19 Jun 2019
Winter is here and we can expect our property markets to slow down considerably over the next few months. However, May was a much busier month than expected in many property markets. As a result, home value declines have slowed down, with Melbourne and Sydney showing the smallest month-on-month falls in over a year.
Interest rate news
At its June meeting, the Reserve Bank of Australia (RBA) decided to make a long-awaited cut to the official cash rate, reducing it to 1.25% – the lowest in Australian history. This was the first rate move the RBA has made since August 2016 and it was widely predicted by economists and market analysts. At least one, but possibly two, further cuts to the official cash rate are expected before the end of the year, which would be great news for homeowners and those looking to get a leg up the property ladder while homes are more affordable.
During May, many banks reduced interest rates in anticipation of today’s RBA move. Additionally, the cost of funding has fallen considerably for lenders in the past few months, which has made them more generous about reducing home loan interest rates for both homeowners and new borrowers. There are some very competitive rates available now, particularly on fixed rate loans, so call us if you’d like us to check your interest rate.
Home value movements
During May, falls in home values slowed considerably compared to recent months. Tim Lawless, Head of Research at CoreLogic, predicts that the softening in home values is likely to continue at this reduced rate until the end of 2019.
However, a renewal of confidence in the property market following the Federal Election seems likely, now that Labour’s plans to change negative gearing and capital gains tax for property investors are no longer on the table. The Australian Prudential Regulatory Authority (APRA), has also relaxed its policies on loan serviceability assessments and interest-only lending, which should help to make borrowing easier for property investors and those who may have found it harder to qualify for a home loan over the past year.
Property market activity
After the Federal Election, Autumn property market activity increased considerably, with a larger number of homes sold via private sales in both Melbourne and Sydney than usual. The table below shows property market activity as at June 2, 2019.
If you’re in the market for a bargain, see us about a pre-approval!
Even though winter has arrived, there are still many homes up for sale and it may be a great opportunity for you to negotiate the price on the home you want. It pays to enter negotiations armed with a pre-approval on your home loan, so if you’re in the market to buy a home please call us today to find out more. It’s also the busy time of year for car sales and business equipment purchases, so just let us know if you need help with finance and we’ll help you get it organised quickly before the end of the financial year.
Mike & the Element Finance Team
05 Jun 2019
Whether you’re upsizing, downsizing or just moving to a home in a new location, no doubt things have changed since buying your last home. This article explains the finance options available when you’re moving on to your next home. We also highlight a few other key considerations to think about.
How do you get from one home to the next?
The ideal way to do it, financially speaking, is to sell your existing home first. That way you’ll know exactly how much money you can spend on your next home and how much you’ll need to borrow. Moving on to your next home this way will also put you in a good position with potential lenders for your next home loan.
But life isn’t always that straightforward. If you can’t sell your existing home first for some reason, you might want to consider a loan product known as a ‘bridging loan’, which gives you access to funds to buy your new home before you’ve sold your current one.
What is a bridging loan?
There are generally two types of bridging loans: closed bridging loans and open bridging loans. Closed bridging loansare available to borrowers who have already locked in the sale of their existing property and know when it will settle. These are usually short-term arrangements. Open bridging loans are used when the existing property has not yet been sold and these can be arranged for up to 6 months.
How do bridging loans work?
A bridging loan requires the lender to work out the size of the total loan by adding the value of your new home to your existing mortgage, then subtracting the likely sale price of your existing home. This requires a valuation by the bank which will cost approximately $200 for each property.
Typically, you pay interest-only on the entire loan amount until the first property is sold and the principal is repaid in full. Bridging loans are sometimes structured so you only make principal and interest repayments on the loan until settlement, capitalising the interest due on the rest of the loan. Either way, once you have sold your existing property, the loan reverts to an ordinary home loan.
The pros of bridging loans
- You won’t miss out on your ideal property.
- If you want to build your next home, you can stay in your existing property until the new one is completed.
- You won’t have to worry about matching up settlement and move-in dates.
- You may achieve a better price for your existing property without the pressure of having to sell immediately, particularly in the current selling environment.
- You can avoid the costs of renting while you’re between homes and paying the movers twice.
The cons of bridging finance
- During the bridging period, you’ll have two loans that are accruing interest.
- Both properties will have to be valued by the lender – which could be costly.
- The longer it takes to sell your existing home, the more interest you’ll pay, as the interest is compounded monthly.
- If you don’t sell your current home within the bridging period, you could be required to pay a higher interest rate to continue. .
- You’ll need at least 20% of the total value of both properties (either in cash or equity in your existing property) to qualify for a bridging loan.
Alternative finance options
If a bridging loan isn’t right for you, there may be other options available to get you over the line with your next property purchase – so talk with us first. For example, if you have enough equity in your existing home, you may be eligible to use a line of credit.
