Over the last 18 months, our hot property markets have been driving rapid increases in home values, particularly in larger markets. This has placed established properties beyond the reach of many home buyers and as a result, we have been seeing a corresponding boom in new housing construction across the country.

For the year from March 2014 to March 2015, there were 210,484 new dwelling approvals which is a healthy 11.2% increase over the previous year. And whilst the most recent figures for April this year show a slight decline in apartment approvals, there were 10,130 new house approvals which was an increase of 4.7% over the previous month.

Thinking of building a new home? Talk to us.
From these figures, it’s clear that more and more people are finding it attractive to build a new home rather than compete in today’s hot property market for an established house or apartment.

And why not? Building your own home not only has the potential to save you money, it gives you the opportunity to get the home you’ve always wanted – one that’s tailored to your personal needs and requirements with all the bells and whistles you may not be able to afford in an established home at today’s prices. New homes also help you plan your finances with confidence, with low maintenance costs and no major repair expenses in the foreseeable future.

Obviously there are some drawbacks to building a new home, compared to buying an established property. The construction process takes time and you may have to wait a while before you can move in. Additionally, if you’re building in a new housing estate, it may be some time before features like schools and shopping amenities catch up with the measure of convenience you’re currently enjoying in an established suburb.

Financing a new build is also a bit different to financing for an established home. Instead of a straight forward mortgage, you may wish to consider a Construction Loan product that can help take the hassle out of the building process.

Construction Loans – how do they work?
With a regular mortgage, you pay a deposit and the lender pays the remainder at settlement in a lump sum – it’s fairly simple and straight forward. Construction Loans differ from regular mortgage products as they pay for the project in stages, paying your builder as construction progresses through each stage – slab, roof, lock-up and completion. Additionally, Construction Loans usually last for the period of construction only.

The major benefit to a Construction Loan is that you only draw down on funds as you need them. This can mean big savings on interest as you only pay interest on the money you use at each stage. And once construction has been completed, you can often nominate which home loan product the Construction Loan will revert to, moving forward – ie. A standard variable rate loan or a fixed interest rate loan.

Another thing to take into consideration when building your own home is purchasing the land. If you purchase the land first, you will usually require a regular mortgage for the land portion of the purchase and then apply a Construction Loan to the build only. The loans can be arranged separately, but are usually bundled together, particularly with a house and land package deal you may purchase from a developer.

There are quite a few different Construction Loans on the market and each of them can be structured differently. We’re here to help you obtain the best loan product/s for your individual needs, so before you commence the process of building your own home, it’s wise to spend a little time with us to get the right financing lined up for your needs.

What else do you need to think about?
Just as with a regular home loan, you will require a deposit before you can commence building your dream home. The amount of deposit you need will vary according to the cost of the project and the lender’s requirements, so you should talk to us about how much of a deposit you will need.

Before you commence your build, you should also be very careful to establish exactly what is covered for the price, as there could be other expenses that you need to budget for. We recommend that you also have some contingency funds set by, just in case of unforeseen expenses that may not be covered by your Construction Loan.

Talk to us for more information
Building a new home may be a great idea for you and your family, depending on your personal financial situation and circumstances. If you’d like to find out more, or explore your loan options and establish your budget for a new build, why not give us a call? We’re here to help you discover if building a new home is a viable option for you and to help you get pre-approval on a suitable financing package before you begin. A short chat could help to take a lot of the hassle and uncertainty out of the process, so why not give us a call today?

In a hot property market like we’re experiencing at the moment, it can be difficult to beat the competition at auction. And with auction clearance rates running at around 80% in most capital cities, it’s clear that the majority of bidders miss out on the property they’ve chosen when the auction gavel comes down. So, how can you avoid going to auction? What can you do to secure a property when you don’t have deep enough pockets to outbid the competition on the day?

A good strategy is to try and secure the property by making an offer prior to auction day. Whilst many vendors will prefer to allow the market to dictate the best price for their property, many are open to offers before auction day.  Here are a few tips to help you make an offer that’s accepted and avoid the hassle and inflated prices that auctions can create.

1. Do your homework
Before you make an offer, you need to decide on an offer price. Start by researching recent sale prices of comparable properties in the area. This will give you a starting point for setting a fair offer price on the property you wish to purchase and give you a good idea of the vendor’s price expectations. It will also tell you if the property is in your budget and worth more of your time.

