July 2021 RBA Decision

As expected, the Reserve Bank of Australia (RBA) has held the official cash rate at 0.10 per cent, retaining a record low streak. To view the official RBA statement from today, please visit the Reserve Bank’s website.

This decision was what most experts were predicting, in line with the RBA’s forecast that it would likely hold the cash rate until at least 2024 to allow the labour market to tighten enough to generate wage growth.

The RBA said at its June meeting that it would not increase the cash rate until actual inflation was sustainably within the 2 to 3 per cent target range.

With record low interest rates, rising prices across major markets and strong demand from owner-occupiers, the competition is fierce in the Australian property market. So if you’re considering buying soon, get in touch with us now to arrange your pre-approval, so you can act fast and negotiate with confidence when you find the right property.

July Property Market Snapshot

If you’d like to know more about this announcement and what it means for you, talk yo us today!

A homeowner’s guide to refinancing

With a home loan it’s easy to just ‘set and forget’. But it’s sensible to review your home loan every two to three years or so. We’re living in a world of rapid change, where interest rates can go up and down, new lenders emerge, and more competitive products become available so keeping the same home loan for 30 years could cost you more money than you need to spend!

In this article, we provide the process to refinancing your home loan, breaking it down into simple layman’s terms. But before we get into that, let us clear up a few common questions about refinancing.

WHY should you consider refinancing?

Generally speaking, there are four main reasons to consider refinancing.

  1. Your loan may be less competitive, and you could potentially get a lower interest rate.
  2. Different home loan features and benefits could work better for you.
  3. Your financial situation may have changed.
  4. You want to access some of the equity you’ve built up in your current home.

WHEN should you consider refinancing?

We’re currently experiencing a low interest rate period, so there are many competitive home loan products available. Generally speaking, it’s a good idea to review your home loan every two to three years.

WHO should you use to refinance?

You should always talk to a mortgage broker because our opinion is not biased towards any particular lender or product. (Unlike a bank which will push whatever loans they have to sell at the time.) And we won’t suggest that you refinance if it isn’t the right move for you.

WHAT is the process to refinance?

We’ve explained the when, who and what of refinancing, but what’s the actual process involved? Here’s a simple step-by-step guide.

Step 1: Speak to us

Before we begin exploring your loan options, it’s important for us to have a sound understanding of where you’re at financially and what you’d like to achieve. We’ll start by reviewing your current home loan and compare it with others in the market. We’ll be here to help you decide if it’s the right time to refinance your home loan and what features will work best for you.

Step 2: Choose your mortgage and apply

You may opt to stay with your current lender by negotiating for a better rate or changing to an alternative product; or refinance by switching to another lender offering a better rate or loan features to suit your current circumstances. We’re here to help you find the right home loan to fit your personal goals and objectives. Then we’ll submit your application.

Step 3: Get your valuation

Your new home loan provider will require a valuation on your property as part of the application process. Keep in mind that their valuation might be more conservative than the market value you estimate.

Step 4: Get approved

Within a few days of submitting your application, it’s likely your inbox will light up with that delightful email confirming you’ve been approved for your new home loan. Yay!

Step 5: Your old mortgage will be closed

Your broker will arrange for you to complete a ‘discharge authority’ form. Your current lender will then provide a payout figure. Your new lender will fund your loan to pay out your current loan provider. If you’re refinancing to consolidate other debts, for example, credit cards or personal loans, these will be finalised with the proceeds of your new loan at the same time.

Step 6: You start afresh!

Once you have your new home loan in place, you will begin making repayments. If you need any help managing your new home loan, we are always here to lend a hand.

We hope you’ll find this guide to refinancing handy, and we would love to help you decide whether refinancing is the right step for you. Whether you are looking to refinance for a better interest rate, to access equity, consolidate debt or for a property investment to build wealth for your future, we can help you to achieve your goals. Please get in touch today!

Get your budget under control

Getting your budget under control and your finances in order is essential to anyone looking to apply for a home loan, but it’s particularly important for first home buyers about to take the first step on the property ladder. Now the end of financial year has arrived and you’re getting all your paperwork together for your tax return, why not take stock of your financial situation and plan your budget for the year ahead at the same time? Here’s a few tips to get financially fit for a home loan application in the new financial year.

