The Australian government has announced an additional 10,000 First Home Loan Deposit Scheme places to be provided in the coming months!
This is a massive boost to first home buyers and will help save them tens of thousands in LMI and reduce the amount of deposit needed to buy their first home. Read more: http://ow.ly/8NMD50BKiTD The last two rounds offered this year were all filled up so better hurry! Are you a First Home Buyer, or know a First Home Buyer we can help? We can help get you into your new home faster, so let's have a chat! Financial markets have been anticipating a 50% chance of the Reserve Bank of Australia cutting the official interest rates even further this year. It didn’t happen today, as the Reserve Bank of Australia has decided to keep interest rates on hold. It remains at the record low of 0.25%.
Federal Budget What economic measures will be taken to deal with the downturn caused by COVID-19 will be known after tonight’s Budget announcement. It is expected to include a number of measures aimed at both households and businesses in order to encourage them to spend and invest. Tax cuts Income tax cuts are expected to be front and centre. The government will bring forward tax cuts that were to start in mid-2022 – they will now start in July this year. Under the proposal, the top threshold of the 19% tax bracket will rise to $45,000 and the top threshold of the 32.5% bracket will rise from $90,000 to $120,000. What does this mean for the average Australian? For workers earning around $50,000 a year, the $1080 per annum tax cut that was scheduled for 2022 will be brought forward. Furthermore, this cut will be backdated to this financial year, beginning from July. They should see around an extra $30 in their pockets by December. For those earning $120,000 or more, the tax cut will be worth up to $70 a week until July 1, 2021. The maximum tax cut of $2500 in 2022 will provide around $50 a week but will be increased for the remaining weeks of the financial year. The government hopes this will encourage spending in the lead-up to Christmas, and therefore turbocharge the Australia economy. Business boost The government is also expected to offer businesses some relief. It’s not clear exactly what will be announced this evening, but is predicted to include asset write-offs and a cut to the corporate tax rate. These and other announcements, combined with the record low interest rate, should be good news for mortgage holders. If you have any questions, please don’t hesitate to contact us. Considering refinancing is a great opportunity to secure a better interest rate to your existing home loan. It can be a bit of a process, so it's best to understand a little more before jumping in... having said that, it is often well worth the hoops!
Here's a step-by-step guide to get your refinancing sorted: Step 1: Understand the need to refinance and the most common reasons for refinancing:
Knowing your 'why' makes it easier to find a new loan that fits you best. Step 2: Home loan options comparison When considering refinancing, you want to make sure you're shifting to the best new loan for the reasons that are most important to you. Make sure to seek guidance and direction in terms of the rate and features to ensure you have considered all of the important elements. You can speak with a mortgage broker, talk to lenders, or check out some comparison sites to be sure you're comfortable with your choice before you apply or transfer your home loan. Make sure to seek details regarding the conditions of your loan, features added and removed, or how long the settlement will take when refinancing. Step 3: Crunch the numbers Refinancing comes with a variety of costs. There are upfront fees to the new loan, exit fees to the old loan, and mortgage registration fees to the government, and they all need to be considered into the viability and feasibility of the proposed changes. Keep in mind that your new loan term will likely start all over again. Make sure to calculate exactly the amount of interest you can expect with your new loan and compare with your current loan to know if it's worth it to refinance. Once you have all the figures, sum it all up to be sure that refinancing outweighs all costs. Step 4: Applying for a new loan Refinancing your existing loan will mean completing paperwork just like your current loan. You will need to provide a proof of income such as payslips and your IDs. Step 5: Valuation Make sure you understand how the valuation works because in refinancing, the new lender will want to value your home. Make sure to spruce things up before assessment as there are lots of small things you can do to maximise your property's market value. Step 6: Loan approval Formal loan documents will be drafted and forwarded to you for signing once your application is approved. Be keen and read the paperwork carefully and don't hesitate to speak with your mortgage broker if you have any questions, they'd love to chat! Step 7: Settlement On the settlement day, your new lender will receive the title deeds to your home, which was previously held by your old lender. All you have to do is enjoy your new loan! With these refinancing tips, you could be in your new loan within 4 to 6 weeks! Interested to know more about refinancing and don't want to worry about all the finer detail, and want an expert to look after it all at no cost to you? Feel free to reach out, book a meeting and let's chat, it's what we are good at(because I am home all the time... and I miss people, any excuse will do!) With the rapid increase in the number of mortgage lenders offering home loans to consumers, the process is even more complicated than in years past. Fortunately, Get Smart Financial is here to help. We have regular contact with a wide variety of lenders, some of whom you may not even know about. Working with us can save you time! Purchasing a property can be a life-changing experience but the home loan application process can be really daunting if you’re new to the process. We can prepare your application on your behalf and mitigate the risks in your request. See below banks for the current turnaround times. Note: Recently updated SLAs are highlighted in Red