Next, research the property itself by obtaining building and pest inspection reports. If there are any problems with the property you can cite these as reasons why you are offering a bit less.

Another factor that you may need to research is demand for properties of this type in this particular area. Demand sets the price of a property and it may be high for a variety of reasons – schools may be particularly good in the area, the area may be about to undergo attractive infrastructure development projects like better public transport links or a new shopping center and so on. If demand for the property is likely to be high, you may need to make a higher offer to succeed.

If your research does not help you come up with a reliable offer amount, don’t be afraid to ask for professional help. A valuations expert can help you assess what the property is worth in today’s market. If you need a professional valuation, ask us for a referral and we’ll be happy to help.

2. Get to know the real estate agent
Negotiation is a two way street – so it is important to have a good working relationship with the real estate agent who is in charge of negotiations on behalf of the vendor. Make sure they see you as a serious buyer and they will be more respectful of your requirements and negotiations.

Remember that the real estate agent has the knowledge that can help you work out how best to play your hand. Here are some questions you can ask to help you formulate your offer strategy.

• Why is the vendor selling?
• What price is the vendor expecting?
• What are the vendor’s requirements regarding settlement? Do they want a long or short settlement, do they need to extend their stay in the property?
• Is this an investment property or the vendor’s home?
• Have they already bought elsewhere?

The answers to these questions will help you decide how to proceed – or even if you will proceed to make an offer at all.

3. Formulate an offer strategy
Once you are fully informed, you will need to think carefully about how to present your offer. By now, you should have an upper price limit firmly fixed in your mind based on your estimate of the property’s value and your budget. No matter what happens during the negotiations, never go above your upper price limit. It’s easy to be influenced by your emotions and the clever negotiating tactics of the real estate agent, so this is a hard and fast rule you should always stick to.

If you are hunting for a bargain, it may be tempting to make a ridiculously low offer for the property. However, this could be a mistake because the real estate agent could dismiss you as a serious buyer. If you have a legitimate reason for making a low offer, be sure to tell the real estate agent why you are offering a reduced price so that they continue to take you seriously.

If you really want to obtain the property, you will need to make a genuine offer.  A good idea is to offer a bit below your estimate of the value of the property. This will mean your offer is taken seriously and give you some room to negotiate upwards if the vendor does not accept your first offer.

Do whatever you can to make your offer more attractive to the vendor. To do this you could offer to meet the same terms they would receive at auction, offer a larger deposit, meet their settlement terms or offer to extend their stay in the property after sale.

4. Be ready for the negotiation process
The negotiation process will begin once you submit your offer in writing to the real estate agent. Verbal offers are not acceptable – your offer must be in writing and signed by you before they can present it to the vendor.

Once this is done, the vendor will either accept your offer, reject it completely or come back with a counter offer. If they reject your initial offer or come back with a counter offer, then you can raise your offer price – or walk away. The choice is yours.

Sometimes the real estate agent will tell you they have already had a better offer and use it to get you to raise your offer price. Do not allow this commonly used tactic to influence you to offer above the limit you have set for the property. Make sure your subsequent offers are reasonable and fair.

Remember, auctions cost money so it can often be in the vendor’s best interests to avoid going to auction too. Once the vendor accepts your offer, you will be asked to sign a contract agreeing to the purchase and the negotiations are done!

5. Be confident
Negotiating can be a nerve-wracking experience, so it is important that you are confident about the offer you make. Doing your homework will certainly put you in a position to negotiate confidently – or walk away if the situation just isn’t going to beneficial to you.

Be sure of your budget and never exceed it. Putting yourself in a difficult financial situation simply to secure a particular property is not worth the ongoing financial pain. To help yourself negotiate from a confident place, talk to us about your budget and we’ll help you to get pre-approval on your financing to give you more negotiating power.

Remember, we’re here to assist you in any way we can. Come in and talk to us about your plans and we’ll help you to secure your financing ahead of time. It’s a great time to be in the market for a property, so call us today.

With interest rates at record lows and property values experiencing steady growth, property investment is now one of the most popular ways to build wealth for your future and retirement. But getting the financing in place to fund your wealth building plans can be a hurdle. So how can you increase your borrowing power to help you take advantage of current opportunities? In this article we take a look at some of the things that banks and lending organisations take into consideration before approving your investment loan.