Reassess your budget and get serious about your savings

When you apply for a home loan, particularly as a first home buyer, it is important to have a thorough understanding of your financial situation and good savings habits. Lenders will want to see an established history of regular savings before they will give you their best rate on a home loan and for this reason, you should take a realistic look at your spending habits and create yourself a budget to ensure your savings will grow at a steady rate.

Work out how much deposit you’ll need and set yourself a savings target

If you set yourself a savings target, you may find it much easier to stick to your budget. To set your target, first you’ll need to work out how much you need for your deposit. The amount of deposit you will need will depend on the cost of the property you want to buy, but if you have an idea of the kind of property you want to purchase you’ll be able to set a goal. It’s recommended that you have a deposit of at least 5% of the purchase price, however if you can possibly save 20% of the purchase price you’ll avoid paying Lenders Mortgage Insurance.

Make an accurate assessment of any debts and ongoing expenses

Lenders assess your creditworthiness on the amount of money you already owe, your ability to repay your debts and your capacity to take on more debt. Paying down any credit card debts or personal loans prior to applying for your home loan will improve your borrowing capacity and give you the best chance of loan approval when you apply.

Even if you don’t have any debt on your credit cards, lenders take into consideration the credit limit on your credit cards and count this as potential debt. So if you have several credit cards, it may be a good idea to cancel some of them now if you are planning on applying for a home loan in the next financial year.

If you have a lot of debts, think about consolidating them

If you take stock of your debts and realise you won’t be able to pay them all off anytime soon, it’s a good idea to look at ways to reduce your interest liability. Credit cards, store cards, short-term personal loans and cash advances all carry high interest rates and this can make them quite difficult to pay down. Getting your finances in order may mean it’s time to consolidate your debts.

Consolidating your debts means rolling all your debts into one, usually using a loan that has a lower interest rate. If you have quite a few expensive debts it may be possible to roll these into your home loan if you have one, or perhaps a personal loan that carries a lower interest rate overall. This may save you a great deal of money on interest payments, which is money you could use to pay off your debts faster. It could also allow you to spread your repayments over time, making them more affordable. If you want to be eligible to apply for a home loan in the next financial year, consolidating your debts sooner rather than later may be a good idea.

The end of financial year is a great time to get your finances in order and you never know, you may get a tax refund that could really give a boost to your savings efforts for a deposit for your home! Remember, we’re here to help you get your finances under control so you can save your deposit and get into your new home sooner. If you’re planning on applying for a home loan in the next financial year, don’t hesitate to give us a call today.

Five ways to fund a Renovation

Considering transforming your home from ‘banal’ to ‘brilliant’, but lack the funds to support your makeover? Never fear, we’ve rounded up five home renovation finance options that could help turn your dream into reality.

1 Equity Release / Top Up Home Loan

This is probably the most common way people borrow money when they want to renovate. It involves borrowing against the current value of your home, before any value-adding renovations and in most cases allows you to obtain the funds upfront. You won’t be able to borrow the full value of your home but, without mortgage insurance, you can usually borrow up to 80 per cent of its value if you own it outright. One potential problem is that the cost of your renovations may actually be higher than the equity you have available. If you run out of funds mid-construction, and if the property is then not in sound, lock up condition, you may have an issue obtaining extra funds down the track.

2 Construction Loan

If you’re planning to completely transform your home and undergo a major makeover, this may be a good option as you can spread the cost over a long period of time. You could even possibly borrow up to 90 per cent of the end value of your home and take advantage of mortgage rates which tend to be lower than credit card and personal loan rates. With a construction loan, the lender will assess the value of your home after the renovation based on the building plans and you can typically borrow against that value.  You won’t be given the full loan amount upfront, but usually in staggered amounts over a period of time – this is called ‘progress payments’ and is linked to a fixed price building contract which will be from your builder.

