10 Sep 2017
WELCOME TO OUR SEPTEMBER NEWSLETTER
Spring has sprung and isn’t it a glorious time of year? It’s traditionally the time for change and new beginnings! If you’ve been considering a property purchase, now could be the time to get out there, enjoy the sunshine and start your property hunt.
Perhaps you’ve been considering refinancing to a fresh new mortgage that’s tailored specifically to your needs? Or perhaps you’re thinking of renovating your existing home? If so, we’d love to help you out. As the property market heats up, we are seeing plenty of competitive lender deals, so be sure to speak to us about your loan options before you start on your spring property plans!
Interest Rate News
This month, the Reserve Bank of Australia decided to keep the official cash rate on hold at 1.5%. Lenders continue to cut rates for owner-occupiers on principal and interest home loans, and at the same time, try to ensure the proportion of their loan books for investment purposes and interest-only loans meet APRA’s lending guidelines. Despite these restrictions, some lenders have cut interest rates for investors on principal and interest loans in recent weeks. Overall, interest rates remain low and there are competitive deals for both home owners and property investors.
Property Market News
Last month, dwelling values increased by 0.11% overall across the combined capital cities. Sydney’s growth was flat during August, while Hobart led the way for growth in dwelling values, at 0.61%. Hobart was also the strongest capital city performer for the past 12 months (13.61% growth). Canberra experienced 0.57% growth in August, while Melbourne remained resilient, with property values increasing 0.54%. Brisbane and the Gold Coast saw an increase of 0.18% for the month, and in Adelaide property values edged 0.03% higher. Perth’s dwelling values slipped -0.83%, while in Darwin they fell -2.17%.
Auction volumes remained high in Victoria and New South Wales, with 1987 combined scheduled auctions in the week ending September 3. Both had relatively strong clearance rates of 73% and 70% respectively. Across the other auction markets, clearance rates were varied. Tasmania had 10 scheduled auctions, with an impressive 100% clearance rate. The ACT had a 68% clearance rate for 69 scheduled auctions, while South Australia’s clearance rate was 62% for 80 scheduled auctions. In Western Australia, 28 properties went to auction, but only 58% sold, while in Queensland there were 292 scheduled auctions, with a clearance rate of 36%.
If you have property plans this spring, talk to us about a competitive home loan, investment loan, or renovation loan that works to your advantage. We’ll compare the market and line you up with a mortgage that ties in with your personal financial circumstances and goals. Please get in touch today – we’d love to help!
Could the equity in your house buy you a new car?
How does it work?
If the equity in your home has grown significantly because you have been paying off your loan for a while, have made extra repayments, or the value of your home has increased, then you may be in a position to refinance your home loan to access your equity. This could give you enough cash to go down to a dealership and buy that new car. Having cash-in-hand may even give you a little extra bargaining power!
Whilst refinancing may mean that your home loan repayments increase somewhat, the increase could potentially be less than the cost of a car loan repayment and your mortgage repayment combined. Car loans and personal loans tend to carry a much higher interest rate than your mortgage. Depending on where you get your car or personal loan, you could pay anything from 6.5% p.a. up to 14.5% p.a. in interest. (Always talk to us before taking out any kind of loan to be sure you’re getting a suitable loan for your needs at a competitive rate.)
Talk to us and we’ll help you to assess your financial position on your loan to see if it is the right move for you.
What are the drawbacks?
It’s important to be aware that if you take some equity out of your home loan, your home loan repayments are likely to increase. You probably won’t be paying as much as you would if you had a separate car loan and a home loan as well, but if you take the full 30-year term to pay it off, it may cost you more in interest over the life of the loan. So if you decide to access your equity to buy a car, we recommend that you make additional repayments and pay it back as quickly as you can. This will help you to maximize the benefit of the lower interest rate you get by using your mortgage rather than a car or personal loan.
Talk to us first
Before you make any large purchase that may require a loan, it’s important to talk to us about your finance options so we can help you find a solution that’s right for you. We’ll help you decide whether refinancing and using your equity to buy what you need is a viable option, or if another type of finance could be more suitable. And above all, remember that car dealerships only offer one type of finance, whereas we offer a variety of finance options that can be tailored to suit your personal financial circumstances and goals – so always talk to us first. We’re here to help you achieve your financial goals, so call us today.
3 ways to start growing your nest-egg using real estate.
Besides providing a cosy nest of your very own, buying a property can potentially open up a world of wealth building opportunities – for your long term benefit! Whether you’re buying your own home or an investment property, home ownership could be a good move to help you get ahead financially. So get ready to start feathering your nest! Here’s a few reasons why real estate can be used as a powerful wealth generator.
