September RBA Cash Rate

Australia’s official cash rate will remain on hold at the historically low level of 0.10 per cent after the Reserve Bank of Australia (RBA) decided it was the best move for the economy. You can check out today’s official statement on the RBA’s website.

The RBA’s decision was widely anticipated. Last month, RBA Governor Philip Lowe said the board would not increase the cash rate until actual inflation was within the 2 to 3 per cent target range – a condition that will not be met before 2024.

Lowe noted that housing markets continued to strengthen, with prices rising in all major markets and strong credit demand from owner-occupiers, plus increased borrowing by investors.

Interest rates are unbelievably competitive at the moment, so now is the time to shop around. Get in touch with us and we will find you a competitive mortgage that ticks all your boxes.

Want to know more about this announcement and what it means for you? Contact us today!

How to make moving simple

Whether you’ve opted for a sea change, a tree change or something in between, moving house and discovering a new neighbourhood is an exhilarating time.

Here’s how to make your packing and moving experience as smooth and seamless as possible, so you can hit the ground running as soon as you arrive in your new dwelling

Declutter!

This is a great opportunity to declutter and get rid of anything that is no longer serving you. Try decluttering by category, not by room. This means dealing with every single one of your books at once, for example, so they don’t creep from room to room, never getting tidied up.

Pack early

Once you’ve decluttered, start packing! Start early and follow the room by room method, categorising and sorting things into labelled boxes (we’ll give you some tips on how to box things up too), so they’re easy to identify, unpack and organise later.

Checklist:

  • Shop around for quotes from removalists and then arrange your move-out and move-in dates; don’t wait until the last minute – and make sure you check their COVID-19 policies!
  • Tackle one small area at a time so you feel less overwhelmed.
  • Pack a bag with all your essentials, so you have your practical, day-to-day items on hand. Don’t leave yourself scrambling for essentials when you are moving in.

Be strategic with your boxes

You’ll thank yourself at the other end if you resist the temptation to throw everything into a box higgledy-piggledy.

Try: 

  • Labelling the boxes clearly on at least three sides – that way you’ll be able to read them no matter how they’re stacked.
  • Packing items you won’t need straight away first, so they’re at the bottom of your boxes.
  • Invest in bubble wrap! And pack fragile items in small boxes.
  • Think about the weight of items as you pack. Mix blankets with books – don’t leave yourself with a big heavy box.

Get to know your new neighbourhood

Don’t get caught out with a bad coffee! Research your new neighbourhood, find the best reviewed coffee shop, and get excited about your new turf.

Start here:

  • If you can, visit and explore your new neighbourhood in person before you move in.
  • If you can’t, check it out via Google Maps or Street View.
  • Make a list of activities, restaurants and cafes you want to try; this type of bucket list will give you direction and purpose once you’re settled in.
  • Check online to see if there are any community Facebook groups to join, and if so, introduce yourself. Do this with your new neighbours as well.
  • Read the local news to get better acquainted with what’s going on in your new community.

We hope these tips help you have a quick and seamless move, so you can spend more time enjoying your new home!

The costs that may surprise you when buying a home

Besides the deposit and monthly mortgage repayments, there are other fees to consider when buying a house. Things like pest and building inspections, borrowing costs, insurance and legal fees all add up.

The average Australian may pay more than $6,000 in unexpected upfront costs on average, according to research from Finder.

When you’re on a budget, every dollar counts. Let’s see what costs you will need to factor in when you buy a house.

Stamp duty

What is it? Stamp duty is a one-off state government tax that’s based on the purchase price of the property.

How much? Varies from state to state, and changes frequently, but it can be well over $10,000. If you are a first homebuyer,  you may be exempt from paying stamp duty or entitled to a rebate or concession. Check out the First Home Owner Grants.

How we can help: We’ll calculate the approximate cost of stamp duty based on your location and property price, and we’ll check to see if you qualify for any government incentive schemes.

Borrowing costs

What is it? Lenders may charge fees to establish a new mortgage and to conduct a property valuation

How much? These differ between lenders and loans, but you should factor in several hundreds of dollars. (Between $200-$700, according to Finder.)