3 Line of Credit

When you apply, you can establish a revolving credit line that you can access whenever you want to up to your approved limit. You only pay interest on the funds you use and, as you pay off your balance, you can re-borrow the unused funds without reapplying if that becomes necessary.  However, care must be taken not to get in over your head in terms of serviceability. Make sure you can make repayments on the line of credit that will reduce the principle because your minimum repayment only pays the interest, it will not reduce the loan. Rates on this product are typically much higher than a construction loan or top up loan. This product feature is great if managed well, but can also be a trap if not seriously considered as your limit will never change.

4 Personal Loan

If you’re only making minor renovations – personal loans are usually capped at around $30,000 – this might be suitable, but interest rates on personal loans are higher than on home equity loans and payments need to be made usually over a maximum of seven years.

5 Credit Cards

This option should only be considered if you want to undertake really small renovation projects. The interest rates are usually much higher than on mortgages, but for a very small project, that extra interest might actually total less than loan establishment fees.

One thing you must do

There are very few exceptions to the rule that your renovations should add more value to your home than they will cost to carry out. Think about how the money you spend on a renovation will increase the value of your property. For example, consider making changes that would appeal to the majority of potential buyers to help you sell your house faster and at a higher price.

Welcome to our June Newsletter

As the winter property season and end of financial year (EOFY) are upon us, the Australian property market would usually slow down during the cooler months, but experts say with current buyer demand and low interest rates, we are in for a stronger-than-usual winter season.

Interest rate news

The Reserve Bank of Australia (RBA) decided to keep the official cash rate unchanged at 0.10 per cent at its meeting on 1 June. This decision is in line with the RBA’s position on leaving rates unchanged until 2024.

RBA Governor Dr Phillip Lowe stated that the board decided to maintain current policy settings. This included the yield on the 3-year Australian Government bond, targets of 10 basis points for the cash rate, parameters of the government bond purchase program, and the rate of zero per cent on Exchange Settlement Balances.

Mr Lowe said “The board is committed to maintaining highly supportive monetary conditions to support a return to full employment in Australia and inflation consistent with the target. It will not increase the cash rate until actual inflation is sustainably within the 2.0 to 3.0 per cent target range.”

The date for final drawings under the Term Funding Facility is 30 June 2021. The facility is supporting low borrowing costs until 2024 through low-cost fixed rate funding for three years. “Given that financial markets in Australia are operating well, the Board is not considering a further extension of this facility,” stated Mr Lowe.

At the July meeting, the board will consider whether to retain the April 2024 bond as the target bond for the 3-year yield target or to shift to the next maturity, the November 2024 bond. The board will also consider future bond purchases following the second $100 billion of purchases under the government bond purchase program in September.

Home value movements

CoreLogic’s national Home Value Index saw prices increase by 2.2% in May. This rise was a stronger result compared with April (1.8%), but weaker than the 32-year high recorded in March when prices grew by 2.8%.

The combined capital city index rose 2.3% in May compared with a 2.0% rise across the combined regional areas. This is the second time in three months growth conditions in capital city home values continue to outpace regional markets.

Hobart (3.22 per cent), Sydney (2.97per cent) and Darwin (2.66 per cent) were the strongest performing markets where dwelling values increased by more than 2.5 per cent in May. The dwelling values for the rest of the capital cities also increased: Brisbane (2.00 per cent), Adelaide (1.87 per cent), Canberra (1.75 per cent), Melbourne (1.75 per cent), and Perth (1.10 per cent).

Along with record low mortgage rates and increase in sales, CoreLogic recorded the number of new listings added to the housing market as 15% above the 5-year average.

CoreLogic’s research director, Tim Lawless, explains what is driving the housing market to remain in place. “The combination of improving economic conditions and low interest rates is continuing to support consumer confidence which, in turn has created persistently strong demand for housing. At the same time, advertised supply remains well below average. This imbalance between demand and supply is continuing to create urgency amongst buyers, contributing to the upwards pressure on housing prices.” Mr. Lawless stated that, “This rapid rate of absorption is keeping advertised inventory levels extremely low, despite the rise in new listings.”

Given the low interest rates, the competition for the limited supply of Australian homes is heating up. If you’re considering buying soon, it is important to get in touch with us to arrange a pre-approval for a home loan. A pre-approval will help you move quickly when you find the right property and the ability to negotiate with confidence. Speak to us about your plans today.

