First Home Buyer Grants: What’s on offer?

Ian Johnson

WFS MORTGAGE BROKER

As an aspiring home buyer, you may have heard about various grants designed to get you into your first home. 

It can be a little confusing as there is assistance from both state and federal governments on offer. 

To add a little more confusion, where you live will also influence how much you are entitled to.

The hardest part of buying your first home is often saving enough deposit to avoid paying LMI (Lenders Mortgage Insurance)

This means you would generally need 20% of the purchase price plus costs which include legal fees and stamp duty.

The First Home Loan Deposit Scheme (FHLDS) is a Commonwealth Government initiative for first home buyers where the government supports the home buyer by underwriting the loan with a group of selected lenders. 

This means as a first home buyer you can buy your own home with as little as 5% deposit.  You will need a little bit more than this to cover associated costs such as legal fees and stamp duty but more on that below.

In its current form you must build a new property to take advantage of the FHLDS.  Price thresholds also apply depending on which area you are looking to purchase in.

As an economic support measure, the Commonwealth Government also announced its Homebuilder initiative

This initiative is designed to support the construction industry by encouraging new building activity. 

A $15,000 grant is available for new builds to both first home buyers and people who have owned property before.  The grant is only available for owner occupied purposes and cost caps apply.


QLD First Home Owners Grant

In recognition of the costs associated with purchasing your first home, the Qld Government has offered different levels of support to owner occupiers for quite some time. 

For first home buyers there is a $15,000 grant available to build a new home.  There are some costs caps that apply to this grant as well. 

Stamp duty concessions apply for both first home buyers and subsequent buyers of owner-occupied properties that are already built.


How Much Do I Need?

Let’s look at what is required for a first home build of $600,000 assuming $300,000 for land and $300,000 for the build portion.

5% deposit                     $30,000

Land stamp duty           $4,959

Legal fees                       $2,500 (approx.)

Total required                $37,459

There are some special requirements for saving the deposit. 

Lenders will want to see that you have been able to save the money yourself as this shows good character. 

In some situations, a gift from parents may be accepted but different lenders have different policies that need to be adhered to.

The QLD Government First Home Owners Grant of $15,000 and the Commonwealth Government HomeBuilder Grant of $15,000 means you will get $30,000 back in your pocket. 

The QLD Government First Home Owners Grant and HomeBuilder are both paid once the slab has been completed.

With interest rates at an all time low, there has never been a better time to get into your own home. 

T’s and C’s apply.  Subject to lenders criteria and acceptance.  Eligibility criteria apply for grants and application is required.

Simple strategies to pay off your home loan sooner

Of course you want to pay off your home loan as efficiently as possible to build equity in your home and avoid excess interest payments.

Yet you don’t want to sacrifice your quality of life for the sake of making crippling mortgage payments each month.

There are some simple strategies to help you pay off your home loan faster, without becoming too stressed about a tight budget.

Place any lump sum payments into your mortgage account

If you receive an annual bonus or a healthy tax return, place the extra money into your mortgage account. These lump sum payments can drastically reduce your loan term.

Pay the same amount when interest rates drop

Don’t let your bank reduce your regular mortgage payment when the interest rate drops – continue paying the same amount, and this will reduce the interest, eventually cutting down your loan term.

Offset your loans with a savings account – pay wages into offset

As your savings account earns interest, this amount is subtracted from the interest payable in your loan. When you reduce the amount of interest you need to pay, you can cut down on the length of your term.

Shop around for a better rate

Always stay alert for a better rate or a loan more suited to your requirements. You can delegate this task to a mortgage broker who will let you know if another lender can offer you a better rate or who can negotiate on your behalf with your current lender to improve the terms of your loan.

Increase your repayment frequency

Simply by making payments fortnightly instead of monthly, you will be making one extra payment a year. Again, this cuts down on the interest you need to pay, shortening the length of your loan term.

Avoid additional debt

While you are working hard to reduce the amount of interest you are paying on your home loan, you don’t need to accrue additional interest payments through credit cards and car loans.

Minimize your debts so you can concentrate on paying off your home loan, as this is the asset which will appreciate in value.

Examine your budget

Have a close look at your weekly or fortnightly budget and see if you can cut down costs anywhere in order to make a small increase on your loan repayments.

You could save $50 to $100 a week through simple strategies such as grocery shopping once instead of twice a week or cutting down on takeaway meals or having a “no spend” day once a week.

That small amount of extra cash can be diverted into your mortgage payment, where it will add up to huge savings in the long term.

Finding the right property for you

Property-hunting is a stressful exercise – you are embarking on one of the biggest financial investments of your life, and you know you’ll have to live with your decision every day.

Yet too many people rush into a property purchase, only to feel financially trapped in an unsuitable choice.

The problem is that many properties on the market are presented in an attractive and appealing way, prompting you to make an emotive impulse decision.

You can avoid the hazards of saying “I love it! Let’s buy…” about the first property you see, if you follow this 8-step preparation plan before starting the search to ensure you can identify the property that is exactly right for your needs.

  • Residential or Investment

You probably already know the answer to this question – do you want a new home to live in, or are you planning to rent it out as an investment property?

Either way, you are making a long-term investment, so you need to plan carefully to ensure you can hold onto this property for long enough to profit from the appreciation in value.

  • Setting a budget

Ask a mortgage broker or financial advisor for assistance in setting a limit for the maximum you can comfortably afford to pay for a new property.

Yes, it can be tempting to go over your budget if you find The One, but even a $50,000 increase in price can have a huge impact on your ability to comfortably cover interest payments and build equity.

If anything, set a conservative budget so you can manage the payments more easily and have some leeway for any future financial crisis.

  • House or apartment

Now you can start thinking about lifestyle choices!

If you have your heart set on an apartment, remember to calculate for body corporate fees as these can be a significant additional expense.

With a house, you need to consider how much additional home maintenance you are committed to completing – do you want your weekends to revolve around maintaining the garden and the pool? If not, you can look for a more low-maintenance home.

  • Location, Location, Location

Next you want to identify the suburbs that are most suitable for your needs. Choose locations where the homes are within your price range, and then narrow down your search to incorporate essentials such as proximity to schools, shops and public transport.

Before you even look at any properties, work out how you will travel to work each day – is it a long commute? Will you spend long periods stuck in traffic? Are there suitable public transport alternatives?

If you are looking for an investment property, you need to consider these questions from the perspective of your future tenant.

What kind of facilities and resources will they require? What are your “must-haves”?

Before you start looking at houses, write down a list of essentials.

If you are buying the property as a couple, you should both write your own list and compare. For example, how many bedrooms must you have to live comfortably as a family, and perhaps also to provide a spare room for visitors?

Again, you need to consider these questions on behalf of your target tenant. If you are planning to use the property for investment purposes, your “must-haves” would include the utilities and amenities (such as air conditioning) that will make life more comfortable for a potential tenant.

Where will your furniture go? One of the best indicators that you’ve found the right property is that you can mentally place your furniture in the various rooms. Even if you are not sure, try mentally “walking through” the house, to figure out where you will eat your meals, where you will place the television and the computer and how you will utilize any outdoor space. This exercise will help you identify any potential issues with the layout of the property.

  • Take some time to consider

Even when you are sure you’ve found The One, take some breathing space to think about it. While a property purchase is one of the biggest financial decisions of your life, many people rush into the commitment, without taking some time to think about the pros and cons of a particular property.

Walk away from the property, check your “must-have” list and your budget, so you can consider the decision from a detached practical position. Then view the property again to see if it still surpasses all your expectations. If you are purchasing as a couple and one of you has reservations about a particular property, then it is no longer up for consideration.

  • Seek expert guidance

Before purchasing the property, bring in the experts. Have the house inspected for any potential issues with structure or electricals to ensure that the house is safe and doesn’t need any costly repair or maintenance work.

If you are planning some renovations, check whether you will be permitted to make the changes – if not, you might prefer to look for a different property.

Just as importantly, seek financial advice from a mortgage broker to calculate your best options for a mortgage so you can pay off the house more comfortably and efficiently with a minimum of financial stress.