Do you really need to sell your existing home? With many of our property markets experiencing a ‘correction’ at present, it could be a good idea to keep your current property as an investment and sell it on when the market recovers. Talk to us about your financial circumstances and we’ll see if you have the borrowing power to make it happen.
The ideal way to find out which loan you need and what you can afford to do with your existing home is to talk to us first. We offer tailored finance solutions, based on your individual circumstances. So, if you’re thinking about moving on to your next home, please get in touch with us today!
An investment property is a business, so managing it properly is very important to your financial success. One of the first decisions you’ll need to make is whether to manage the investment property yourself, or to employ the services of a property manager.
If you’re thinking of managing your investment property yourself, it may not be as straightforward as you think, so here are 6 tips to help you discover what’s involved.
Tip 1: Familiarise yourself with the law
Each state and territory have legislation in place to protect both tenants and landlords. As a DIY landlord, it’s important to familiarise yourself with these laws and have a solid grasp of the rights and responsibilities of both you and your tenant – even if you do decide to employ a property manager. You can find useful information on landlord responsibilities for each state and territory here.
Tip 2: Prepare the necessary documentation
Before you start looking for tenants, it’s a good idea to organise all the documentation required up front. These essential documents will include:
The lease: usually a fixed-term for six or 12 months. Once the initial lease expires, you can use a periodic lease, which is a month-by-month agreement that kicks in once the fixed term lease expires.
The bond: an upfront payment by the tenant (often one month’s rent) to the landlord as security for rent owed or damage. This is usually paid in advance and held by the governing authority in your state. Find out more here.
The condition report: a document which notes the condition of the property prior to the tenant taking up residence. This is an important document, as it can be used as evidence if the tenant damages the property. You complete a condition report, and the tenant is also given the opportunity to submit a condition report once they get the keys. Taking photos is usually a good idea.
Many of these standard agreement forms are available online. For example, in Victoria, standard lease forms and condition report forms can be accessed through the Consumer Affairs Victoria website, and you can generate and lodge a bond form through the Residential Tenancies Bond Authority (available here).
Tip 3: Attract quality tenants
Before you advertise for tenants, you’ll need to investigate the correct rent for your property. Check out websites like www.realestate.com.au, or ask your local real estate agent for advice.
Once you’ve set your rental price, you can go ahead and advertise your property. Be sure to use quality photos (you may like to use a professional photographer). Most renters go through websites like www.domain.com.au and www.realestate.com.au nowadays, so be sure to put your ad online.
Tip 4: Screen and secure tenants
Once you receive applications from prospective tenants, you can begin the screening process. Think about what you’re looking for in a prospective tenant and create a list of relevant questions to ask them. For example: if the body corporate for your investment property limits the number of pets, you’ll need to ensure your tenant does not have too many.
Be sure to request several references, including a reference from their employer, as well as previous landlords. Another tip is to check tenant databases in your state or territory to see if the prospective tenants have been blacklisted by previous landlords or real estate agents. Information about these databases (which are run by private companies) and your obligations as a landlord is available here.
Tip 5: Fill out the documentation, lodge the bond and collect the rent
Once you find a tenant, be sure to follow the paperwork required by your state to the letter. Keep in mind that each state or territory may have different requirements, so make the effort to find out what they may be.
There are landlord software platforms available that can help with everything from rent tracking and expense management to end-of-financial-year tax reports and documentation (here’s an example). You could also use an app like RentRight, for example.
Tip 6: Retain and maintain
Once you’ve secured a quality tenant, it’s in your best interests to keep them for as long as possible. Respond to requests for repairs and maintenance quickly and efficiently.
Organising regular inspections is also important, to keep tabs on how your property is faring. State or territory rules may differ in terms of the frequency of inspections, how you notify the tenant and entry procedures, so check with your local authority. Often inspections are held three months after the move in day and every six to 12 months thereafter. Another tip is to be meticulous about your record keeping and document everything – phone calls, messages, the lot – as this will help protect you should issues arise.
Remember, as your mortgage broker, we’re here to help. In addition to making sure your investment loan is right for you, we can also offer referrals to professionals for your team (it’s always a good idea to get professional legal and tax advice). So, if you’re thinking about becoming a landlord, please give us a call today!
With the end of the financial year fast approaching, now is a great time to purchase a work vehicle or equipment for your business. The Federal Government passed legislation last year to extend and increase the instant asset tax write-off for small businesses. That means if your business is eligible, you could potentially make several purchases up to $30,000 each this financial year, then claim the expenses back on your next tax return – and get the tax-man to help you pay for it!
We’re happy to work with you and/or your accountant to maximise your business cash flow and tax advantages, whatever these may be. We have access to a very wide variety of lenders who offer multiple ways to finance the business items you need.
Here are some popular business equipment finance options to give you a general idea of how we can help.
