When Is The Best Time to Refinance Your Home Loan?
Nov 9th, 2020 • Home Loans
When is the best time to refinance your home loan?
All of the major banks have sliced interest rates on fixed rate home loans
Nov 4th, 2020 • Industry News • Home Loans
Five Simple Ways to Increase Loan Repayments
Aug 27th, 2018 • Industry News
Five Simple Ways to Increase Loan Repayments
Exit Costs When Refinancing
Aug 13th, 2018 • Industry News • Home Loans
Exit Costs When Refinancing
Are You Better off Buying an Established Home or a New One?
Jun 14th, 2018 • Home Loans
It doesn’t matter whether you’re a first home buyer, next home buyer or a property investor, deciding between a brand new home and an established one is an important choice that every property buyer needs to make.
To Rent or Buy?
Jun 8th, 2018 • Industry News • Home Loans
Pros of renting
- You can live wherever you want
Career and lifestyle are important considerations, whether you’re single or a family. Renting a place in a suburb or location that is close to your work, friends and ideal lifestyle amenities (like schools or shopping) can often be much more affordable than buying there.
- Flexibility
If your work or lifestyle require you to be ready to up stumps and move at short notice, then renting gives you greater flexibility and mobility. Or if your situation changes and you find you need less expensive digs, you can quickly find a rental that fits your new budget.
- Lower costs and less hassle
Renting is usually cheaper than buying and you won’t have to worry about ongoing expenses like rates, body corporate fees, maintenance, repairs and building insurance.
Cons of renting
- The ‘dead money’ argument
Have you ever heard the phrase ‘rent money is dead money’? Many argue it’s much better to pay off your own home loan than someone else’s. It’s certainly true that capital gains on a property can potentially grow your wealth, and you can look forward to living ‘mortgage free’ within 25 – 30 years.
- Restrictions
Common complaints from renters include living with the landlord’s décor, not being able to put hooks in walls, restrictions on pets, or even the number of people who live with you.
- Uncertainty
Rental properties don’t offer long-term certainty. Moving can be expensive and you’re vulnerable whenever the lease ends or the landlord decides to renovate or move back in.
- Inspections
Most rental properties require you to submit to inspections by the landlord or agent every six months. These can be stressful and inconvenient.
| What the statistics say * Based on the 2016 census |
|
|---|---|
| Percentage of Australians renting | 30.9% |
| Percentage of Australians who own their home outright | 31% |
| Percentage of Australians paying off their home | 34.5% |
Pros of buying
- Freedom to do what you like with the property
Buying your own property means you have the freedom to do whatever you want with it. You can decorate any way you like, and add value by renovating.
- Capital gains and wealth-building opportunities
You’ll own an asset eventually, and while you’re paying it off the property could potentially increase in value. What’s more, you may be able to use the equity in your home to build wealth through property or other investments.
- Certainty
You’ll have the security and certainty of knowing where you’ll be living for years to come. You’ll also obtain a degree of financial certainty – because you’ll own a substantial asset.
Cons of buying
- Affordability constraints and costs
High housing prices and low wages growth have made buying difficult for some people. However, there are incentives available like the First Home Owner Grant to help you get started. Ask us if you’d like to know more.
- Added responsibility
Becoming a home owner means you’ll have new financial responsibilities (such as paying your mortgage repayments and bills in a timely manner).
- You may not be able to afford to buy where you want to live
As a home buyer, you may have to compromise on location or property type to find a property that suits your budget at first. However, once you get a foot on the property ladder, the potential capital gains could help to make your next property purchase more ideal.
Just because you want to live close to the action doesn’t mean you have to forfeit your dream of owning property. Rentvesting is a strategy that allows you to live where you want and buy an affordable investment property elsewhere! You could potentially get a foot on the property ladder now, enjoy the benefits of capital growth and having a tenant to help you to pay the mortgage, but still live wherever you like.
Talk to us about what’s right for you
Whether to rent or buy comes down to your personal situation and goals. If you’ re considering buying, then talk to us and we’ll help you decide what’s right for you. Keep in mind that even if you don’t have a 20% deposit saved, there may be other ways to get you over the finish line to buy a home or kick off your rentvesting strategy. We’re happy to explain everything you need to know, so please get in touch today!
Can a Boarder Help You Pay Your Mortgage?
May 4th, 2018 • Industry News
Taking on a boarder could be a viable way to help you pay your mortgage, but it won’t all be beer and skittles! If you’re going to take in a boarder, there are some very important implications to consider first, as we explain in this article.The pros of having a boarder
- Additional income
- You can offset your household costs
- Potential tax deductions for property expenses
- The social factor.
- Loss of privacy
- Extra responsibilities as a live-in landlord
- The income may push you into a higher tax bracket
- You may be subject to Capital Gains Tax (CGT) when you sell
- Many lenders don’t take rent from roommates into account when assessing whether you can afford a home loan.
Legalities to consider
The money received from your boarder will generally be considered accessible income by the Australian Taxation Office (ATO), and you must declare it on your tax return. You may be able to claim deductions for expenses associated with renting out part of your home, such as interest on your mortgage. However, if you rent to a relative at a discounted or less than market rate, it can affect what you can claim. In some instances, payments from a family member for board or lodging may be considered a domestic arrangement and not rental income, so you may not be able to claim tax deductions.