Additional sources
https://rba.gov.au/media-releases/2021/mr-21-09.html
https://www.corelogic.com.au/news/australias-housing-boom-rolls-national-home-values-lifting-another-22-may
https://www.realestate.com.au/news/australias-property-boom-set-to-continue-in-exceptional-winter-season/
https://www.theadviser.com.au/breaking-news/41628-rba-announces-june-rate-decision

Government Incentives

The federal government has made an announcement that could help you achieve your home ownership goals sooner than you thought.

Here’s some useful information about the latest updates.

First Home Loan Deposit Scheme expansion and increased price caps
10,000 additional places will be available under the FHLDS from 1 July 2021. The federal government have also increased the maximum purchase price by an additional $150,000 in some states and territories. Click here to see the updated property price caps.

New Home Guarantee construction extension
The New Home Guarantee has been expanded with an additional 10,000 places available and will now have a construction commencement timeframe of 12 months.

Eligible first home buyers can use the New Home Guarantee in conjunction with other government programs like the First Home Super Saver SchemeHomeBuilder grant or state and territory First Home Owner Grants and stamp duty concessions. Find out more here.
As your broker, I can help you find a loan to suit your financial situation and talk you through government initiatives that you might be eligible for.  

Get in touch to find out more.

June 2021 RBA Cash Rate

The Reserve Bank of Australia (RBA) decided to keep the official cash rate unchanged at 0.10 per cent at its meeting today. To view the official RBA statement, please visit the Reserve Bank’s website.

At its previous meeting, the RBA confirmed that the final date for drawings under the Term Funding Facility is 30 June 2021. “Given that financial markets in Australia are operating well, the Board is not considering a further extension of this facility,” RBA governor Philip Lowe said.

The RBA has upgraded its inflation and economic growth forecast but insists that the record low interest rates will remain for another three years to generate wages growth. The Board will consider whether to extend its government bond purchases at their July meeting. Mr Lowe said the Board is prepared to undertake further bond purchases to assist with progress towards the employment and inflation goals.

Given the low interest rates, the competition for the limited supply of Australian homes is heating up. If you’re considering buying soon, it is important to get in touch with us to arrange a pre-approval for a home loan. A pre-approval will help you move quickly when you find the right property and the ability to negotiate with confidence. Speak to us about your plans today.

 If you’d like to know more about this announcement and what it means for you, talk to us today!

Discharged from bankruptcy and wanting a home loan? There is hope.

Discharged from bankruptcy and wanting a home loan?  There is hope

Recovering from bankruptcy can be a long and difficult process. And even when you’ve been discharged or completed a debt agreement, some lenders will automatically decline your application for a home loan because of the history.

However, there is good news. Some lenders look at things a little bit differently to others. Well-established non-bank lenders like Pepper Money believe a past bankruptcy shouldn’t mean that you’re not able to achieve your future goal of owning your own home. So they designed home loan products specifically to help.

If you’ve been officially discharged from bankruptcy or entered a debt agreement, there are some solutions available today that might suit you. In some cases, a lender may even be able to help with finalising a debt agreement for you – as part of the debt consolidation feature in their relevant home loan option.

Whatever your case looks like, you can begin by talking to us. The more we learn, the better we can help. We’d like to know what you need, understand how the credit issues came about and what’s happened since that means you’re now in a position to consider taking on a mortgage. Talk to us today about how we may be able to put you in touch with a lender that can help if the major banks say ‘no’ to your loan application.

How to pay off your home loan faster

Your home is probably the biggest purchase you will make in your life- it can feel like a 30-year long marathon. There are some simple ways to cut years off your mortgage, which we share in this article so you could become mortgage-fee sooner than planned.

Small Extra Repayments

One of the most obvious ways to pay off your home loan quicker is to make extra repayments. Depositing lump sums, such as a tax return or work bonus, will always be beneficial, however it doesn’t always take large amounts or windfalls to make a substantial difference – planning for regular, small cash injections can have a great impact over the life of a loan.