How we can help: With access to multiple lenders, we’ll compare mortgage rates and fees to find the most suitable product for your needs. We’ll help you understand the costs associated with your mortgage, so you can factor these into your budget.

Pest and building inspections

What is it? Before buying any property, you should get a building and pest inspection to assess for structural, electrical or pest problems.

How much? Around $400.

Why do you need it? Gain a better understanding of how much it may cost you for repairs, or if you should avoid this property altogether. We encourage you to get an inspection to avoid nightmares down the road.

Conveyancing

What is it? The legal transfer of property ownership into your name, and registering the property at the Land Titles Office, done by a solicitor or conveyancer.

How much? About $1,000 or more. The fee will vary depending on the complexity of the transaction.

Insurance

What is it? As a stipulation of your mortgage, you’ll need proof of building insurance. This is a recurring cost that you’ll be responsible for as a homeowner.

How much? Varies depending on the provider and property. Shop around for the best price, or bundle contents and auto insurance to save on the total.

How we can help: We partner with some of Australia’s largest Insurers who can help you find the right product for your needs.

Buying a new house is an exciting milestone, and we’re here to help you understand these upfront costs, so you’re not caught off guard. Give us a call to help you budget, discuss mortgage pre-approval and prepare you for your next property purchase.

Is bad credit a total barrier to a home loan?

Your finances can get a bit out of control sometimes, for all sorts of reasons. Illness, divorce, redundancy – sometimes, just getting overwhelmed with things to do and accidentally missing a bill payment. The end result can be that you get put in the bad credit basket. Even if you sort it out and pay the overdue bills or fix up a default on a loan repayment, you can still have a black mark against your name afterwards. So while you may see yourself in the clear after clearing debt, others might not. Understandably, if you’re in that situation it can feel pretty overwhelming. So let’s tackle the ‘bad credit’ issue and help figure out where you stand.

What is bad credit?

‘Bad credit’ is when you’ve ended up with a history of not keeping up with some payments and the result is that you’re not easily able to get approval for any new loans or credit. The reason many lenders will now steer away from you is because they see you as a high risk. The bottom line is that they’re concerned about your ability to make the regular repayments on their loan if you’ve missed regular payments on other loans in the past.

How do you end up with a bad credit record?

There are a fair few things that can leave you with a ‘bad credit’ record. For example:

•   Having unpaid bills or loan payments

•   Going over your credit card limit

•   Having been declared bankrupt in the past

•   A divorce leaving you in debt

•   Registered credit defaults against your name

•   A part 9 or 10 Debt Agreement

•   Having time off work with no pay because you were ill

•   Your credit file having ‘too many’ credit checks run on it by potential lenders.

How can you know if you have a bad credit record?

Most times you wouldn’t really know. It’s not until you apply for a loan that you find out. Then you suddenly find you’ve been labeled ‘non-conforming’ by the lender you had an application with, because you don’t fit their lending rules. It doesn’t matter if the credit issues were large, small, or even accidental, in the lender’s eyes, the fact that you missed payments has made you a candidate that is now too high-risk.

What can you do?

The good news is that there are more lenders than the major banks out there. And some non-bank lenders are pretty human about it all. They understand that circumstances beyond your control can sometimes lead to a missed payment, default or even bankruptcy. They will talk with you one-on-one to learn more about what went on and then look at how they might be able to work towards a solution for you.

So if you’ve had a home loan application turned down because you’ve had credit defaults, it doesn’t mean it’s definitely over. It also doesn’t mean you have to wait to be in the clear before you can apply again. You have options.

There are good non-bank lenders like Pepper Money who may be able to help you. More often than not, they will have some specialist loan features outside a basic or standard variable home loan. Along with taking a more holistic approach, they will usually look at your individual circumstances before making a decision. If you’d like more information on how to get a home loan if you’ve had bad credit talk to us today. We may be able to put you in touch with a lender that can help if the major banks have said ‘no’ to your home loan application.

Disclaimer: Original content source: Pepper Money. It is designed for publication through Accredited Brokers, to provide you with factual information only, and it is not intended to imply any recommendation about any financial product(s) or to constitute tax advice. If you need financial or tax advice you should consult a licensed financial or tax adviser. The information in the article is believed to be reliable at the time of distribution, but neither Pepper nor its accredited brokers warrant its completeness or accuracy. For information about whether a non-bank loan may be suitable for you, call us on 0400 787 613.