1. Minimise your existing debts
One of the first things that lenders look at when assessing you for an investment loan is the level of debt that you are already maintaining. In addition to your existing home loan, they also take into consideration any other debts you may have including personal loans, car loans, student loans, credit cards, store credit financing, outstanding bills and so on.  The more of these you have on the go, the more impact it will have on your credit score with a lender.

By minimising your debts and the number of repayments you have to make, you can help to increase your borrowing capacity when the lender makes an assessment.  If possible, it’s a good idea to pay off as many of these debts as you can before you submit an application for your investment loan. Another strategy might be to roll all of your smaller debts into just one personal loan or a loan with lower interest rate than credit or store cards, for example.

If you have an existing home loan, you might already be happy with the interest rate – so it’s worth finding out if you can roll your debts into your existing home loan to free up your borrowing capacity in the future. Talk to us and we will help you to determine if this is an option and if it will have the desired effect on your capacity to borrow for an investment property.

2. Minimise your outgoing expenses
Lenders also take a look at your expenses and use these to make an assessment of your capacity to repay a loan. You may think that this won’t be an issue with an investment property because your tenants will be paying rent to help cover the mortgage expenses, but this is not the case. Lenders take into consideration the worst case scenario – what will happen if your investment property remains vacant for long periods of time? How will you make your loan repayments then?

Take a look at your regular outgoing expenses and do everything you can to minimise them. Do you really need that expensive gym membership? Could you make do without that second car? Could you cut back on your pay TV subscriptions? Most of us are regularly paying for luxury items we don’t really need, so be ruthless with your budgeting strategies.

3. Reduce your excess credit limits
Another thing the lenders take into consideration before approving your investment loan is your capacity to get into more debt. That means that your credit cards could be reducing your borrowing capacity, even if you have a zero balance.

For example, if you have one credit card with a $20,000 limit and two more with $10,000 limits, this will have a considerable impact on the amount of money you can borrow – even if you owe nothing on those cards. In some cases, a lender could take these credit card limits to mean that you have a potential debt of $40,000 against your name. It might not seem fair, but they will often calculate what you would have to repay if you actually used up those limits and add that to your outgoings.

In order to increase your borrowing capacity, it is therefore recommended to cancel the extra credit card and loan facilities that you don’t really need. You’ll also save money on annual fees and this could help to minimise your outgoing expenses, as mentioned earlier.

4. Keep your financial records up to date
One of the most common reasons why property investors find their borrowing capacity is limited is because they don’t have up-to-date financial information to prove their income and financial position to the lender.  Your tax return is the best proof of your financial position and earning capacity that you can provide to a lender, so it is very important to keep them on file.

In many cases, lenders only ask for three or four payslips or bank statements as your proof of income, but this may not provide an accurate view of the bigger picture. If you are self-employed, or have a low base salary but earn commissions or bonuses for example, a few payslips or statements alone will not accurately convey what you actually earn and this may reduce your borrowing capacity or make you ineligible for the best interest rate deals.

You may also have additional income from existing investment properties, stocks and shares, or even a border in your home. To be sure the lender can make an accurate assessment of your income and earning capacity, you need to be able to provide plenty of documentation about these other sources of income as well as your regular job.

5. Access the equity in your existing property to increase your deposit
If you already own a home or some investment properties, accessing the equity can help you secure finance for another property purchase. Your equity is the difference between what the house is worth on today’s market, and how much you owe against it.

Put simply, your property’s equity will increase both as you pay off your mortgage and as the property’s value grows. For example, if your $500,000 property increases in value by 10% over the two years you own it, that’s an extra $50,000 in equity – and you can also add in any reduction you have made to the mortgage from your repayments.

Depending on your financial circumstances, it may be possible to refinance your mortgage to access that money. This will help to increase your deposit amount for your investment property and also help to increase your borrowing capacity. Just ask us and we’ll help you determine if this is the case.

In order to access the equity in your existing property, you will first need to obtain an accurate valuation from a reputable valuations expert. We can help you with this so don’t hesitate to ask us for assistance! The lender will also obtain a proper valuation, so this is an important step when you are considering accessing your equity.

You might also want to consider ways to add to the equity in your existing property by making improvements or renovations. This can be a fast way to increase your borrowing capacity so you can get into your next investment sooner.

Don’t wait to get started with your property investment plans!
If you’re thinking about making a property investment, why not come and talk to us about strategies to increase your borrowing power before you start the buying process? We’re here to support you in your ambition to use property to responsibly build wealth for your future and retirement, so give us a call today.