Capital growth potential
Real estate has real potential to increase in value over time – this is called capital growth. That’s because the supply of housing is often insufficient to meet demand, supporting growth in values.
Whether you’re buying your home to live in yourself, or you’re buying a property as an investment to rent out to tenants, capital growth is going to be very beneficial to your financial situation. If the value of your property increases, you could potentially make a nice profit when you sell, particularly if it’s your own home. Alternatively, you could access the capital gains (known as equity) as you go along by refinancing your loan – effectively using the property as a money tree.
Make more investments
Money tree you say! We all know that money doesn’t grow on trees, so how does that work?
If you refinance your home loan you can access your equity, which gives you funds that you can spend how you like. If you’re focused on building wealth, you may wish to use it as a deposit for an investment property. Once some time passes and your equity builds in that property too, you could refinance your loan again and use those funds as a deposit for your next investment, and so on. In this way, your nest egg could potentially keep growing and growing.
This is just a broad outline of how property investment works. We recommend that you talk to a professional financial planner to help you formulate an investment strategy that’s right for you. Just ask us if you’d like a recommendation.
As mortgage brokers, we’re not tax advisors or financial planners. But generally speaking, property investment is a very popular form of investment, mainly because the Australian Taxation Office supports it with tax benefits.
One popular strategy is to ‘negatively gear’ your investment property to reduce your taxable income. Negative gearing is when the expenses associated with owning the property (including interest on the loan borrowed to finance the property) are greater than the income it generates. You can claim any net losses against your taxable income and in this way, reduce the tax you’ll have to pay on the money you earn in your job or by other means – all whilst your property investment makes capital gains. Once again, talk to your accountant and financial planner to be sure that a negative gearing strategy is right for you.
Speak with us about your property plans!
Buying real estate could be a smart move for you financially, whether you’re buying a home to live in or are investing in property to rent out to tenants. We’re here to help you maximise your financial position and obtain a loan that’s suitable for your purposes and goals. Talk to us about how buying a property could benefit you – we’ll help you to determine your borrowing capacity, get pre-approval on your loan and can even help you with insightful property data to assist you with locating and purchasing the right place. Just give us a call and we’ll be happy to chat with you about your plans.
Investment property refinance made easy!
Talk to us and we’ll help you to decide! Despite recent tightening around investor lending, there are still some very competitive interest rates available from a variety of lenders. In this article, we cover some of the common questions we get from our property investor customers – and if you do decide you’re ready to refinance, you can rely on us to make it easy!
Why should I refinance my investment property?
There are generally two main reasons why you may want to refinance your investment property. These are to access your equity, or to change to a different loan.
If you’d like to expand your investment portfolio, refinancing to access your equity could be a good move. You could potentially use your equity as a deposit to buy another property, or to take advantage of some other kind of investment opportunity – talk to your financial planner to see what strategy is right for you.
Accessing your equity to renovate could also be a good move. It could help you add value to your investment property, fast-track its capital growth and perhaps improve the rental value to increase cash-flow.
What kinds of fees are involved?
The good news is that when you refinance an investment property, the costs involved in exiting your existing loan and setting up another are usually tax-deductable. That includes the borrowing expenses and any exit fees or penalties. In the first five years of owning your investment property, you can usually claim borrowing expenses back incrementally, and if you refinance within that timeframe, you can claim the remaining tax deductions immediately. Talk to your tax accountant about the benefits appropriate to your situation. If you don’t have one, we’ll be happy to help you with a referral.
Should I use one lender or multiple lenders?
Professional investors often prefer to use multiple lenders to avoid cross-collateralisation. Cross-collateralisation is where you secure a loan against two or more properties instead of one – which can be inconvenient when the time comes to sell, and risky if property prices should fall. If you use one lender, your properties may be cross-collateralised by default. Having said that, some investors may prefer to use one lender. Overall, it depends on your individual financial situation, goals and the size of your investment portfolio, whether you may choose to go with one lender or several. Talk to us and we’ll help you decide which loan structure is right for you.
Should I refinance all my investments at the same time?
If you’re reviewing one mortgage, you might as well ask us to assess all of your investment loans to make sure they are up to scratch. You may decide you are happy with the deal you are receiving for some of the loans, and only proceed with refinancing others. Or you may decide it’s time to change the way all your loans are structured and if so, we’re here to help.
Talking to your financial planner or tax accountant is also a good idea, to make sure refinancing is the right strategy for you financially. If you’d like to chat or explore the kinds of investment loan options out there, please get in touch today. We’d love to help you find the right finance to fulfill your needs!