Welcome to our August newsletter

Australian housing values continued their upward trajectory in July, rising another 1.6%, despite lockdowns in many parts of the country.

This brings national housing values up a staggering 16.1% over the past year. But some experts say there are signs that the market may be losing some momentum.

Interest rate news

The Reserve Bank of Australia (RBA) has once again held the official cash rate at 0.10 per cent to support the economy’s pandemic recovery and expansion.

RBA Governor Philip Lowe previously said that the bank would not increase the cash rate until actual inflation was within the 2 to 3 per cent target range.

“The Bank’s central scenario for the economy is that this condition will not be met before 2024,” he said.

While a rate hike is likely not in the cards any time soon, Lowe said the “condition for an increase in the cash rate depends upon the data, not the date; it is based on inflation outcomes, not the calendar.”

Home value movements

As mentioned, over the last 12 months, national housing values have increased 16.1%— the fastest pace of annual growth since February 2004, according to CoreLogic’s National Home Value Index. However, the monthly national growth rate has slowed since March from 2.8% vs. 1.6% in July.

Across each of the capital cities, dwelling price appreciation is also trending downwards with Sydney leading the way. Sydney’s monthly capital gain fell from 3.7% in March to 2.0% in July.

“Worsening affordability is likely a key contributing factor in the slowdown [in Sydney], along with the negative impact on consumer sentiment as the city moves through an extended lockdown period,” said CoreLogic’s Research Director Tim Lawless.

What’s the reason for this slowdown in monthly growth rates?

Lawless explained:

  • Dwelling values are rising more in a month than incomes are rising in a year, making housing less affordable to more people.
  • Some of the housing-related fiscal support that had been available during COVID has now ended.

While buyer demand is still high, in part because of record-low interest rates, there’s also a major supply issue with active listings remaining about -26% below the five-year average.

“Prospective buyers are likely to be feeling a sense of urgency due to the level of competition in the market. However, with affordability constraints starting to impact purchasing capacity, it’s possible market activity could reduce through the second half of the year, helping to rebalance the market and take some heat out of the rate of house price growth,” Lawless said.

If you’re in the market, we can help you get your finances, pre-approval and home-buying plan in order, so you can make your move when the timing is right.

Give us a call to chat about your plans.

August RBA Decision

The Reserve Bank of Australia (RBA) has once again held the official cash rate at 0.10 per cent to support the economy’s pandemic recovery and expansion. To view the official RBA statement from today, please visit the Reserve Bank’s website.

This decision was delivered as expected, keeping in line with RBA Governor Philip Lowe’s previous statements in July, when he said that the bank would not increase the cash rate until actual inflation was within the 2 to 3 per cent target range.

“The Bank’s central scenario for the economy is that this condition will not be met before 2024,” he said.

While a rate hike is likely not in the cards any time soon, Lowe did emphasise that the “condition for an increase in the cash rate depends upon the data, not the date; it is based on inflation outcomes, not the calendar.”

With the cash rate on hold, now is the time to take advantage of competitive mortgage rates. If you’re considering buying property soon, get in touch with us now to arrange your pre-approval.

 Want to know more about this announcement and what it means for you? Contact us today!

Your Protection, Insurance To Protect You and Your Assets

Your Protection, Insurance To Protect You and Your Assets

Buying a property is an exciting and busy time in anyone’s life! Like most, insurance usually isn’t front of mind during this period. However, knowing you, your family and your home are protected against unforeseen events is priceless! Maybe you’ve purchased a home recently or would like to review your insurance options. I can help you finalise your insurance needs and understand your options.

There are different types of insurance to consider when you have a mortgage which include:

Income Protection
If you were to become sick or injured, and unable to work and make your home loan repayments, this insurance provides an income safety net.

Mortgage Protection
If you were to die or become seriously ill, this insurance covers the cost of your mortgage.

Building, Home, and Contents
Building or home insurance protects against the cost of rebuilding or repairing your home from things that are outside your control, like fire or natural disasters. Contents insurance provides a level of financial protection against damage, theft or loss of personal possessions – the ‘contents’ of your home.