Understanding the buying and loan process

Purchasing a new home or an investment property can be a daunting prospect, and you might find it difficult to identify the first logical step.

Here we look at the process of securing a loan so you can buy the property that suits your needs and your budget.

Ask yourself what you want to achieve

The first step is to establish exactly what you are looking for.

Do you want an investment property or a family home?

If you are looking for an investment property, are you looking for a property you can fix up and “flip” or do you want something that is a low risk, long term prospect?

Is your family home intended to be a starter home, or are you planning to live there for several decades?

Talk to your broker about your financial situation, so you can establish how much money you can borrow, and which loan is right for your needs. Ascertain which lender and loan is right for you.

Apply for a pre-approved loan

Arrange a pre-approved loan so you can have a clear idea of how much you can spend and how long it will take you to pay off the loan once you purchase the property.

With a pre-approved loan, you will also stand out as a serious prospect, compared to other potential buyers who don’t have pre-approval.

Find your property

Once you have a vision for your property and you know your financial limits, you can start looking for your property.

When you find something you like, investigate the location as well as checking out the floor plan and fixtures – research the local property prices, the potential capital growth, and see if the local council has any plans for the existing infrastructure that might affect the area in the future.

Ask a registered valuer to make a full valuation of the property, so you can be sure you are getting a good deal.

Make an offer

When you are confident that you have found the property that suits your needs and your budget, you can make a written offer.

If the seller accepts your offer, you can review the contract of sale with your solicitor or conveyancer, before signing it.

Your solicitor or conveyancer will also take responsibility for any searches, and checking that all rates and taxes have been paid to date.

The contract of sale confirms the selling price as well as terms and conditions. Your lender will usually require a property valuation, building inspection report and a pest inspection before giving you full loan approval.

Pay the deposit

Once you have exchanged contracts, you will need to pay the deposit, which works as your bond until settlement, which is usually six weeks after signing. You can cancel the contract during the cooling off period which is a specified period of time that varies from state to state.

Congratulations!

Now you are a home owner!

Keep in regular contact with your lender, so you can ensure your home loan remains the best fit for your needs.

Contact us today if you wish to discuss your plans for owning a property. We can discuss the buying process and help with finding the right loan for you based on your financial situation and your individual needs.

Top Five Reasons Why Your Loan Would Be Declined

It can be extremely disheartening to have your loan application declined, especially if you already have a property in mind.

The best response is to treat the rejection as a positive learning experience, and an opportunity to strengthen your financial position so your application will be successful next time.

Here we look at some of the more common reasons your loan application would be declined and how you can turn the situation around:

Insufficient Income

Lenders calculate your borrowing power based on the balance between your income and your financial commitments. If the balance is insufficient to pay off a potential loan, they will not approve your application.

You have two options – you can reduce your financial commitments by tightening your budget, or you can find a way to increase your income.

One or both of these strategies will create a larger balance between your income and expenditure, giving you more funds to funnel towards paying off a loan.

1. Bad credit
Your future lender wants to see that you have a good history of repaying loans promptly and responsibly. If you’ve actually been the prudent type who avoids debt, you won’t have much evidence that you are a reliable borrower – you can fix this by using a credit card to demonstrate that you will make prompt and reliable repayments.

However, it will be more difficult to prove yourself a good risk if you have a history of defaulting on loans, so you may need some time to improve your credit record before applying for a new loan.

2. Excessive debt
Lenders will look at every aspect of your financial position, and will pay particular interest to any outstanding debts you already have.

If the lender can see that your debt repayments exceed your income and assets, they will be wary about lending you more money.

The solution here is to reduce your debt before taking on more financial responsibility.

Start with the highest interest debts first and reduce any other regular outgoing payments, so you can demonstrate that you have the income to manage your loan.

3. Insufficient savings
Your savings not only provide a deposit and a buffer, they also demonstrate that you are a good risk who is committed to achieving your long-term goal. If your application is knocked back due to your lack of savings, start by putting aside a small amount from each pay, and watch it build.

Keep in mind that a sudden windfall such as an inheritance does not demonstrate your ability to save! You need to show consistency and self-discipline.

Even three months of regular savings can be enough to convince a lender that you are a good risk.

4. Irregular income
Today many people choose a more flexible approach to working than the traditional 9 to 5 job with a regular salary. If you are self-employed or do contract work, or even if you have switched jobs recently, a lender might be concerned that you will be unable to handle regular loan repayments.

However, as more people shift from traditional employment, there are lenders responding to the challenge.

Look for a lender who specializes in home loan products specifically for people with irregular income.

5. Unsuitable property
Sometimes it’s not your financial situation that causes the problem. The property you want to buy may be a bad risk, or perhaps you are proposing to pay more than it is worth. In this situation, the lender will see that you cannot redeem the value of the loan and they will turn down your application.

When a loan is declined for this reason, the lender is actually doing you a favor. You want your investment to be as profitable and manageable as possible, so listen to the lender’s advice and find a property that has more potential to be a good investment.

Overall it helps to see your lender as an astute and helpful business partner who wants to ensure you are in the best possible position to manage your loan.

When your loan is declined, look at this as an opportunity to strengthen and improve your position so you will get the right loan package for your needs, you can make repayments comfortably without any additional financial pressure, and the property will build into a good investment for you.

Five Reasons why you need a Mortgage Broker

For most people, buying a home or an investment property are the biggest financial investments of their lives.

A mortgage broker can help streamline the costly and confusing process, while saving you valuable time and money.

Here’s how:

Simplifying the home loan process

While this is an overwhelming first-time experience for you, your mortgage broker can efficiently guide you through the entire process, from the application to the property settlement.

With their assistance, you can handle all the complexities of paperwork and legal details. They can also give you the right advice to ensure your application is approved promptly.

As a result, you have the peace of mind of delegating the process to an expert who will keep you informed every step of the way.

Fast comparisons

With so many banks and lenders offering different deals, it can be difficult to figure out which is the right loan for your situation.

While a bank will only promote their own products, your mortgage broker has the experience and the contacts to compare a wide range of lenders and products, to identify the right package for you, based on your individual situation.

They can decipher the financial jargon for you and explain the pros and cons of various home loan features, so you can confidently make an informed choice.

Direct service

As your mortgage broker regularly works with various lenders, the application process can be several days faster than going to a bank directly. Best of all, you are dealing with one point of contact, rather than whichever member of the bank’s credit team takes your call.

This gives you the benefit of securing the loan features that are best for you, based on your circumstances.

Better value from your property investment

When an expert oversees your choice of loan, you reap the long-term benefits of better interest rates and the right flexibility for your personal situation.

The right loan can take years off your mortgage while cutting down your interest payments.

In comparison to the significant savings, the cost of a mortgage broker’s fee is negligible. In the US and UK, mortgage brokers charge around 1-2% of the total loan, while in Australia, mortgage brokers are paid by lenders so there is no cost to the client.

Specialized assistance

If your situation is a little more complex than a standard home purchase, a specialized mortgage broker can help you through the process.

Whether you need assistance with property investing, commercial properties or a hobby farm, there is a mortgage broker who knows exactly how to help you.

There are also mortgage brokers who specialize in assisting people with individual challenges that might deter lenders, such as bad credit, non-residential status or contract employment.

What happens when your fixed rate expires?

Do you know when your fixed rate term is coming to an end?

Once it finishes, the bank is free to quietly switch you to a higher interest rate – unless you act fast!

Think of how costly it could be if you simply let the bank choose your interest rate.

If your bank charges you just 0.5% more than the competitive interest rates, this adds up to a significant amount over the term of your loan.

You can save yourself a great deal of money and perhaps even cut years of your loan, if you are proactive about monitoring your interest rates and choosing the right option for you.

Switching to a variable rate

A variable rate can be a great option if you want to take advantage of low interest rates, or if you want the flexibility to redraw or make extra payments.

When your fixed rate term expires, the bank will automatically switch your loan to the Bank Standard Variable Rate (BSVR).