Here is an example.
Kate has just been approved for a $500,000 loan with an interest rate of 3.50% p.a. over 30 years. If she paid an extra $50 per fortnight, she would save $27,182 of interest over the life of the loan, which in turn would shave 2.3 years off the loan period!

Switch you payment intervals

If you find that you don’t have the discipline to make extra repayments, then simply switching your payment structure can also help save years off your mortgage, as well as simplifying your finances if you are paid fortnightly.

For example, there are 12 months in a year but 13 four-week cycles, by switching your payment intervals from monthly to fortnightly, you are essentially paying off an extra month per year.

Make sure you have the right type of loan

Ensuring your loan allows extra repayments without penalty will help you to make the most of bonuses received or funnel small extra payments to reduce the loan principle more quickly, saving on interest immediately. An offset account will use your savings or living expenses to reduce your principle, while still allowing you to access these funds from a transaction account.

For example, say you have an investment property that is rented, and the mortgage repayments are set up under an interest-only arrangement. If you made the principle and interest repayment equivalent by putting surplus rental income into an offset account, any money sitting in the account will help reduce the loan period. This is because interest is calculated daily but charged monthly.

Although you may have to pay extra fees for the offset or redraw account, these may well be lower than the interest saved. Talking to our professional team of mortgage brokers is the easiest way to work out whether this option is financially sound.

Let us help you explore your options

Paying off your home loan faster isn’t necessarily difficult; however it does require financial discipline and expertise in ensuring the right loan features are in place. There may be other options we haven’t covered here, so please reach out and we’ll help you put a plan in place.

Disclaimer: Please note that the examples mentioned are indicative only, and outcomes will depend on your financial situation. It’s best to discuss this with your mortgage broker.

What do you know about your credit report?

Ever had someone ask you for $50 and promise to pay you back within a week? And if they didn’t, would you be inclined to lend them $50 again? Well, that’s how a lender looks at you, the borrower.

It’s why most lenders take your credit report into consideration when assessing your suitability for a loan. Your credit report paints a picture of your life as a responsible bill payer and borrower. Under the Comprehensive Credit Reporting (CCR) rule introduced in 2019, your credit report is more important than ever.

What is a credit report and why is it important?

Credit bureaus compile credit reports based on feedback about your credit behaviour from banks and other credit providers. Your credit report contains a credit rating between zero and 1200, which is an overall measure of your creditworthiness. If you’re applying for a loan, credit card, electricity or mobile phone contract, chances are a credit check will be undertaken.

In 2019, under the introduction of CCR, it’s compulsory for banks to share both negative and positive details about your credit behaviour with other lenders.

How to access your credit report

Simply request a copy from a credit reporting body like EquifaxDun and BradstreetExperian or the Tasmanian Collection Service. You can access your report for free once a year and it should arrive within 10 days.

Tips for keeping your credit report healthy

  1. Regularly review your credit report

Make a habit of checking your credit report at least once a year. Carefully comb through the details and check for any errors. Make sure your personal identification information and financial details are accurate. Be sure to check that any negative information such as bankruptcies have been removed from your credit report after the required amount of time.

Hot tipSome credit bureaus offer subscription services that alert you to changes in your credit report. This could come in handy for protecting yourself against identity theft.

2. Report any errors

If you notice something’s amiss, it’s important to address the issue immediately. Contact the credit provider (bank, utility company or telco, for example) and ask that the matter be investigated. Also, file a dispute with the credit reporting agency about the error. If you are told the discrepancy will be rectified, be sure to follow up to make sure it’s been fixed.

3. Pay your bills on time

If you have a track record of late payments, credit providers may think you are under financial stress. Remember to pay your bills and credit cards by the due date. Setting up autopay or direct debit is a good way to stay on track. By paying bills on time, you’ll position yourself as a responsible borrower who is reliable when it comes to money matters.

4. Go easy on credit applications

Applying for multiple credit cards, loans or other forms of credit in a short timeframe can signal a red flag for future credit providers. Only apply for credit when it’s necessary, you’ve chosen your preferred provider and you are confident of being approved.

Like to know more?

If you’re interested to learn more about your credit report and how it may affect you as a borrower, please reach out. We’re here to help and would be happy to answer any questions.