Contact Xclusive Money today to discuss your requirements and we can help you make an informed decision on the right type of insurance for your needs.

Explainer: Fixed-Rate Loans

With interest rates at an all-time low, and many lender’s fixed rates lower than their variable options, locking in an interest rate on your home loan to guard against possible future fluctuation may be attractive. However, it pays to know the ins and outs of fixed-rate loans before committing to one.

room interior with lamp and vases on table near wall
Fixed Rate Home Loans

When purchasing a property, refinancing or just renegotiating with your current lender, borrowers can generally decide between fixed-interest loans that maintain the same interest rate over a specific period of time, or variable-rate loans that charge interest according to market rate fluctuations.

Fixed-rate loans usually come with a few provisos: borrowers may be restricted to maximum payments during the fixed term and can face hefty break fees for paying off the loan early, selling the property or switching to variable interest during the fixed rate period.

However, locking in the interest rate on your home loan can offer stability.

“For those conscious of a budget and who want to take a medium-to-long term position on a fixed rate, they can protect themselves from the volatility of potential rate movement,” a finance broker says.

Fixed rates are locked in for an amount of time that is prearranged between you and your lender.

“There are some lenders that offer seven-year or 10-year fixed terms, but generally one to five years are the most popular,” the finance broker says. “The three and five-year terms are generally the most popular for customers because a lot can change in that time.”

Further to this, fixed-rate loans can also be pre-approved. This means that you can apply for the fixed-rate loan before you find the property you want to buy.

“When you apply for a fixed rate, you can pay a fixed rate lock-in fee also known as a ‘rate lock’, which will, depending on the lender, give you between 60 and 90 days from the time of application to settle the loan at that fixed rate,” the broker explains.

“It will also depend on the lender as to whether the rate lock will be applied on application or approval,” added the broker. “It is important to be clear on this issue as it has been known to be a common point of error”.

Pre-approval helps you to discern how much money you are likely to have approved on official application. Knowing that your potential lender will offer a fixed-term fixed interest loan gives further peace of mind for those borrowers looking to budget precisely rather than be susceptible to rate fluctuations.

In addition, borrowers should consider the possibility of arranging a ‘split’ loan. This option allows you to split your loan between fixed and variable rates – either 50/50 or at some other ratio. This can allow you to ‘lock in’ a fixed interest rate for up to 5 years on a portion of your loan, while the remainder is on a variable rate which may give you more flexibility when interest rates change and potentially minimise the risks associated with interest rate movements. Also, be aware that at the end of the fixed-rate term, your loan agreement will include information about how the loan will then be managed by the lender, usually to a ‘revert’ variable rate – which may not be the lowest the lender offers.

Lenders Mortgage Insurance (LMI)

While some view LMI as being exclusively beneficial for lenders, we explore the value for first home buyers.

Not to be confused with mortgage protection insurance (which is designed to protect the borrower), LMI is insurance that covers the lender’s risk within a residential mortgage transaction should the loan go into arrears and the borrower is unable to resolve the situation satisfactorily. LMI is a fairly common practice within the industry, particularly for new home buyers who may struggle to save a deposit. It allows an additional fee to be paid by the borrower and usually applies when the loan is more than 80 percent of the purchase property’s price.

The purpose of LMI is to ensure security for the lender in case the borrower fails to make loan repayments. Even though the actual house acts as security, the nature of the property market, like any investment class, means there is a chance that its value could decline, resulting in a financial loss for the lender.

The cost of the premium is dependent on several factors, such as the loan size and property value, and most insurers are flexible when it comes to the method of payment. It can either be a one-off upfront premium payment or that premium could be included in the overall cost of the loan and included in monthly repayments. It is not transferable, which means a new loan may require a new fee depending on how much equity the borrower has.

crop faceless multiethnic interviewer and job seeker going through interview
Lenders Mortgage Insurance (LMI)

What’s in it for me?

While it may appear that it is exclusively favourable to the lender, there is value to borrowers in paying the premium. Opting for LMI means it allows a borrower to independently purchase a property sooner than they otherwise might. LMI is the alternative to using a guarantor or having to save for a bigger deposit, both of which are not feasible options for many first home buyers.