The great thing about leasing is that you can access the latest equipment and vehicles with no capital outlay. The lender retains ownership of the asset and you lease it back from them at a fixed monthly payment. Once the lease is up, you can choose to pay a ‘residual payment’ and buy the asset, then potentially trade it in and upgrade to a newer version. Another option is to refinance the residual and continue leasing.
- You’ll know what your payments are and can manage your cash flow accordingly.
- You may be able to claim the lease payments as a tax deduction (speak to your accountant).
- There could be other tax benefits, including potentially making advance lease payments for tax or cash flow purposes (again, it’s best to consult your accountant).
- You may be entitled to claim a GST credit for the GST included in each lease payment.
- There’s flexibility to reduce the size of your payments by increasing the residual amount at the end.
- You can keep your assets up-to-date and some equipment leases can potentially include a service contract.
In addition to finance leases, there are also operating lease agreements. This is when you don’t take on the obligation to pay the residual value at the end. The asset is simply handed back to the lender.
Again, a hire purchase allows you to obtain the latest equipment and vehicles for your business, whilst preserving your cash flow. With this finance option, the lender purchases the equipment or vehicles you require, then hires it to your business for a specific period. It’s like a finance lease, but when the final payment is paid, your business immediately owns the asset.
- Won’t tie up your cash
- Generally, doesn’t require additional security
- Depreciation and interest on any lease repayments may be tax deductable (check with your accountant)
- You own it at the end of the hire period.
A chattel mortgage is another type of finance option that works well for businesses. The financier secures the loan using the “chattel”, or the vehicle or equipment you purchase. You take ownership of the asset, and the mortgage is registered with ASIC. Once the loan is paid off, the mortgage is removed, and the vehicle or equipment is officially yours.
- If you’re registered for GST on a cash basis, you may be able to claim the GST in your vehicle’s price up-front through your next Business Activity Statement (BAS), (check with your accountant).
- GST is not payable on your repayments
- You may be able to claim depreciation and the interest charges on your chattel mortgage as a tax deduction (again, consult your accountant)
- Lower interest rates generally apply as finance is secured against the asset
- You may be able to decrease your regular repayments by paying a deposit upfront, trading-in a vehicle, or opting for a balloon payment at the end of your loan term
- You can manage your business cash flow more effectively.
Loans and other finance options
In addition to these popular ways to finance vehicles, machinery and equipment for your business, we can also offer a wide variety of business loans – both secured and unsecured. These can be used for anything from equipment purchases to inventory control and cash flow management.
Whether your business finance needs are straightforward or more complex, we can help you find the right solution. Our business lender panel includes peer-to-peer lenders, private funders and major banks. Best of all, we offer fast turnaround times – we could potentially get your finance approved in as little as 48 hours*.
Remember, EOFY is sale time for vehicles, IT, machinery and equipment – so there may also be bargains to be had. Contact us today and we’ll get the ball rolling on your finance in plenty of time to make your purchases before June 30.
15 May 2019
The busy Autumn selling season is in full swing, with many property bargains available as the housing market correction continues across the country. With the Federal Election looming this weekend, we can expect to see property market activity to slow a little too. Meanwhile, economists predict there may be good news on the horizon for home owners, with the possibility of an RBA rate cut increasing after the Federal Election is over.
Interest rate news
As expected, the Reserve Bank of Australia (RBA) decided to keep the official cash rate at 1.5% during its May meeting. Early in April, many banks cut rates on Fixed Rate Home Loans in anticipation of RBA rate cuts later this year.
During the last week of April, the Australian Dollar went on a surprising slide below US$70c after the US Federal Reserve failed to cut interest rates, despite demands from President Donald Trump. Analysts predict the RBA is likely to cut rates in order to stimulate a continuation of this trend, as a lower Aussie Dollar will be great news for our economy.
Home value movements
During April, the housing market correction started to have a significant impact on homeowners. According to ANZ, almost 5% of households have slipped into negative equity on their home loan. (That’s where you owe more on your home loan than the current market value of your home).
The Housing Institute of Australia has also indicated that several hundred thousand new apartments and units are about to hit the market, which may cause home prices to fall even further.
Nevertheless, analysts are still saying home values should start to recover in 2020, so the current market conditions are only likely to affect homeowners wanting to sell this year. Meanwhile, it’s a great opportunity for those looking to get onto the property ladder – particularly for first home buyers looking for bargains at the lower end of the market.
Property market activity
Despite the housing market correction, the Autumn property market has been very active, with more homes now being sold via private sales than auctions. The table below shows property market activity as at May 6, 2019.
If you’re in the market for a bargain, see us about a pre-approval!
Just a reminder that bank lending criteria have tightened over the past 6 months, so it’s important to see us to check your borrowing power and to get a pre-approval on a home loan if you’re in the market to buy property.
Please call us today to find out more.
Mike & the Element Finance Team