Do some research to find out whether this is a competitive rate; if not, you can talk to your bank and try negotiating a better deal. And if they do not offer you a competitive rate, you can switch lenders.

Lenders generally prefer to negotiate rather than lose a customer, while they don’t generally make their best offers to customers with a proven history of loyalty.

So when it comes to your interest rate, stay alert and ask questions – keep your lender busy, trying to keep you happy!

Extend your fixed rate

One option is to ask the bank to refix your home loan, extending it for another one, three, five to ten years.

The fixed rate is a good option for you, if you are planning to pay off your loan steadily over a long period of time, and you want each mortgage payment to be a regular amount so you can budget your money precisely.

Fixed rate protects you from rate rises and you could be paying less than the variable rate.

However, there is also the risk that you could end up paying higher than the market rate if you are locked into an outdated fixed interest term.

There may also be a break fee if you change or pay off your loan within the fixed period; this means the fixed rate is not a good option for anyone planning to sell their home.

COVID property boom could push QLD home prices up 20 per cent – the highest of any capital city

According to numerous media sources QUEENSLAND is on the cusp of a property boom that could lead prices to skyrocket by more than 20 per cent in some areas and last for years to come.

Fears of a real estate Armageddon in the wake of the pandemic have been replaced with a surge in confidence in the Brisbane and Sunshine Coast’s housing market, driven by an exodus to lifestyle and affordability, infrastructure spending and cheap money.

Buyer demand is at an all-time high and suburb sale-price records have been smashed since COVID-19 took hold in March, while the state’s southern counterparts are languishing. 

Interstate migration from southern states is ramping up.

New data from CoreLogic, analyzed by Finder, has found the number of house sales in Brisbane jumped 21 per cent in just one month in July, and rose in value by nearly 23 per cent to a staggering $1.4 billion — a bigger rise than in any other capital city.

Low interest rates, government stimulus and a bounce in confidence are expected to mitigate the risks imposed by higher unemployment.

Economists at Westpac who were forecasting price falls of 10 per cent at the start of the year are now predicting a 20 per cent rise in Brisbane property prices over the next two years — the highest of any capital city.

ANZ has also reversed its negative COVID predictions and is predicting growth 9% pa growth for Brisbane.

Catherine is visiting Brisbane this week looking for good options for WFS clients.  If you want to find out more about some great investment opportunities email her catherine@wfscanberra.com.au

Read more via the link below.

https://www.realestate.com.au/news/brisbane-house-prices-to-jump-95pc-in-2021-anz/?rsf=syn:news:nca:news:spa

What is PSI, does it affect me?

This article is written by our WFS Melbourne Director, Tax Accountant and Mortgage Broker – Abby Morphett.

abby@wfsmelbourne.com.au

You’ve heard the term PSI, but you’re unsure whether it applies to you or what it actually is?

In a nutshell, PSI or Personal Services Income is income you derived from your personal efforts and skills.

An example would be IT Consultants and plumbers. An example of what is not PSI is someone who sells goods.

If you provide personal services but you have decided to structure your business as a company for the tax benefits, the ATO has a number of test you have to satisfy in order to be able to take advantage of this structure.

This is where is can get a bit tricky.

Structuring your business as a company might seem like the best way to go so you pay less tax at the small business tax rate where the personal tax rate could be up to 46.5%. 

An example of this is if you derived $200,000 income as an employee you pay $64,667.00 in marginal tax* and as a company you pay $55,000.00 in tax*.

But if the PSI rules apply, you would be treated as an employee in the eyes of the ATO, company or not.

Meaning you pay the higher tax rate (if applicable) and you are unable to benefit from the deductions (such as; immediate write off).

However, there are some tests that the ATO recognizes that enables you to take advantage of the different business structures.

Results Test

The results test is where 75% of your income comes from producing a result, with your own equipment or tools and you are responsible for rectifying any defect in your work.

What does a “result” mean?

If you were an IT Contractor and the government gave you a contract to complete a “job” for a set rate. Such as; designing a new security system for internal processors for $150,000K – that would be your result.

If you are on a pay by the hour contract you likely won’t satisfy this test, even if you are working towards a result and you still need to satisfy the remaining 25%.

The 80% Rule    

If 80% of your income comes from one client, you will not satisfy this test, and the PSI rules apply (meaning you can’t take advantage of the company tax rate or immediate write off).

Therefore, even if you work for a labour hire company you will not pass this test.

If you satisfy this rule, there are additional rules to check the unrelated clients test, the employment test, and the business premises test.

These rules can be somewhat confusing, and the best option is to talk to your accountant.

A HR compliance checklist for Australian workplaces in a COVID-19 world

HR professionals and business leaders find themselves in uncharted waters as they navigate the changes that COVID-19 has forced upon organizations around the world.

Their key priority is to look after employees.

Today, this mission involves a new challenge: honoring workplace compliance laws that are constantly shifting amidst the global turbulence.

Unfortunately, many Australian organizations struggle to abide by workplace regulations – even at the best of times.

In March 2020, the Fair Work Ombudsman released findings from its national audit of 1,217 businesses.

Surprisingly, nearly half of all respondents failed to adhere to the basics of workplace compliance laws (such as paying staff correctly).

Fair Work inspectors issued: 24 on-the-spot fines totaling $32,980 in penalties; 457 contravention letters; 56 formal cautions; and 47 compliance notices. Organizations that breach HR compliance regulations – whether deliberately or inadvertently – face fines, legal expenses, increased employee turnover and brand damage.

Throw a health pandemic into the mix, and the job for HR professionals becomes notably more challenging.

However, while staying on top of regulation changes is difficult, there’s no excuse for non-compliance.

This checklist is for business leaders who want to protect their employees and avoid penalties by meeting all compliance obligations.

For ease of use, we’ve broken this checklist into several key sections, each of which addresses a specific focus area.

 Below is a summary of these sections:

1. Employment laws in Australia

2. Returning to the workplace

3. Working from home (when possible to do so)

4. Payment and leave entitlements

5. Changes to working hours, location or duties

6. Standing down employees or ending employment

If you would like to know more about HR compliance and/or receive a detailed checklist for the above categories please contact our Tax Team Manager – Chris McGuigan at WFS.

chris@wfscanberra.com.au

Which Is The Right Home Loan For You?

There are a bewildering variety of home loans available, and it can be confusing to figure out which type of home loan is the best for your circumstances.

However, when you know the pros and cons of each type of loan, you can make a decision that will fit best with your financial situation.

Fixed Rate Home Loan

A fixed home loan offers an interest rate that is fixed for a set period of time – usually 1, 3 or 5 or 10 years.

The key benefit is the ability to budget, knowing exactly how much your repayments will cost each time.

However, a fixed loan doesn’t have the same flexibility as other loans – you will encounter restrictions if you want to make additional repayments, such as fees or capping to a low amount.

You might also be disappointed if interest rates drop dramatically and you are still paying the same fixed rate.

This is a good option if you want to make steady regular payments and you intend to stay in your current home throughout the term of the loan.

It is not such a good option for someone who wants to move to another property in the foreseeable future, or who wants to cut down on the term of their loan.

Variable Rate Home Loan

A variable home loan is far more versatile, with the option of making extra payments at no extra cost, enabling you to pay the loan off sooner.

Your loan might also offer unlimited redraws, so you can access money in an emergency. Another positive feature is the offset account, a transaction account linked to your mortgage account which reduces your interest payable.

This is a good option if you want to invest the maximum into your mortgage, with the freedom to redraw in an emergency.

However, as the interest rates will vary from payment to payment, it is not such a good option if you struggle to budget for unpredictable changes in the loan repayments.

Split Loan

The split loan offers the advantages of both fixed and variable loans.

You can split your loan into any proportion you wish – 50/50 or 80/20.

One of the benefits of the split loan is that payments will gradually decrease, as the steady fixed rate payments lower the amount of the loan, so that the variable payment is proportionally lower at times when interest rates rise.

