Take control of your budget

January. It’s that time of year when many of us begin to feel remorse – not just about all those Christmas pies we overindulged on but also about our festive spending blowout.

Last Christmas, credit card spending plunged Aussies $24.3 billion deeper into debt. It’s a worry, particularly for those in the market for a property purchase in 2022.

If your finances have taken a pounding of late, here are some tips to help get you back on track.

Reassess your budget

It’s a new year, time for a new budget.

Create your 2022 budget, taking note of all income and outgoings.

Be sure to include fixed expenses (like rent and electricity), debt (credit card, loans, etc.) and unexpected expenses (car repairs and pet bills).

Hint: Moneysmart’s budget template is a great free tool to help you work out exactly where your money is going.

Shop around

While you are reassessing your finances, it’s a good idea to shop around to ensure you’re getting the best deal.

Get in touch with everyone from your insurance company to your electricity provider and ask whether they can offer you a discount or a better deal. You’d be surprised at what they’ll come back with if they think you may go elsewhere.

If you already have a mortgage, ask your finance broker to compare the market for you. It may be a good time to consider refinancing to a more competitive rate.

Get serious about saving

Consider what your ‘need to haves’ versus your ‘nice to haves’ are.

You might need to ditch your gym membership or reassess your social habits to supercharge your savings goals.

Remember, when you apply for a home loan, particularly as a first home buyer, lenders will want to see an established history of regular savings before they lend you the big dollars.

Set your savings goal

Set yourself a savings target so that you can factor it into your budget and work towards it.

If you’re planning a property purchase, we can run you through how much money you’ll need for your deposit. In general, we suggest aiming for 20% of the purchase price to avoid paying Lenders’ Mortgage Insurance.

Knock over your debts

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 a home loan could improve your borrowing capacity and give you the best chance of being approved.

Hint: If you have several credit cards, consider cancelling them even if the balance is zero. Lenders consider the credit limit on your cards and count this as potential debt when approving loan applications.

Consolidate if it’s right for you

If you have lots of different types of debt, it may be worth consolidating.

With this option, you essentially roll your debts into one, usually using a loan with a lower interest rate. In some instances, you can roll them into your home loan if you have one, or a personal loan that has a lower interest rate overall.

There are pros and cons of debt consolidation, so it’s important to speak to your financial advisor or accountant about whether this is the right option for you.

Like to know more?

If you’re planning on applying for a home loan in 2022, speak to us about how to get your finances in order. We can give you a heads up about what lenders will be looking for and how to optimise your chances of being approved for a loan.

We’re here to help, so get in touch today!

Welcome to our January newsletter

Hello 2022! We hope you enjoyed some quality time with family and friends over the Christmas and New Year break.

In December, we saw auction activity go gangbusters, with capital city auction volumes through the roof. With more stock available, it may leave you in a better position to negotiate on price.

If you’re planning a property purchase, talk to us about pre-approval and we’ll help get the ball rolling.

Interest rate news

The Reserve Bank of Australia (RBA) will hold its next meeting to decide on the cash rate on February 2.

Last year, the cash rate remained on hold at the historically low level of 0.10 per cent.

Based on recent commentary by RBA Governor Philip Lowe, it would appear unlikely the RBA will change the cash rate anytime soon.

Having said that, we’ve seen some lenders increase fixed-rate loans recently, so it’s a good idea to shop around. If you’d like to explore your mortgage options in 2022, get in touch.

Home value movements

Last year, the Australian housing market experienced an unprecedented year of growth.

CoreLogic’s Head of Research Eliza Owen said the estimated value of Australia’s residential real estate increased from $7.2 trillion at the end of November 2020 to a record high of $9.4 trillion in just 12 months.

In addition, sales volumes soared to the highest level in almost 18 years, while property values nationally increased 22.2% in the 12 months to November – the highest increase since 1989.  “Strong housing market performance over the year was driven by multiple factors, including low interest rates, fiscal and institutional support for households, high household savings and relatively low levels of advertised stock,” she said.

“Rates of housing turnover had also been relatively low for some years before these factors boosted housing demand, which may also explain the elevated volume of sales in the past 12 months, which at November was 32.6% above the decade annual average.”

What’s ahead in 2022

The final months of 2021 saw housing values move through the fastest rate of annual growth since the late 1980s at a time when wages and household incomes hardly moved. Considering the housing affordability situation, and with a federal election to be held this year, home ownership and housing affordability are likely to be hot political topics across the major parties.

COVID remains the biggest wildcard, especially given surging case numbers related to the Omicron strain. A return to restrictive policies, especially those that prohibit movements or home inspections, would result in a new phase of temporary disruption to transaction activity. This may prolong expansive monetary policy and low interest rates, which helped sustain housing demand through 2021.

Make your first step – we can help!

Ready to make your dream of buying a home or investment property a reality? Please don’t hesitate to give us a call and we can support you along every step of your home buying journey. Get pre-approved on your finance and start the property hunt today!

4 signs it may be time to refinance

The pandemic has drastically changed the way we live and work. For some, there may have been big changes to their financial situation.

You may have changed jobs or been promoted? Perhaps you’ve saved up some extra funds during lockdown, or you may be struggling to make ends meet?

Maybe your goals have shifted – you’re no longer saving to travel to Bhutan, but instead want to renovate your home to be that perfect retreat during lockdown.

Here are a few reasons why now is a good time to review your home loan.