If you have any questions, book in a time with me below. With the rapid increase in the number of mortgage lenders offering home loans to consumers, the process is even more complicated than in years past. Fortunately, Get Smart Financial is here to help. We have regular contact with a wide variety of lenders, some of whom you may not even know about. Working with us can save you time! Purchasing a property can be a life-changing experience but the home loan application process can be really daunting if you’re new to the process. We can prepare your application on your behalf and mitigate the risks in your request. See below banks for the current turnaround times. Note: Recently updated SLAs are highlighted in Red
If you have any questions, book in a time with me below. Considering transforming your home from ‘blah’ to ‘brilliant’, but lack the funds to support your makeover? Never fear, we’ve rounded up five home renovation finance options that could help turn your dream into reality.
1 Equity Release / Top Up Home Loan This is probably the most common way people borrow money when they want to renovate. It involves borrowing against the current value of your home, before any value-adding renovations and in most cases allows you to obtain the funds upfront. You won’t be able to borrow the full value of your home but, without mortgage insurance, you can usually borrow up to 80 per cent of its value if you own it outright....It may be worth considering Lenders Mortgage Insurance however, if you can see that the renovations are going to achieve you great return on lifestyle, and / or investment! Equity is key! 2 Construction loan If you're planning to completely transform your home and undergo a major makeover, this may be a good option as you can spread the cost over a long period of time. You could even possibly borrow up to 90 per cent of the end value of your home and take advantage of mortgage rates which tend to be lower than credit card and personal loan rates. With a construction lending, the lender will assess the value of your home after the renovation based on the building plans and you can typically borrow against that value. You won’t be given the full loan amount upfront, but usually in staggered amounts over a period of time – this is called ‘progress payments’ and is linked to a fixed price building contract which will be from your builder. 3 Line of credit When you apply, you can establish a revolving credit line that you can access whenever you want to up to your approved limit. You only pay interest on the funds you use and, as you pay off your balance, you can re-borrow the unused funds without reapplying if that becomes necessary. However, care must be taken not to get in over your head in terms of serviceability and to make sure that you are actually paying off over the loan, which is not necessarily a feature of a line of credit. Rates on this product are typically much higher than a construction loan or top up loan so we want to make sure that there are no other, perhaps more suitable options for you, and that this really is the right product for you! This product feature is great if managed well, but can also be a trap if not seriously considered as your limit will never change. 4 Personal loan If you’re only making minor renovations – personal loans are usually capped at around $30,000 – this might be suitable, but interest rates on personal loans are higher than on home equity loans and payments need to be made usually over a maximum of seven years.... certainly worth looking at a new valuation to the home after the renovations are completed, as we might be able to consolidate that lending for you, and rates probably half that of the personal loan! 5 Credit cards This option should only be considered if you want to undertake really small renovation projects. The interest rates are usually much higher than on mortgages, but for a very small project, that extra interest might actually total less than loan establishment fees. Sometimes, this can be a more cost effective option than increasing, or taking a loan with Lenders Mortgage Insurance, but careful consideration needs to be taken to ensure you understand the pros and cons of this approach, and that you prioritise paying off that credit card FAST! *HomeBuilder If you’re looking for further assistance to be able to afford your property renovation project, the Federal Government recently announced $25,000 grants for eligible Australian owner-occupiers to build a new home or substantially renovate an existing home. The Government’s HomeBuilder package is designed to assist the residential construction market by encouraging the commencement of new home builds and renovations. Income and other conditions apply and this grants program is active until 31 December 2020. For more information visit the Treasury website. One thing you must do! There are very few exceptions to the rule that your renovations should add more value to your home than they will cost to carry out. Think about how the money you spend on a renovation will increase the value of your property. For example, consider making changes that would appeal to the majority of potential buyers to help you sell your house faster and at a higher price. Interested to know more in any of these? Feel free to reach out, book a meeting and let's chat (because I am home all the time... and I miss people, any excuse will do!) While some view LMI as being exclusively beneficial for lenders, we explore the value for first home buyers.