You won’t have to pay Goods and Services Tax (GST) on the rent you charge, nor will you be able to claim GST credits. However, when it comes time to sell, you may not be entitled to the full main residence exemption from Capital Gains Tax (CGT) - generally you don’t pay this when you sell the home you live in. You can find more details via the ATO website, however, it’s wise to speak to your accountant about the financial implications before proceeding.
Precautions
It’s also important to familiarise yourself with your rights and responsibilities, and those of your boarder. Contact your local tenancy authority for advice. You’ll also need to follow the rules about lodging the bond with the residential tenancy authority in your state or territory.
Having a solid contract or tenancy agreement in place will help protect you, should things go wrong. The agreement should stipulate exactly what’s included (e.g. furniture and parking), when and how rent is due, details about notice required and room inspections, and bill arrangements. Also, consider your insurance needs. We partner with some of Australia’s leading insurance providers, so please ask us for help.
When interviewing candidates, be sure to ask plenty of questions and request references from previous landlords (even if it’s someone you know). Being clear from the start will help you avoid issues down the track. Talk openly about your expectations about things such as:
- privacy
- paying rent
- noise
- cleanliness
- overnight guests
- Lastly, before they move in, fill out a condition report and take photographic evidence.
Becoming a live-in landlord can help you pay off your mortgage and cover living expenses, whilst also allowing you to claim tax deductions in some instances. However, there are important implications to consider, which is why it’s so important to consult your accountant or financial planner first. If you’d like to know more about your finance options for purchasing your home, please speak to us. We can help you find a home loan that suits your specific financial needs and goals – and perhaps make it affordable without Cousin Jimmy’s contributions!
Finance Broker or Bank?
Apr 30th, 2018
Finance Broker or Bank?
Stamp Duty Explained
Apr 24th, 2018 • Industry News • Home Loans
Stamp Duty Explained
Auction by Phone
Apr 10th, 2018 • Industry News • Home Loans
Why bid at an auction by telephone?There are many reasons why you may prefer to bid at an auction by phone, rather than attending in person. These may include:
Geography: You may want to bid on a property that is rural or located interstate. Or you may want to bid at several auctions being held on the same day and can’t attend them all in person. If that’s the case, you may be better off organising someone to be there for you and work with them over the phone.
Nerves or inexperience with bidding: A lot of people feel nervous about bidding for themselves – it’s a normal reaction. It’s also normal to feel intimidated by other bidders, particularly if you’ve come face-to-face with some competitive types! Bidding over the phone can help you remain objective by keeping the excitement of the situation at arm’s length.
Avoid overspending: It’s easy to get carried away by the excitement at an auction and bid above your budget. If it’s a property you really want, it’s hard to stop adding another thousand when the object of your desires is only a few meters away – that’s why they often hold auctions at the property’s front door! It’s easier to stay in control if you place your bids remotely, because you can give your bidder an absolute spending limit.
What are the pros and cons?
Auctions can be loud and stressful, and bidding by phone can take a lot of the anxiety out of the experience. When the auctioneer starts spruiking and the crowd gathers, you won’t be distracted as you try to sort the sticky-beaks from the serious bidders. You’re more likely to remain calm on the other end of the phone, and go about things in a business-like fashion.
By the same token, not being able to see the other bidders can be a disadvantage, as you won’t be able to read their body language and gauge the competition. That’s where communication with your stand-in is essential! You may even like to use Skype, FaceTime or a similar app, so that you can “see” the competition during the auction.
How do you go about organising it?
The first step is to check that phone bids are accepted by the auctioneer, agent and vendor. If they are, you’ll most likely have to register and fill out a form beforehand nominating a stand-in to bid on your behalf. Then it’s simply a matter of nominating someone to bid for you. You may also like to organise your solicitor to be available in the event that yours is the winning bid.
What happens if the property is passed in and you want to negotiate?
If the bids do not meet the seller’s reserve, the property may be passed in or withdrawn from auction. If you are the highest bidder, you’ll have first dibs on negotiating with the seller. Your agent or contact on the other end can do this for you whilst you’re still on the phone, or can pass over the phone to the auctioneer or seller so you can speak with them directly.
How do you pay the deposit and sign on the dotted line if you succeed? When you fill out the paperwork to nominate your stand-in, you can specify how you’ll pay the deposit on the day if successful (usually 10 per cent of the purchase price). You can authorise the agent or auctioneer to complete a signed blank check, provide a signed bank cheque for 10 per cent of your maximum bid, authorise the stand-in to pay the deposit on your behalf, or transfer the money into the agent’s trust account.
In terms of the sale contract, you can nominate the authorised bidder or auctioneer to sign on your behalf. Alternatively, you may like to be present and go along to sign once the phone bidding is over, or tee up your solicitor to represent you beforehand.
Bidding at auction by phone could be a less stressful way of securing your dream home or investment property. It can also be more convenient if you’re not close by. Remember, organising pre-approval on a loan before the auction is vital, so please get in touch. With any luck, you’ll hear those magical words on the big day – “sold to the bidder on the phone!”
ThisThis article provides general information and has been prepared without taking into account your objectives, financial situation or needs. We recommend that you consider whether it is appropriate for your circumstances. Your full financial situation will need to be reviewed prior to acceptance of any offer or loan product. It does not constitute legal, tax or financial advice and you should always seek professional advice in relation to your individual circumstances. All loan applications are subject to lenders’ terms and conditions, and eligibility criteria. Lender fees and charges will apply.
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