Interest Only Loan

With an interest only loan, you pay only the interest on the loan for the initial term, usually from one to five years.

Your monthly repayments are considerably lower, although this is because you are not reducing the principal of the loan.

At the end of the interest only term, your repayments will rise as you must start paying both interest and principal.

This can end up being an extremely expensive option if you are not sure what you are doing.

However, investors tend to choose interest free loans, as they can take advantage of low repayments over a set period, before they resell the investment property.

Low Doc

The low doc loan has lower requirements for proof of income and credit rating, yet they also require a higher deposit and charge higher interest rates.

For someone with a unstable credit history or employment background, the low doc loan will be difficult to pay off.

While this option can be popular with self-employed people, who don’t have the same level of documentation to prove their income, the excessively high interest rate generally makes it a bad long term choice.

If this is your only option for a loan, your best alternative might be to wait until you can be approved for a different type of loan.

Pros and Cons of Debt Consolidation with Your Mortgage

If you are struggling to keep up with multiple credit repayments – credit card, car loan and mortgage – one option for simplifying the issue is to consolidate all the debts into your mortgage.

However, there are also potential negative consequences for consolidating all your other debts with your home loan, so you should consider this strategy carefully and ask for independent advice before making a decision.

So what are the pros and cons of debt consolidation with your mortgage?

Pros: Shifting from multiple payments to one payment

When you consolidate your debt, you only need to make one regular payment, so your finances are more organized and you don’t have the stress of doling out minimum payments to multiple lenders.

Once you have streamlined your repayment plan, you may even be able to increase the amount of that one repayment.

Lower interest rate

Multiple debts is equivalent to multiple interest rates, yet when you consolidate all these debts, you are only paying interest on one loan, which is generally at a lower rate than before.

This is an automatic saving.

With one interest rate and one regular payment, your monthly payment will probably be much lower than usual, giving you the option of increasing the amount of your regular repayment to get on top of the loan faster.

Cons: Reduces the equity in your home

Unlike your car and the items you purchase with your credit card, your home is an investment which will appreciate in value.

Your goal is to increase the equity in this asset for your own financial security. Yet when you combine your home loan with your other debts, you are reducing your equity without any increased value of assets to balance it out.

Risking your secured loan

Another difference between a mortgage and your other debts is that a mortgage is a secured debt – if you can’t pay it, the lender can take something from you in lieu of the debt.

In contrast, if you cannot make your credit card payments, it will affect your credit rating and your ability to get another credit card but it won’t have a significant impact on your overall security.

Consolidation loans are also secured loans. When you consolidate all your debts into your home loan and then cannot manage to make the repayments, your home is at risk.

More costly in the long term

While your minimum monthly repayments may be reduced in the short term, your long term debt may be increased.

For example, if your car loan was taken over a five year term and then consolidated into your 30 year home loan term, then the interest on the original car loan will actually be increased so you are ultimately paying more for your car.

Debt consolidation can be a valuable tool for some borrowers, but can be difficult for others.

Are You New To Australia? Eight tips for New Australians Wanting to Purchase Property

If you are new to Australia and looking to establish a comfortable, settled life here, then sooner or later, you will naturally consider buying property, either as an investment or a home for your family.

So there are a few things you need to do in preparation for your first property purchase.

1. Find steady employment

When you eventually want to apply for a loan, the first thing the bank or lender will investigate is your employment history. They want to see that you have are securely settled in a job with regular pay. From the financial point of view, of course, this is also the best way to start saving!

2. Start saving

It’s never too soon to start building up your savings towards your property. Set a firm, yet realistic budget and create a steady savings routine. This will not only build up your funds for a deposit and all the additional costs, it will also demonstrate to lenders that you are committed to the financial responsibility of buying a property.

3. Apply to Foreign Investment Review Board for approval

Your visa and citizenship status may affect whether you are eligible to purchase property in Australia. So if you are keen to own a home, contact the FIRB to learn whether you have permission to purchase real estate.

4. Research all your expenses

There are numerous one-off costs involved in buying a property, such as conveyancing fees, stamp duty and inspection fees. Calculate all these fees into your budget, so you are not overloaded with unexpected expenses when you are finally ready to buy.

5. Reduce your debt

While you are paying off debts, it can be difficult to concentrate on saving for a deposit, and lenders may be less keen to approve your loan. Your best option is to reduce all your debts as much as possible, so you can concentrate on the important task of building your savings. When you are shopping for a loan, declare your debt, including any foreign debt, so you secure a loan you can pay off.

6. Secure pre-approval

Pre-approval is when a bank or other lender says they are willing to approve you for a loan at a later date. This is useful if you want to show sellers that you are serious about buying their property and that you can secure payment. It also gives you a clear idea of exactly how much you can spend on a property and how much you will need to borrow, based on the amount of your pre-approval. You can apply for pre-approval from a lender, or you may receive an unsolicited offer.

7. Get to know your mortgage broker

A mortgage broker acts as an intermediary between you and the lenders, helping you fill in paperwork and secure the best deal for your circumstances. Your mortgage broker can answer all your questions, and help you evaluate all your options.

8. Find your dream property!

Finally, you reach the fun part – you have the funds and the support team to make your dream a reality. Now you can start searching for your perfect home. Make a list of the most important attributes of your dream home – number of bedrooms, house or unit, proximity to public transport or schools – so you can recognize it when you see it.

Are You Working from Home?

🙋‍♀️🙋

If yes, do you know what expenses can you claim as tax deductions?

If yes, do you know how much ?

We know that tracking these expenses can be challenging, so from 1 March to 30 June 2020, the ATO has introduced a temporary shortcut method to make our life easier.

It’s a simple way to calculate these expenses with minimal record keeping requirements.

In most cases, if you are working from home as an employee, there will be NO capital gains tax CGT implications for your home.

There are 3 ways of calculating home office expenses depending on your circumstances.

The methods are the:

Shortcut Method (80 cents) – Only available 1 March to 30 June 2020

Fixed Rate Method (52 cents)

Actual Cost Method

For the shortcut method, you can choose to use this rate if you are working from home to fulfil your employment duties and you have incurred additional running expenses as a result of working from home.

The shortcut method covers all your work from home expenses, such as:

Phone Expenses.

Internet Expenses.

The Decline in Value of Equipment and Furniture.

Electricity and Gas for Heating, Cooling and Lighting.

If you use this method, you can’t claim any other expenses for working from home.

You don’t need to have a dedicated work area to use this method. However, you must keep a record of the number of hours you have worked from home.

This could be a timesheet, roster, a diary or documents that set out the hours you worked from home.

Stay tuned for more information on the other two methods.

Medicare Levy Surcharge (MLS)

DID YOU KNOW 🧐 that if you are earning more than $90,000 (single) or $180,000 (couple) and do not hold an appropriate level of private patient hospital cover, you might be liable for an extra tax of up to 1.5% of your income?

This is called the Medicare Levy Surcharge (MLS).

The MLS is designed to encourage these people to take out private patient hospital cover and use the private hospital system to reduce demand on the public Medicare system.

Contact us today to find out how you can avoid paying the Medicare Levy Surcharge or to compare your private health cover to see if it remains competitive in terms of pricing and service offering.

☎️ 6162 4546

How to Choose the Best Home Loan for You

Taking out a home loan is a huge financial commitment and it is particularly important to choose a loan that suits your needs, so you can make repayments on your terms without worrying about hidden fees or excessive interest.

Yet it can be bewildering to navigate all the different loan options available and pinpoint the loan that is best for you.

It is important to keep in mind that lenders are determined to minimize their risk so for every benefit they offer to make the loan seem enticing, there is always another fact protecting their investment.

So you need to look at the loan package as a whole rather than being drawn to one particular feature.

Choose the right structure for your circumstances

You need to consider your financial needs and your plans for the property as you want the loan’s features to cater to your circumstances. For example, you will require different features and flexibility from your loan if the property is to be a family home rather than an investment, your first home or second home, or if you are planning to renovate. You also want a loan that is compatible with the size of deposit you can afford. Most lenders will only agree to lend 80% of the value of the property unless you agree to pay lender’s mortgage insurance (LMI) which can be expensive.