Not to be confused with mortgage protection insurance (which is designed to protect the borrower), LMI is insurance that covers the lender’s risk within a residential mortgage transaction should the loan go into arrears and the borrower is unable to resolve the situation satisfactorily. LMI is a fairly common practice within the industry, particularly for new home buyers who may struggle to save a deposit. It allows an additional fee to be paid by the borrower and usually applies when the loan is more than 80 percent of the purchase property’s price. The purpose of LMI is to ensure security for the lender in case the borrower fails to make loan repayments. Even though the actual house acts as security, the nature of the property market, like any investment class, means there is a chance that its value could decline, resulting in a financial loss for the lender. The cost of the premium is dependent on several factors, such as the loan size and property value, and most insurers are flexible when it comes to the method of payment. It generally equates to around 2-3% of the value of the property you are buying, and given it is a one-off, then it often means you can get into the market sooner. It can either be a one-off upfront premium payment or that premium could be included in the overall cost of the loan and included in monthly repayments. It is not transferable, which means a new loan may require a new fee depending on how much equity the borrower has. What’s in it for me? While it may appear that it is exclusively favourable to the lender, there is value to borrowers in paying the premium. Opting for LMI means it allows a borrower to independently purchase a property sooner than they otherwise might. LMI is the alternative to using a guarantor or having to save for a bigger deposit, both of which are not feasible options for many first home buyers. A deposit of at least 20 percent of the desired loan amount is required for a borrower not to be deemed ‘high-risk’. If you consider that the average price of a home in Sydney is $650,000, that would mean a deposit of around $130,000 is required. The beauty of LMI is that it buys time, which means borrowers with smaller deposits are able to enter the market sooner rather than later. The major benefit of LMI is that it allows the dream of home ownership to become a reality for a lot of first home buyers. To see if this is the case for you, book a meeting and let us help you! With the rapid increase in the number of mortgage lenders offering home loans to consumers, the process is even more complicated than in years past. Fortunately, Get Smart Financial is here to help. We have regular contact with a wide variety of lenders, some of whom you may not even know about. Working with us can save you time! Purchasing a property can be a life-changing experience but the home loan application process can be really daunting if you’re new to the process. We can prepare your application on your behalf and mitigate the risks in your request. See below banks for the current turnaround times. Note: Recently updated SLAs are highlighted in Red
If you have any questions, book in a time with me below. COVID-19 has been it is fair to say, like a really bad B Grade movie with George Clooney nowhere to be seen. At this point, I would even be prepared to give some opportunity to Tom Cruise (sorry Nic) to save the day, but there have been some saving graces amongst all that 2020 has been so far!
