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Last month, we continued to see considerable property market activity, despite the arrival of the cold weather. Auction clearance rates continue to fall, indicating that conditions are currently favouring buyers. Interest rates remain low and there are plenty of opportunities out there for savvy property buyers and investors. If you’re looking to buy or refinance your existing home loan, call us now.

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.

Loan refinancing is a strategy used by property investors to access funds – usually to grow or improve the value of their property portfolio. The right time to do it largely depends on your strategy, plans and equity. In this article, we highlight some of the key considerations for this strategy and how savvy investors often use the funds. If you’re considering investing in property or taking the next step in your investment journey, remember your mortgage broker is a great source of information and support, so please don’t hesitate to give Element Finance a call.

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!

Last year, the Federal Government introduced down-sizing incentives aimed at the baby-boomer set. Add this to rising capital city property prices that give just about everyone an incentive to cash-in on their big home, and it’s not surprising that more and more people are looking for smaller, less expensive places to live.

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.

Are you thinking about buying a home and wondering how you’ll cover the mortgage repayments and still have a life? Remember Cousin Jimmy mentioning he was looking for a new pad? Sure, he’s a little ‘unusual’ with his back-scratcher collection and all, but if living with his bizarre hand gadgets means you’ll score some help with the rent, then why not?

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!

When done right, investing in property can help you to build long-term wealth, and who doesn’t like the idea of an additional income stream? (Imagine what you could do with that!) The really great thing about property investing is that just about anyone can understand the principals. If you’re thinking about building wealth for your future this way, here’s a step-by-step guide on how to go about it. We’ve kept it super simple and you’re bound to have questions, so please give us a call to find out how we can help you make it work!

Step 1: Talk to us about your borrowing power

The first step involves a friendly chat with us about the finance set-up. We’ll run through your personal financial circumstances and help you determine your borrowing power – which is the amount a lender may be willing to lend you. Your borrowing power may be very different for an investment property than for a home to live in yourself.

Like all property purchases, you’ll need a deposit. If you already own your home and it has appreciated in value, or you’ve paid down your mortgage somewhat, you may be able to refinance to access equity to fund it. We can explain how this works and the kind of loan that will best suit your situation. We can also organise pre-approval so that you can set a purchasing budget and be confident a lender will come through with the finance when the time comes to start investing.

Step 2: Formulate an investment strategy

Ask yourself what your ultimate objective is – do you want to build a big investment portfolio of 10 properties or more and make a business out of it? Or are you more interested in concentrating on paying off your own home, perhaps using an investment or two on the side to generate some money to do it?

We recommend seeking advice from your financial planner or professional tax advisor when formulating your investment strategy. Maximising tax advantages is a big part of property investing and knowing what they might be in your personal situation is key. Ask us for a referral if you don’t already have a professional on board.

Step 3: Set your budget

There are many costs to factor into your budget when buying an investment property. The financial side of a successful property investment is a balance between costs, income, tax deductions and how they affect your overall cash-flow. The costs to factor in may include the following:

Initial costs

    • Deposit
    • Loan establishment fees
    • Lenders’ mortgage insurance (if you have less than 20% deposit)
    • Stamp duty (calculators are available here)
    • Conveyancing and legal fees
    • Building and pest inspection reports
    • Quantity Surveying fees – to create your Depreciation Schedule for the fixtures in the property, so you can maximise your tax deductions (after purchase).

Ongoing costs

  • Rates/government taxes
  • Insurance
  • Mortgage repayments
  • Body corporate fees
  • Utilities not paid by the tenant
  • Property management fees
  • Repairs and maintenance costs.

Step 4: Do your research 

The key to buying the right investment property is to spend plenty of time researching. Property investors usually focus on two key financial returns – capital growth potential (which is the growth in the property’s value) and rental yield (the income the property will generate from the tenants).

These factors are driven by supply and demand, so try to find a property that will be in high demand by tenants and future potential buyers. Ask us for assistance with the right property market data to inform your property searches.

Once you’re set on a property, be sure to organise building and pest inspections. You’ll want to know that the property is structurally sound and free of unwanted guests before making an offer or going to auction.

Step 5: Finalise your finance

The final step involves us helping you secure an investment loan that suits your financial circumstances and goals. Ask us to get you pre-approval on a loan for the specific property you want to buy before you make an offer or buy it auction, so you can have a realistic ceiling price to work with during the negotiations.

This step is the most important one of all if you’re buying at auction – you will be required to put your deposit down on the spot and it is not refundable if the lender does not agree the property is worth the price you paid and won’t lend the amount you need to complete the purchase. If you are buying under offer, we recommend you include a ‘subject to finance’ clause in the sales contract, to cover this contingency.

If you’re thinking about joining the thousands of Australians building wealth for the future through property investment, don’t wait to give Element Finance a call. Our mortgage brokers are here to give you expert guidance about investment loans and structuring your finance. Talk to us today!


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