Additional payments without fees

One key feature to look out for is the ability to make additional payments at no extra cost. This enables you to make faster progress on your mortgage, and gives you the flexibility to pay more if you happen to have extra funds, such as an annual bonus from work. A home loan that penalizes you for making extra payments is apt to be more costly in the long term.

Flexibility to adjust interest rate

It is also useful to know that you can adjust your interest rate or split your loan at no extra cost if your situation or the market changes. You don’t want to be penalized financially for seeking out a more suitable loan structure.

Communication

Ultimately, you need strong communication and a trustworthy relationship with your lender to ensure your home loan matches your needs, and that you can change your options as your circumstances change. Alternately, you can discuss your loan requirements with a mortgage broker who will stay one step ahead of the market and help you find the home loan that is the best fit for you.

Benefits of A Mortgage Offset Account

An offset account is a bank account linked to your home loan.

Rather than accumulating interest within the account, the money in the offset account is offset daily against your mortgage, reducing the interest payable on your mortgage.

For example, if you have $20,000 in your offset account and a mortgage of $400,000, you will only be charged interest on $380,000 rather than the full $400,000.

This can drastically reduce the length of your mortgage and the amount you need to pay in the long term.

Tax free interest

As you are not earning compound interest from the money in the offset account, you are not liable to pay tax on that money. Instead you are increasing the equity in your property.

Flexibility

As the mortgage account is like any other transaction account, you can deposit and withdraw funds such as your salary without incurring access fees. As the offset amount is calculated daily, you can keep a lump sum in the account for emergencies while reducing interest on your loan.

However, some lenders do place restrictions such as minimum transaction amounts and withdrawal fees which could end up costing more than the interest you save.

Is the offset account for you?

The people who benefit most from offset accounts are those who can keep a significant sum of money in an accessible account over the long term. If you are instinctively a saver, an offset account is preferable to having to pay tax on interest, as you are making significant gains through equity.

It also gives you a flexible alternative to paying extra money directly into the mortgage, as you can still access the funds quickly and without penalty in case of emergency.

Even having your salary deposited into your offset account ensures that for one day at least you will reduce the interest payable on your mortgage for that day.

However, if you are only keeping a small minimum balance in the offset account, the interest savings will not be so significant.

Do your own research

Talk to your mortgage broker or financial advisor about whether an offset account would be suited to your current circumstances. And before opening an offset account, make sure you are fully aware of any fees or conditions that may have a negative impact on the long term benefits.

What’s the Best Time to Purchase a Second Property?

You are established in your home and ready to dabble in some investments, yet you are a little daunted by the responsibility of owning two properties.

How do you know when conditions are right for you to purchase a second property?

If you are like most one-property owners, you might visualize a few obstacles preventing you from purchasing a second property.

So let’s look at some of these obstacles and see if there is a way around them.

Don’t let market conditions dictate your decision

Many buyers find themselves in limbo waiting until interest rates and housing prices are “just right.” While this is a positive opportunity to continue saving and build equity in your existing property, it can also be counter-productive if the ideal conditions never eventuate.

Property investment is about long term capital growth, and you can only start that growth process once you make the purchase.

An alternative to paying off existing property

Property owners can also be inhibited from buying a second property because they are focused on paying off their existing home first. However, if you are looking at your property portfolio from the investment perspective, it is worth calculating your options here, as a second property can considerably increase your overall equity.

While paying off your first home first may seem like the more secure option, investing that money into a second property can be more profitable, thereby increasing your financial security.

Your own financial situation

Ultimately, the best time to purchase your next property is when you are financially capable of managing a second mortgage. Ideally, you should have at least a 10% deposit available (plus closing costs), through cash or equity or a combination of both, with additional capital to cover any rise in interest rates, emergency maintenance or loss of income in between tenants.

Talk to your mortgage broker to assess your options, so you know how to make best use of your equity, what sort of loan you can apply for, and how much the repayments should be to fit your budget and achieve your investment goals.

A property with profit potential Besides capital, the other factor that signals the best time to buy is when you find a property within your budget with high and safe returns. Look for a property with great rental potential for its area, so you can be confident of a regular rental income.

Property investment is never an impulsive decision – it will take intensive research and budget calculation to find the property that covers all your bases.

When you find that property and have the capital to cover your investment expenses, then you have narrowed down the right time to purchase your second property.

Thinking About Refinancing Your Homes Loan?

A bit of extra cash is always welcome, and chances are, refinancing your home loan can be a way to pocket serious savings.

Not only it could save you tens of thousands of dollars over the life of your loan, but it could also help you pay off your home loan sooner.

Especially at the time when the interest rate is at its historical low, and banks are offering cashback to help you to refinance, there is no better time to refinance. We are also offering a $500 cashback for refinance.

Switching to a loan that’s better for you should be simple, not stressful.

Also, see below the rates offered by our lenders

Rate starts from
Owner-Occupied P&I Variable2.19%
INV P&I Variable2.49%
INV IO Variable2.94%
OO 1-3 YEARS FIXED P&I2.19%
INV 1-3 YEARS FIXED P&I2.49%
INV 3 YEARS FIXED IO2.59%
Lender’s Cashback offer for refinanceUp to $2,000 per security
Our Cashback offer for refinance$500

Contact us to see how we can help you refinance your home loan.

What Loan Features Are Right For You?

When you are choosing your home loan, there are a wide range of optional features to improve the value of your loan. However, it is important to ensure you choose features which contribute to your overall goals. Your mortgage broker or financial advisor can help you select the right goals for your needs, but it helps to do some research so you know which features are most suited for your circumstances.

Interest Only Repayments

With this feature, you only pay the interest on the loan rather than the principal for a set term at the beginning of the loan. This term could be from one to five years although it could be longer. This feature keeps your repayments low, and is suited to investors who intend to sell the property once it increases in value.

Extra Repayments

This feature enables you to make additional repayments, so you can reduce the principal of the loan more quickly, reducing the amount of interest you need to pay over the life of the loan. This is a good option for someone paying off a primary residence, as you want to pay off the loan as efficiently as possible, and save money by lowering interest payments.

Weekly or Fortnightly Repayments

While most loans are based on monthly repayments, you can choose the option of making weekly or fortnightly repayments. This feature is suited to people who are paid on a weekly/ fortnightly basis. As you are making more regular repayments, you will reduce the loan more efficiently, reducing interest.

Redraw facility

This feature provides access to the funds from any extra repayments you have made. However, you do need to ensure that this feature often includes restrictions such as a redraw fee and a minimum redraw amount.

Salary crediting

With this feature, you can deposit your salary directly into the mortgage account. This is a good option for someone who is not disciplined at making repayments independently.

Repayment holiday

This feature enables you to take a “holiday” from your mortgage responsibilities by either reducing or stopping repayments for a set period. This is a useful feature if you anticipate an interruption to your income, such as a change of job, illness or maternity leave. However, interest will accumulate during your “holiday” adding to the overall cost of your loan, so this feature should only be used in times of real need.  

Offset account

An offset account is a bank account connected to your home loan. The funds in the account will offset the interest calculation against your overall loan, reducing the interest you need to pay.

Direct debit

This feature gives you the convenience of automatic withdrawal of your repayments from a nominated bank account. You only need to monitor the balance of your bank account to ensure you can cover the repayments. 

All in one home loan

An all-in-one home loan is combined with a cheque, savings and credit card account. This gives you the option of having your salary paid directly into the account, and the available cash in your account offsets your mortgage, reducing your interest charges. However, this option requires a great deal of financial discipline to ensure you continue to make the required mortgage payments.

Loan Portability

Once you find the right home loan package, you might want to keep all the same features and benefits. The loan portability feature enables you to sell a property and then transfer the loan to another property. This will also save you set up fees, as well as saving you the time and effort of setting up a new loan, although there may be other fees.

Choosing the right loan features for your circumstances can make a huge difference to how quickly you pay off your home loan. Ask your mortgage broker what other loan features might be right for your real estate goals.