1. Refinancing With the low-interest rates, banks at this point are competing hard for customers. A different lender may offer you better features on your loan that you couldn’t get previously, like an offset account, additional repayment and redraw facilities, an interest-only option or a fixed or split-interest option... with rates just above 2%, there are some serious savings to be had if you are able to consider refinancing. If your current lender can’t offer you what you want, it's worth looking for mortgage options that do, and at the best possible rate! 2. First Home Buyer Grant There are a number of select lenders that have been provided quota for the 10,000 Scheme places for the 2020-2021 financial year, and we can assist by guiding you through your lender options, and their respective process, to achieve the best outcome possible.... we are seeing amongst the challenges of 2020, some really exciting outcomes for our First Home Buyers, some of who are really embracing Digital Inspections to achieve some fabulous outcomes! You could be in your first home with as little as 5 percent deposit with the scheme, and if you have a gift from family, and are currently renting which is a substitute for demonstrating your genuine savings, it could be even less. 3. HomeBuilder Grant The Australian government announced HomeBuilder: a $700M housing package for Australians to access $25k grants for building a new home or substantially renovate an existing home. This is available to eligible owner-occupiers including first home buyers and is a time-limited, tax-free grant program to help the residential construction market to get through the Coronavirus pandemic by encouraging the building of a new home and renovations this year... there is more information to be released, so hang on tight, this could be good! 👏🏻 4. Lesser Lenders Mortgage Insurance St. George Bank / Bank of Melbourne announced that their Lenders Mortgage Insurance (LMI) is reduced to $1.00 during the application stage to help their clients into their own home sooner for those with a loan to valuation ratio (loan / purchase price) of 85% or below. From 13 July 2020, St.George Bank is offering to let first home buyers who are borrowing up to $850,000 for a property worth up to $1 million take out LMI for the sum of just $1. This was introduced to account for how Australian first home buyers are re-evaluating their homeownership plans following the COVID-19 pandemic. Interested to know more in any of these trends? Feel free to reach out, book a meeting and let's chat (because I am home all the time... and I miss people, any excuse will do!) With the rapid increase in the number of mortgage lenders offering home loans to consumers, the process is even more complicated than in years past. Fortunately, Get Smart Financial is here to help. We have regular contact with a wide variety of lenders, some of whom you may not even know about. Working with us can save you time! Purchasing a property can be a life-changing experience but the home loan application process can be really daunting if you’re new to the process. We can prepare your application on your behalf and mitigate the risks in your request. See below banks for the current turnaround times. Note: Recently updated SLAs are highlighted in Red
If you have any questions, book in a time with me below. With official interest rates trending downward, shrewd mortgage holders may take the opportunity to call their lender to ask for a better deal.
But when even a small interest rate reduction means potential savings of thousands of dollars, is a simple phone call enough to get you there? In 2020, ‘your interest rate should have a two in front of it’, is common advice for homeowners considering the competitiveness of their loan settings. But while a number of lenders offer lower rates to new customers, it’s not always so simple for existing customers to secure the same outcome. A leading mortgage and finance broker says that if people want a better deal on their mortgage, there are two options: 1. Call your bank and ask them to match the new rate, or 2. Contact your broker and vote with your feet. And although the first option is commonly recommended, lenders aren’t always so obliging when it comes to rate-matching to get you a more affordable mortgage. As an existing client, it can be disheartening to see your bank offer new customers a lower rate to the one you currently have. Lenders regularly try to ‘win’ new customers by offering low rates. It is a great acquisition strategy. But if they refuse to match your current rate to this new offer, you can always contact a broker and refinance with a lender who is hungry to win your business. Mortgage brokers, on average, have access to a panel of 30-40 lenders and this creates opportunity for competition amongst lenders. Mortgage brokers are also in a position to offer you a more in-depth and customised level of service. This can allow them to find their customers a mortgage product that may suit their current needs, wants and circumstances. Want to know more? There is so much to know, and understand... want to get into the driver’s seat and take control of your financial future? Let's have a chat to find out more!
I wanted to take a minute to appreciate and celebrate my birthday here on the blog :)
I had a little cake... looks like the start of a bush fire, but... CAKE!!!!
When the team take my birthday to the next level and surprise me with this!!! ??????
Super happy to be 21.... again!!!
On Monday, 27 July it was announced by NSW Premier Gladys Berejiklian, that from 1 August, the NSW state government will temporarily axe stamp duty for first home buyers purchasing newly built homes that are valued at under $800,000 (up from the previous limit of $650,000).