  1. You’ve been with the same lender foreverInterest rates are at historic lows and competition between lenders is fierce. There are plenty of red-hot deals out there, so it’s important to shop around.If you’ve been with the same lender for years, chances are you’re probably missing out on a better deal elsewhere. If your interest rate isn’t close to 2%, call me today.
  2. You have no idea what a redraw facility or offset account isMost home loans nowadays come with money-saving features like offset accounts and redraw facilities. These tools allow you to save in interest and potentially pay off your loan sooner.How they workOffset AccountsWith this set-up, a transaction account is linked to your mortgage. Any money deposited is offset against your loan balance, reducing your interest payable.Example: you owe the bank $400,000 and you have $50,000 in the offset account. Interest will only be calculated on $350,000.Redraw facilityWith this loan feature, you can make extra repayments on your mortgage and potentially save on interest. On top of that, you can still access the funds in future should you need them.
  3. Your personal circumstances have changedWhat’s changed since you took out your mortgage? Are you earning more money? Have your living expenses changed? Do you have different financial goals?All of these elements need to be taken into consideration when choosing the right home loan for your needs.
  4. You’re drowning in debt paymentsIf you’re struggling to cover multiple debt repayments, debt consolidation could be the answer. This strategy involves refinancing your mortgage and using some of your equity to pay off your debt.

The benefits are:

  • Home loan interest rates are lower than other types of credit
  • You’ll only have one repayment to meet
  • You can spread the repayments out, so that they’re more affordable
  • You may be able to make additional repayments and knock off your debt sooner.

While debt consolidation is not right for everyone (in some instances, you may end up paying more in interest over the course of the loan), it’s at least worth investigating.

Like to know more?

We’d be happy to review your home loan and check whether you’re getting the most competitive loan for your current financial situation and goals. Get in touch today!

A step-by-step guide to property investing

Property investment can offer all sorts of benefits – additional income, capital growth, tax deductions, and the list goes on.

If you’re considering an investment property purchase, we’ve put together a simple guide to help you get started. Let’s dive in.

Step 1: Formulate an investment strategy

The wonderful thing about property investing is that it opens your world up to different ways to potentially build your wealth.Some common strategies include:

  • Buying in an area with strong capital growth potential, then holding on to the property as the value increases.
  • Negatively gearing the property. This is when the expenses associated with owning the property are greater than the rental return and you can claim losses against your tax liability.
  • Positively gearing the property, whereby the rental return covers the expenses and provides a surplus cashflow.
  • Renovating to potentially add value to a property and increase the rental income, then holding on to it.
  • Flipping properties, which involves giving a fixer upper a facelift with a view to re-selling for a profit.
  • Buying off the plan.
  • Subdivision.

Each strategy comes with its own pros and cons, so it’s a good idea to speak to your financial advisor or accountant about which is right for you.

Step 2: Set your budget

Before you start browsing realestate.com.au, it’s important to understand what you can afford to buy. Some of the costs you’ll need to consider when setting your budget include: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 3: Do your research

The key to buying the right investment property is to spend plenty of time researching.

You’ll want to consider the capital growth potential (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, with good access to amenities nearby.

Speak to us about our complimentary property market reports, which are loaded with useful information.

Step 4: Get a building and pest inspection done

Trust us when we say building and pest inspections are worth the money. The last thing you want is to discover your investment has a structural issue or termites once it’s all yours.

Step 5: Finalise your finance

Luckily this part is relatively straight forward– we’ll line up with the right investment loan for your specific needs.

Ready to get started?

We’re here to provide expert guidance about investment loans and structuring your finance. Talk to us today!

Welcome to our October Newsletter

It’s an exciting time for property owners, with Australian housing values continuing to rise in many markets.

The rate of growth has slowed down of late, but is still well above average.

Lockdowns continue to affect sales and listing volumes, but once restrictions are eased, activity is expected to recover quickly, as was the case in Melbourne this time last year.

Interest rate news

At its October meeting, the Reserve Bank of Australia (RBA) left the cash rate on hold at the historically low level of 0.10 per cent.

The RBA’s decision came as no surprise. RBA Governor Philip Lowe recently indicated 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 prices were continuing to rise, although turnover in some markets had declined following the virus outbreak. He said housing credit growth had picked up due to stronger demand for credit by both owner-occupiers and investors.

Home value movements

There are signs that freshly listed housing stock is starting to lift as the spring selling season begins to heat up, according to CoreLogic research director Tim Lawless.

“Every Australian capital city has seen a lift in the number of new real estate listings over recent weeks, with some of the largest listing increases recorded in those capitals navigating lockdown. Despite this, the new listings trends remain below the five-year average in every capital apart from Adelaide, Perth and Darwin,” Lawless said.

“Nationally, new listings bottomed out over the four weeks ending September 5th with just 31,731 new listings added to the market, the lowest volume since the seasonal low in January this year. While new listings have since lifted by 9.8%, the number of new listings is currently -21.6% lower than the recent high in March and -3.9% below the five-year average for this time of year.”

Interestingly, capital city houses are continuing to record a stronger growth rate than units, but the gap is narrowing. In the first quarter of 2021, house values in capital cities were rising about 1.1 percentage points faster than units each month, but by August the average performance gap decreased to 0.7 percentage points.

Meanwhile, Australia saw the highest number of annual property sales since 2004 over the year ending August 2021.

Mortgage competition remains fierce amongst lenders, with plenty of great deals available. Speak to us to find out more!

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.