Tips For Choosing a Good Mortgage Broker

Research the loan market

By researching the market, you will be able to make informed decisions based on the broker’s recommendations. A mortgage broker has access to a panel of lenders, so they can draw your attention to loan options that might not be available to you directly.  However, you are better equipped to assess a mortgage broker’s recommendations if you have done your own research into the market. When you can assess a broker’s recommendations independently, you can work out from the beginning whether these recommendations are well suited for your circumstances in comparison to other options on the market.

Research a range of mortgage brokers

Mortgage brokers having varying areas of expertise and they can also charge clients in various ways. You need to find a mortgage broker with the expertise to give you valid advice, and you also need to understand how the broker will be paid for his services. Explain your personal situation, including your financial standing and your investment goals.  Find out whether you need to pay any fees or whether the broker is paid wholly by commissions. If the broker is paid by commission, you need to assess whether this will influence their recommendations.

Check their qualifications and experience

Look up the qualification requirements for mortgage brokers in your area, and make sure your mortgage broker has the correct credentials. Unfortunately, you will find that some mortgage brokers set up business without the appropriate qualifications. Find out how long the broker has been in business, and ask to look at their lender panel – these are the lenders on the broker’s list and this will give you an idea of.

Explain your needs

Ask each mortgage broker about their experience in relation to your specific type of loan. Different mortgage brokers specialize in different financial situations, such as home loans or investment loans. Also, if your financial situation raises red flags with lenders – for example, if you are self-employed or a contractor – you need a mortgage broker with the expertise and the network to help you find a lender who accepts these financial circumstances. 

Ask for written confirmation

Your mortgage broker should give you a written report, outlining recommendations, and the reasoning behind each option, along with details of fees, products and commission. This way, you can take your time to assess each recommendation, and you have a written record of what you were promised.

Check their complaints process

It doesn’t hurt to think ahead! Just in case you later have a complaint about your broker, check out their complaints procedure to see if they are connected to an approved external dispute resolution scheme. This connection demonstrates that they will be held accountable for any poor service, giving you extra peace of mind that a potential dispute will be handled professionally.

Communication and Rapport

You need to feel comfortable talking to your mortgage broker, and maintain the confidence to ask questions and follow up if you still don’t understand something. If you feel awkward or confused, or if you aren’t comfortable asking questions, then this mortgage broker might not be the right fit for you. When you are making major financial decisions, you want to feel confident that you are fully informed and when you ask questions, you will receive prompt and detailed answers.  

Tips For Finding The Best Property Loan For Your Investment

An essential element of property investment is finding the loan that will support your investment goals. Here we look at some strategies that can be particularly beneficial for property investors.

Research a wide range of lenders

You don’t need to limit yourself to your local bank’s latest deal. Research as many lenders as possible to learn more about their loan products. A mortgage broker can simplify the search process for you, and make recommendations based on your financial situation and investment goals.

Choose the loan features that support your investment strategy

Different loan features support different strategies. If you are setting up a rental income, you will look for different features than someone looking for capital gain.  Interest-only loan repayments can reduce the amount you need to spend on your investment, while an offset account can be used to save up for the next investment property. Your mortgage broker can help you work out which loan features are best for your goals, so you can find the loan right package.   

Fixed or variable interest rate

A fixed rate can simplify your budget, as you won’t have fluctuating repayments as interest rises and falls. However, if you plan to sell the property, keep in mind that selling it during a fixed term can incur costs. A variable rate can give you access to 100% offset facilities. If you want to protect yourself from excessive rate rises, yet keep the advantages of a variable rate, you can opt for a split rate which combines a portion of both.

Revaluation options

Your property will keep appreciating in value, and regular valuations gives you access to the increased equity, which you can use to expand your portfolio further. Before choosing a loan, ask if the lender will allow you to do this, as not all loan agreements permit this practice.     

Credit facility

If you are planning to renovate and resell the latest investment purchase, you could benefit from a credit facility feature with your loan, as this will provide the funds to pay for your renovations.    

Still not sure?

With so many loan options available, it can be overwhelming to figure out the right loan features for your specific needs. Speak to your mortgage broker and financial advisor to figure out which features will help you achieve your investment goals.

Getting Back To The Basics

Generally, when we refer to investing, we see this as putting time or effort into something that will provide a long-term benefit, such as an education or developing skills in some way.  

When we talk about financially it’s more often with the view of investing money and often comes with the expectation of generating an income or profit with a long-term benefit.

The long-term benefits of investing are often with the goal of achieving the lifestyle you want to live. As advisers, it’s our hope that for most investors, growing their investments and savings isn’t about getting rich quick but about creating financial security and freedom to choose the life they want to lead – to put them in control.

With all the turmoil and uncertainty, we’ve experienced in the world in 2020 we thought it may be a great time to revisit the basics on different types of investments.

Share markets are moving constantly, there is much in the media around property prices dropping and cash rates are certainly not attractive in the long term. But all investments can have their place on your long- term wealth plans. 


Shares

One of the most well-known types of investments are shares. Put simply, when you buy a share you are acquiring a small piece of ownership in a company.


You may have also heard shares referred to as stocks, and although they are often used interchangeably, there is a small difference.

When a company sells a portion of its ownership, it does so by issuing stock. The stock in a company is then divided into shares.

As you own part of the company, you are also entitled to part of the earnings of that company.

Profitable companies may therefore pay dividends, which is a way of distributing the earnings of the company to its shareholders.

In Australia companies pay a large proportion of their earnings out in dividends compared to many other countries in the world.

You can purchase shares through a share market, which is essentially one big auction house, where buyers and sellers list their respective buying and selling price, and when agreed upon pass on ownership of shares.

In Australia the main exchange is the Australian Securities Exchange (ASX).

Just to confuse you, the share market can be referred to as both the stock market and stock exchange, but this is just finance people enjoying having different names for the same thing.

Stock Market

Bonds

Put simply, a bond is a loan.

When a company or government needs funds, they may issue bonds to borrow money.

When you buy a corporate bond, you are lending money to that company for a set amount of time in return for regular interest payments. As well as the interest payments, your initial investment will be repaid to you on a pre-determined date, known as the maturity date.

Think of it like taking out a loan from the bank, except the roles are flipped, with you paying the principal upfront and then receiving the interest payments.

Bonds, like cash, are considered a more defensive investment since they provide you with a predictable income.

Because there is more risk involved, bonds typically pay a higher interest rate than cash investments like term deposits. For example, if the company or government that issues the bond runs out of money and defaults on the loan, it’s possible you won’t get back the full amount you invested.

Lending money to governments is safer than lending money to a company, and as such government bonds generally pay lower interest than corporate bonds.

Some bonds can be traded on the share market, and there are even ETFs that track bond markets.

Bonds

ETFs

ETF stands for an Exchange Traded Fund.

An ETF is essentially just a basket of different shares that are pooled together into a single financial product that can be traded on the share market.

ETFs often track an underlying well-known index. An index is a hypothetical portfolio of shares that tracks a segment of the financial market.

The S&P/ASX 200, for example, tracks the performance of the 200 biggest company stocks in Australia.

So, an ETF that tracks the ASX 200 index will comprise the shares from those 200 companies and change in value in line with the index.

One of the main advantages of ETFs is that for a low cost they give you exposure to many different companies, diversifying your investment.

ETFs aren’t limited to tracking just the share market, and are available for many different types of assets, such as bonds, cash and commodities.

Exchange Traded Fund

Property

Investing in real estate has a unique position in the investment field.

Unlike the above investments, property is a physical, tangible object that you can see and touch.

Demand and supply for property is the main driver of real estate prices. There are many factors which influence the demand for property, but location is the main one. The main factor that affects the supply of property is unemployment.

Property investing is well understood by many. In Australia and many parts of the world there is a belief that property prices always rise. However, this may not be true and because there is no exchange where properties trade daily, their price is less transparent.

The downfall of property is the high entry and exit costs and having to pay interest if you need a loan to acquire the property.

