consider the zoning and whether upcoming developments could affect supply and demand
- Check out recent comparable sales on websites like realestate.com.au
- Get to know local real estate agents now, so that they keep you in the loop about new listings during Spring
- Ask us for a free suburb report with all the key info you’ll need.
Attend several auctions before you actually bid
Bidding at auction can be extremely daunting, particularly with the knowledge that there’s no cooling off period. You’ll want to feel confident about the process before going in guns blazing.
Over the coming weeks, make time to attend several auctions to get a feel for how they unfold. Even if you’ve bought at auction before, it’s a good idea to suss out the market in advance.
Tips if you’re planning to SELL this Spring:
That’s right, it’s time to channel your inner Marie Kondo (she’s a tidying expert, if you haven’t heard of her). You may be thinking, ‘it’s only August, I’ll have time for that later,’ but it’s important not to underestimate how long the decluttering process can take!
Decluttering can make a world of difference to prospective buyers. It allows them to see the space more clearly and imagine themselves living in your home. In simple terms, space sells.
With that in mind, ditch what you don’t need and consider putting the majority of your belongings into storage.
Time to give your home a thorough clean. You’ll want your property looking its absolute best for when the inspections begin.
If there are any repairs or maintenance jobs you’ve been putting off over the Winter, now is the time to address them.
Want to drive up the sales price? Why not renovate this month and add value to your property?
Most experts recommend the top priorities when renovating for profit should be the kitchen and bathroom(s). If you need finance for these kinds of big-ticket renovations, we can help.
However, even making small cosmetic enhancements, like applying a fresh coat of paint or putting up new blinds, could result in a heftier price tag.
Sort out your finance for your next property purchase
Already found your next home? You may need bridging finance to tide you over until settlement is finalised on your old property.
So, what’s on your to-do list this month? Remember, whether you’re buying or selling this Spring, now is the time to start planning and preparing. Speak to us for all your finance needs today!
Rentvesting has become increasingly popular in recent times. Last year, research from the Property Investment Professionals of Australia (PIPA) found that one third of first-time buyers opted to become ‘rentvestors’, rather than homeowners.
Here’s what you need to know before deciding whether rentvesting is right for you. But first, let’s look at an age-old question.
To rent or buy?
If you’re wondering whether it’s cheaper to rent or buy, the answer depends on where you buy and your individual financial situation.
Domain Group compared weekly mortgage repayments on a median sale price to median rent for both houses and units in the year to April. The research found that in many capital city suburbs, rents were higher than mortgages (find out where it’s cheaper to buy a property than rent).
But what if you didn’t have to choose between renting and buying. What if you could have the best of both worlds?
What is rentvesting
Rentvesting is where you rent where you want to live and buy where you can afford. Simple.
A leg up on the property ladder
If, like most first-time buyers, you can’t afford your dream home straight away, rentvesting gives you options. It allows you to get started in the property market with a smaller deposit and work towards buying the home you want, or to build your investment portfolio.
Want to live in a trendy neighbourhood that’s out of your price range? With rentvesting, you can. Live the lifestyle you want, and invest elsewhere.
Renting gives you increased flexibility to move around if your circumstances change.
What’s really great about owning an investment property are the tax perks. Most of the property expenses can be offset against your income.
If you decide to buy an investment property rather than a home, you won’t be entitled to the First Home Owner Grant and stamp duty exemptions or concessions. These are for first time owner-occupiers.
Being a renter and a landlord at the same time means you’ll have multiple expenses to cover. In addition to paying your rent, you’ll have costs including council rates, body corporate (if applicable), property management fees, maintenance, other running costs, and of course, your mortgage repayments. Keep in mind that if your investment is tenanted, the rental return may cover some, if not all, of these expenses.
You won’t own your home
Renting means you won’t be able to make the property your own. You also won’t have control over how long you can stay. Leases usually tend to be 6 or 12 months, so you may end up having to move regularly.
Capital Gains Tax
If your investment goes up in value, you may be subject to Capital Gains Tax when you decide to sell.
Steps for purchasing your first investment property
Step 1: Talk to us about your borrowing power and get pre-approval on your finance
Step 2: Formulate your investment strategy (it’s a good idea to talk to a financial planner or accountant)
Step 3: Create a purchasing budget, factoring in all the costs associated with owning an investment property
Step 4: Do your research (for things like capital growth potential and rental yield)
Step 5: Once you find a property, organise building and pest inspections
Step 6: Get us to finalise your investment loan.
Like to know more?
If you think rentvesting is right for you, we can help you explore your finance options. We’ll hook you up with a competitive investment loan that’s right for your needs. Please get in touch.
You may be surprised to discover that how much you spend on day-to-day living can considerably reduce the amount you are eligible to borrow, even if you are a high-income earner. So, if you’re planning to buy a home, it may be time to cut back on some of life’s little luxuries and set yourself a strict weekly budget. Here’s why.
Why do living expenses matter?
Under the National Consumer Credit Protection Act (NCCP), mortgage brokers and lenders are required to meet ‘responsible lending’ guidelines. These guidelines are designed to ensure a borrower can afford to make the repayments on their loan without suffering ‘substantial hardship’.
That means by law, a mortgage broker or lender must ensure that you have plenty of money left over from your income to repay your loan after you have covered your regular financial commitments. So, we must perform a thorough living expense and income assessment to determine your true financial position before you can apply for a loan.
What are living expenses?
A living expense is anything you spend your money on. It could be a $500 monthly payment for your personal trainer, the $5 coffee you buy every morning on the way to work and everything else in between.
According to a survey by UBank in 2018, 86% of Australians don’t know how much money they spend every month on their living expenses. If you don’t track your purchases, it’s very easy to spend more than you earn without even realising that it’s happening – particularly if you buy everything on your credit card.
Tips for controlling your expenses
The MoneySmart Budget Planner is a great way to see where your money is going. It’s available free from the ASIC MoneySmart website here.
The MoneySmart TrackMySpend app is another handy tool for budgeting and working out where your money is going. It helps you record your weekly household budget, nominate spending limits for different categories of expenses, separate your ‘needs’ from your ‘wants’, and kickstart your savings goals.
How do we perform a living expense assessment?
As your mortgage broker, we will provide you with a Needs Analysis Questionnaire to help you figure out your living expenses. It divides them into simple categories, so it’s easy to see that you’ve remembered to include absolutely everything. These categories include:
Frequently asked questions about living expenses
Is rent a living expense? You don’t need to include your rental expenses as part of your living expense assessment if you’re buying a home you intend to occupy.
How about debts? Any debts you have will be included in the liabilities section of your living expense assessment and loan application.
How do we check all of this? We are obliged to ask to see your transaction account and credit card statements, so we can check your spending corresponds to your declared living expenses. We must also ask for proof of income – like copies of pay slips for example.
Cut back on your expenses to increase borrowing power
Whether you’re considering purchasing your first or next home, it’s important to have a solid understanding of your living expenses. Remember, a lender will only give you a loan for an amount that you can afford to repay – cutting back your everyday spending could help to increase this amount and improve your borrowing power.
We will be happy to run through your living expenses and help you find ways to budget and save to increase your borrowing power if you need help. We’ll also prepare your loan application to maximise your chances of getting your loan approved the first time.