A deposit of at least 20 per cent of the desired loan amount is required for a borrower not to be deemed ‘high-risk’. If you consider that the average price of a home in Sydney is $650,000, that would mean a deposit of around $130,000 is required. The beauty of LMI is that it buys time, which means borrowers with smaller deposits are able to enter the market sooner rather than later. The major benefit of LMI is that it allows the dream of homeownership to become a reality for a lot of first home buyers.

How to compare home loans and features

Which home loan is right for you? How can you tell when there’s so many different lenders, loan types and features to choose from? How can you compare loans properly when you’re not sure what you should be comparing?

Finding the right home loan for your situation is a process that can be confusing, particularly for first timers. In this article, we give you a basic guide for making home loan comparisons and tell you more about the features you may need with your home loan.

Interest rates and comparison rates

Interest rates are one of the factors which determine the cost of your mortgage and how much your repayments will be. Even a small difference in interest rates can make a significant impact on the amount of interest you’ll have to pay over the term of the loan. However, the loan with the lowest interest rate may not necessarily be the cheapest, as there could be additional fees to factor in. This is where the comparison rate comes in.

The comparison rate is an indication of the true cost of a loan, once the interest rate and fees are included. It’s usually expressed as a percentage, which makes it easier for you to compare the real cost of different loan products. When choosing a home loan, it’s important to look at both the comparison rate and the features that come with the loan.

Loan Types

Principal and Interest

This type of home loan requires you to make repayments that cover both the principal (or the amount you borrowed) and the interest at the same time. People buying their own home usually use a principal and interest loan, as you pay down your loan with every repayment until you eventually own the property.

Interest-only

An interest-only loan allows you to only pay the interest you owe on the loan for a fixed period – usually from one-to five years – so the monthly repayment is lower than it would be under a principal and interest loan. At the end of the fixed period, the loan usually reverts to a principal and interest loan, but it is possible to refinance to another interest-only period. People buying an investment property often start off with an interest-only loan because the interest (and therefore the entire repayment) is tax deductible for themHowever, they are not considered ideal if you are buying your own home to live in as you will likely end up paying more in interest over the term of the loan and your repayments don’t pay off the original loan amount.

Variable Home Loan

With a variable rate home loan, the amount of interest you pay may go up or down in response to changes in interest rates. This can be a good thing if interest rates go down, as the interest you pay will be less and your repayments will decrease. Another positive is that you can often make extra repayments on a variable home loan, which may help you to pay off your home loan sooner and save some interest over the term of the loan.

Fixed Home Loan

A fixed rate home loan lets you lock in your interest rate for a period (usually 1 to 5 years). The benefit is that you know exactly how much your repayments will be during that time, which can be beneficial if you’re on a tight budget or a fixed income. You’ll also escape any interest rate rises that may happen during the fixed period.

However, if interest rates fall, you won’t be cracking open the bubbly because your home loan interest rate will stay the same and so will your repayments. There may also be restrictions on making additional repayments with a fixed rate home loan.

Split Home Loan

One option that appeals to some homeowners is to fix the interest rate on a portion of their loan and keep the rest variable. This offers the certainty of knowing what your repayments will be on the fixed part of the loan, while you can make extra repayments and enjoy any interest rate drops on the variable part of the loan. It’s a way to get the best of both worlds!


Loan Features

Offset Account

An offset account is a transaction account that’s attached to your home loan. It can save you money on the interest on your home loan and help you pay off your loan sooner because the money in your transaction account is offset daily against your loan balance, and you only pay interest on the difference. For example, if you owe $300,000 on your home loan and there’s $50,000 in your offset account, you’ll only pay interest on $250,000.

Redraw Facility

A redraw facility allows you to make extra repayments on your home loan and then take out the extra repayments you’ve made later if you need to use the money for a different purpose.


What’s right for you?

The right home loan choice is different for everyone. It all depends on your personal financial circumstances and goals. We’re here to help you decide what is right for you and will make recommendations based on what you tell us about your situation and what you want to achieve. Then we’ll compare the choices from the different lenders and offer you a selection of cost-effective options.

Don’t wait to find out what’s right for you. Contact us today for a chat about your plans.