The other downfall is the cost of maintaining the property. These costs create the possibility to lose money if your interest payments and maintenance costs are less than the income you earn from the rent and capital appreciation of the property. Property is also a highly illiquid asset, which means it’s difficult to convert the assets you own into cash.

Property Market

Cash

Cash is what you keep in your bank account.

It represents the low risk, low reward option of the investment world.

In Australia, many cash deposits are guaranteed by the government, so they are very low risk.

When we talk about cash as investments, we focus on high interest savings accounts and term deposits. Term deposits are bank accounts where you cannot touch your cash for a specified number of months and usually receive a higher rate of interest.

The advantage of keeping money in cash is that it provides certainty (as long as the Australia government can pay) that you will get your money back when you need it, however this comes at the cost of low returns, which can be very low.

Currently we are living in a record low interest rate environment, with most of the interest earned from cash investments being wiped out by the increasing cost of living.

Cash

Where To From Here?

If you’re uncertain about where any of these investments fit within a well-diversified portfolio or you simply want to review your current holding we invite you to meet with our financial planning team to make sure that in looking at your assets the following are considered.

  1. Your tolerance to risk
  2. Your time frame for investing
  3. Your goals when investing
  4. Any income required from your investment
  5. Any tax issues

Quick tips for working out a property’s market value

When you are searching for the perfect property, it can be challenging to work out exactly how much you should be paying. Rather than relying completely on the word of others, you can develop your own strategy for valuing a property, so you have a better independent idea of how much it is really worth.

1. Make a comparison search

Property sales are in the public domain, so you can research your chosen area and make a list of five comparable properties that have sold within the last six months. To ensure the properties are comparable, make sure they are within a kilometre of your target property, and that they have similar features, such as the same number of bedrooms, bathrooms and car spaces, and a similar land size. Also make a note if any property has additional features such as a pool, or whether it is more conveniently located in relation to amenities such as schools and transport. Do not include properties that have not yet sold, as the advertised price is not a true indication of how it will sell.

2. Rank your list

Once you have a short list of comparable properties including the one you are planning to sell or buy, rank each property in order from “Most Desirable” to “Least Desirable.” Try to be objective in this exercise, looking at the land size and location, rather than whether you prefer one garden to another. Proximity to schools is a plus if you are valuing a three or four bedroom home, but less of a concern for a one or two bedroom home. Buyers tend to be drawn to properties with newly renovated kitchens and bathrooms, so keep this in mind when ranking your properties. Your ranking from most to least desirable might not tally with the ranking from most to least expensive – this will give you an idea of what features are important to people buying into the area.

3. Adjust for market movements

Now you have placed your target property within a list of five comparable properties so you can see where it stands in the price range between the most expensive and least expensive properties. However, the market may have shifted within the last six months from hot to cold or back again, since the first property was sold, so you will need to adjust for current market conditions. Once you have adjusted, you should have a clear idea of how much your target property is currently worth, based on its place in your ranking list.

4. Check your figures

You can back up your research by checking the median house price for the suburb in question. The Domain real estate website will also show the discounting percentage for a specific area, which is the average discount below the agreed listing price. For example if a house listed at $1 million sold for $900,000, then the discounting percentage is 10%.

Contact us today if you need assistance assessing the value of a particular property.

+61 2 6162 4546

Should you sell or buy first?

You’re ready to sell your old house and purchase a new home – but the big question is:

Do you sell first or buy first?

Whichever one you tick off first, you face the risk of some kind of limbo. The state of the market and your own financial situation can help determine the right procedure for your circumstances.

Pros and cons of buying first

Buying your next property before you sell your previous home gives you the luxury of choosing the property that suits you best and moving house comfortably within your own timeframe. If you purchase early enough, you can move your furniture into the new home, leaving the property on the market uncluttered and available for potential buyers to view. However, this strategy only works if you are in a strong financial position and can afford to hold out for the assets from your previous home. It’s also beneficial if the market indicates that your home will sell quickly. Alternately, you might find it financially beneficial to rent out the original property, making some income from the old home while you settle into your new home. If the first property takes a long time to sell, you could find yourself juggling two mortgages. Bridging finance can help smooth the way if your previous home takes longer to sell than expected. Another financial hazard is if your first home sells for considerably less than expected.

Pros and cons of selling first

Selling your home before purchasing another property is definitely the most financially prudent strategy. Your funds are available and you know your exact budget for the next property purchase. The stress of selling first lies in the pressure of finding a suitable property to purchase before you lose access to your previous home. House-hunting while your property is on the market can be discouraging because you may see the perfect property sell before you have the funds to make an offer. Once you have sold, the pressure of a short settlement period can result in a hasty ill-considered purchase.

Renting in between

One option to ease the stress is to rent for the period in between putting your house on the market and purchasing your new home. This gives you at least six months flexibility to sell your home and then search for the perfect property without any anxiety about potentially finding yourself homeless. In order to figure out whether this is the right option for your situation, you need to include the cost of rent for at least six months into your calculations. Even if you do purchase immediately after your sale, you will be required to continue paying rent for the duration of the lease.

Seek expert advice

An expert such as a mortgage broker can help you make an informed decision by giving you some insight into the current market. You can base your decision on whether your home is projected to sell quickly or slowly, along with your options for purchasing a suitable new property within the desired time frame.

Contact us today to get the best customized procedure for yourself.

+61 2 6162 4546

🚫 Top Property Investment Mistakes 🚫

1. Emotional investment

When you are choosing an investment property, there is no such thing as “love at first sight.” If you make an emotional investment before you have done your research into the location and the rental potential, you are at risk of making an extremely expensive mistake. Investors who let emotion rule their decision-making are far more likely to over-capitalise from the beginning, making it even more challenging to ensure your long term investment will be profitable. Your investment purchase decision should be based on thorough research into the long term profitability of the location and the specific property.

2. Lack of planning

Any long term investment strategy requires specific goals and a realistic strategy in order to be successful. Without a clear plan, you will not have any sense of direction, and this could leave you struggling to maintain your financial commitments and missing profitable opportunities.

3. Get rich quick attitude

If you are looking for a quick turn-around or a fast profit, the real estate is not the investment strategy for you. Shares and other asset classes can have an unpredictable value, property is a long term investment. Real estate is a long term investment because it takes time for a property to increase in value and there are numerous additional costs involved in buying and selling a property. The value of property lies in its long term security and lack of volatility.

4. Poor cashflow management

Your property may not generate enough income to cover the cost of maintenance, rates, taxes and management fees, particularly in the beginning so you will need a comprehensive budgeting plan and a long term strategy to ensure you always have the cash flow to maintain the property. When you are planning to purchase an investment property, a good rule of thumb is to budget an additional 10% of the property’s value to cover costs until the property becomes more self-sufficient.

5. Misinterpreting the market

Many inexperienced property investors fail to ask the most essential question of all – is this property an appealing rental prospect? Do some research into the local area and find out what types of properties are in demand for tenants, and what types of tenants you will attract. Check out the property at different times of the day to see if there are any glaring issues that may drive tenants to leave as soon as their lease expires – noisy neighbours, heavy traffic, or just an inconvenient commute to the local shops could make it difficult to rent out the property in the long term. You should also calculate the average rent in the area to see how it will cover your costs.

6. Lack of delegation

You might think a DIY approach to property management will save you money, but remember your time is valuable as well. Consider all the jobs a property manager handles – finding new tenants, conducting regular inspections, collecting rent, and managing any emergency maintenance issues. A property manager also deals with any legal issues relating to the rental property and will represent you at a tribunal if necessary. This person is an invaluable asset, and gives you the opportunity to expand your property investment portfolio with more properties, knowing you can delegate all property management issues to a full time expert.

Talk to us today to make sure you invest in a smart and safe way.

+61 2 6162 4546

Why do banks and agents value your home differently?

  • Have you ever wondered why your lender will give you one value for a house while the real estate agent has said something completely different?
  • How do you know the real value of a property when everyone is giving different quotes?

The difference in the two valuations is due to the lender and the agent assessing different aspects of the property’s value – the lender is looking at how much to comfortably lend you in relation to the cost of the property, while the agent is looking for a sale price.

  • Bank Valuations vs Market Valuation

The property’s market value is the estimated amount for which the property should fetch on the date of valuation, assuming a buyer and seller were to enter willingly into a sales transaction. The bank valuation is the amount that the lender is prepared to lend against the property.

  • How is the bank valuation made?

The bank or lender appoints a valuer to independently verify the value of the property. As the property is the asset providing security for the loan, the bank valuation generally tends to be more subjective and conservative, to protect the lender financially in case you cannot pay your mortgage and the property must be sold to cover your debt.

While the bank valuation is based on extensive research into comparable properties, it will be lowered when the buyer is borrowing more – this is a way for the bank to balance its risk. The bank’s valuer can potentially be held liable if the bank suffers financial loss, so they prefer to make a safer more conservative estimate. The valuer can also advise the bank to refuse the finance application if they believe the buyer has paid too much for the property.

  • Not happy with the bank valuation?

If you are dissatisfied with the bank valuation of your chosen property, you have two options – request a reassessment of the valuation; or cancel your finance application and start again with another lender. The bank will only do a reassessment if you can provide evidence that comparable properties reflect a higher value than their valuation.

You should also check that the market valuation reflects the true market price of a comparable property, as you may find that the seller has overpriced the property. You can hire an independent valuation company to make a market valuation of the property.

  • How is the market appraisal made?

The market opinion is assessed by a real estate agent, and establishes the asking price for the home. The agent has a different agenda than the bank’s representative – they want to value the property to achieve the highest possible price in the sale. However, they do need to work realistically within the parameters of recent sales and real estate activity in the area. The vendor can receive valuations from several agents when deciding which agent to appoint to sell the property.

Whether you are buying or selling, contact us today if you want independent advice about your property.

Top Ten Tips For First Home Buyers

Image may contain: text that says 'TOP TEN TIPS FOR FIRST HOME BUYERS'

It is a long journey from saving up the first deposit to actually owning your own home, but it is certainly a rewarding one! Your first property is an important financial and emotional investment into your future, so you want to make the most of every opportunity to make your dream home a reality.

1. Start budgeting like a home owner

The journey starts with saving for your deposit. This takes a great deal of discipline, especially in the beginning when the dream of owning a home seems so far away. Once you own your home, you won’t have so much disposable income, so start limiting your disposable income now, and put this money aside to build your deposit. And when you establish a realistic and practical budget, you will have a better idea of what you can afford once you take on a mortgage.

2. Save the biggest deposit possible

The larger your deposit, the more equity you will have in your property right from the beginning. This also means you are paying less interest. Place your growing savings into a fixed term deposit or a high interest savings account so you can grow your deposit through accumulated interest. A larger deposit will also have the bonus of making lenders look more favourably on your loan application. When they see that you are disciplined and committed to owning a home, they will know you are a good risk.

3. Minimize your debt

Accumulating debt through credit cards can undermine all your efforts to save up for a deposit. When you are ready to apply for a home loan, the lender will be examining your credit history, so if you do have ongoing debt, stay on schedule with payments so your credit rating is not adversely affected. Cut down on the credit card use, and pay off your car and any personal loans so you can concentrate on saving for your first deposit.

4. Remember to calculate the costs of purchase

Once you feel you have saved a sufficient deposit to buy the property you want, don’t forget to double check your figures to make sure you can also afford all the related purchasing costs. Many first home buyers disregard or under-estimate expenses such as inspection reports, stamp duty, Lenders Mortgage Insurance (LMI) and legal costs. When you fail to account for these expenses, you run the risk of reducing your deposit when you are ready to buy.

5. Stay within your means

House hunting can be an extremely emotive business and it is easy to get carried away about a dream property and forget that you can’t actually afford it. You need to maintain strict self-discipline so you don’t become tempted to purchase a property that is priced beyond your means.

6. Apply for the First Home Owners Grant early

The First Home Owners Grant is a government initiative designed to assist Australians in purchasing their first home. This grant can save you thousands in fees and duties. The conditions and benefits vary from state to state so visit the First Home Owner Grant website to learn how this can help you.

7. Research incentives and concessions

Each Australian state and territory also offer their own incentives and grants to first home buyers, including stamp duty concessions. So it pays to do your research on what financial assistance you are eligible to receive where you live.

8. Choose a property that suits your needs

Stay objective when you are looking at houses, and write up a list covering all the essential requirements of your ideal property. The list will generally centre on property size, location and price, although you may have other key requirements that need to be included on the list. You can also include a list of “wants” but these should be negotiable.

9. Don’t forget the property inspection

Once you have found your dream property, don’t assume that everything is as perfect as it seems on the surface. Arrange for an independent property inspection, so you know exactly what you are buying. Potential problems could include faulty plumbing, structural faults or electrical faults. After the inspection, you might find grounds to renegotiate the asking price, or you may decide the property needs too much maintenance to be suitable.

10. Get independent legal advice

Seek legal advice before you sign the contract, so your lawyer or conveyancer can check that there are no issues such as covenants or easements hanging over the property. Contact us today if you need help or advice before purchasing your first home.

Professionalism

We are a multi-faceted business with trained experts in many fields.We give professional, qualified service so you can have peace of mind.

You can come to us with your property investment, tax, mortgage and superannuation needs confidently, knowing that you’ll be dealing with fully qualified professionals. In a sometimes unregulated, sometimes unprofessional arena, you can rest assured that Wholistic Financial Solutions is always professional, qualified and licensed. We’ll give you the experienced and expert advice you’ve been looking for. You’ll find people with solid, stable reputations eager to pass on their hard-earned knowledge to you.

Estate Planning & Wills

Wholistic Financial Solutions is now able to offer full Estate Planning Services including Estate Planning, Tax Advice for Estates, Will drafting, setting up and running Testamentary Trusts and Death Benefit planning advice.

 In our opinion, a Will is best drafted with Taxation Planning in mind.  Thus it makes sense for you to see us to discuss your Estate needs.

It is my firm opinion that anyone who has children (at whatever ages) should ensure that their will contains a Testamentary Trust.  Establishing testamentary trusts in your Will provides your beneficiaries with a large degree of flexibility in dealing with their inheritance.

Further, in many cases these trusts will provide significant protection for a family’s wealth.

The benefits of Testementary Trusts are explained in more detail on our Fact Sheet below.

However in summary;

*        They provide major tax advantages which can be used to grow the family wealth by taxing all income at adult rates even if distributed to minor beneficiaries

*        They provide Capital Gains tax concessions allowing assets to be transferred to the trust without CGT

*        They provide major Asset protection benefits

I believe the tax concessions alone are enough to make Testamentary Trust an invaluable strategy however the Asset Protection benefits can be even more attractive.  Let’s face it, and to be blunt – you don’t know when you are going to die!  How would you feel if everything you have ever worked for passes not to your children but to a greedy recently ex-partner or creditors if your child is in financial difficulty.  Testamentary Trusts protect against this by retaining your hard worked money in a Trust that can’t be touched by anyone else other than whom you so wish.

The price of a will with a Testamentary Trust is $1,100*.  A small price to pay for peace of mind and for major tax benefits for your family for generations to come.

To get us started on arranging your will – please complete the following form

 WILL QUESTIONNAIRE

and return it to catherine@wfscanberra.com.au

Alternatively you might like to arrange a time to discuss this further and if so please email catherine@wfscanberra.com.au

*        This price is for a relatively straight forward will with TT.  Any change to this price will be notified before proceeding.

 The wills are drafted by a professional legal team. 

FACTS SHEET FOR YOUR INFORMATION (Catherine to provide the most update to date information)

Why use Testamentary Trusts
Fact Sheet – Family Trusts

Fact Sheet – SMSF’s
Fact Sheet – Vulnerable Beneficiaries

Fees

For further information about our fees and charges for estate planning and wills services, click the link below.

Contact

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