This is to support approximately 6,000 first home buyers plus boosting the construction industry. This move will surely help in creating jobs amid the COVID-19 crisis. The state government will also raise the threshold for stamp duty on vacant land. The adjustments will last for 12 months and only applies to first home buyers purchasing newly built homes and vacant land. Estimate from the federal government would be approximately 27,000 grants across $10 billion building projects, supporting 140,000 direct jobs and 1,000,000 related jobs. Interested to find out more? Let's have a chat! With the rapid increase in the number of mortgage lenders offering home loans to consumers, the process is even more complicated than in years past. Fortunately, Get Smart Financial is here to help. We have regular contact with a wide variety of lenders, some of whom you may not even know about. Working with us can save you time! Purchasing a property can be a life-changing experience but the home loan application process can be really daunting if you’re new to the process. We can prepare your application on your behalf and mitigate the risks in your request. See below banks for the current turnaround times. Note: Recently updated SLAs are highlighted in Red
If you have any questions, book in a time with me below. Reviewing your lending, particularly in the year that has been thus far could be ideal means to minimize expenses, boost savings, and provide you financial parachute fund at a time of uncertainty such as the current. This could save you some money or even make money, depending on your strategy,and importantly, could help you sleep a little better at night to know that you have your finances under control, and have a contingency plan in place.
Tips: Consider asking what features you really need, and those you perhaps don't which could save you thousands! The official cash rate is at its lowest ever in 60 years and interest rates are at an all-time low. Your current rate may not be the most competitive at this point even if your mortgage is just over two years old. A very slight rate change could trim your monthly repayments instantly, improving your liquidity in these times of financial stress. Banks at this point are competing for customers. A different lender may offer you better features on your loan that you couldn’t get previously, like an offset account, additional repayment and redraw facilities, an interest-only option or a fixed or split-interest option. If your current lender can’t offer you what you want, it's worth looking for mortgage options that do, and at the best possible rate! Shorter loan terms If you have a steady income despite the COVID-19 crisis, this may be the best time to refinance to a lower interest that could pay off your loan faster with the same repayments. With refinancing, you can switch to a mortgage option with a shorter term, maintaining the same repayment amount. Debt consolidation If you're currently juggling a lot of non-mortgage debts, making it hard to pay, manage and track bills and payments, you might want to consider consolidating payments. If you bundle multiple payments into your home loan, you'll have a clearer timeline on when you can be debt-free, plus you might have lower interest rates than other rates like credit card loans. Refinancing costs Despite the benefits, there may be costs involved in refinancing, depending on your loan and lender. Example costs and fees could be exit fees, government charges, or Lenders Mortgage Insurance. It is best to consider getting a piece of advice from a mortgage broker if you plan to refinance. At Get Smart Financial, we can help you with refinancing, so you can save more, and make the odds be in your favor. Book a meeting so we can discuss! With the rapid increase in the number of mortgage lenders offering home loans to consumers, the process is even more complicated than in years past. Fortunately, Get Smart Financial is here to help. We have regular contact with a wide variety of lenders, some of whom you may not even know about. Working with us can save you time! Purchasing a property can be a life-changing experience but the home loan application process can be really daunting if you’re new to the process. We can prepare your application on your behalf and mitigate the risks in your request. See below banks for the current turnaround times. Note: Recently updated SLAs are highlighted in Red
If you have any questions, book in a time with me below. With interest rates at an all-time low, and many lender’s fixed rates lower than their variable options, locking in an interest rate on your home loan to guard against possible future fluctuation may be attractive. However, it pays to know the ins and outs of fixed-rate loans before committing to one.
When purchasing a property, refinancing, or just renegotiating with your current lender, borrowers can generally decide between fixed-interest loans that maintain the same interest rate over a specific period, or variable-rate loans that charge interest according to market rate fluctuations. Fixed-rate loans usually come with a few conditions: borrowers may be restricted to maximum payments during the fixed term and can face hefty break fees for paying off the loan early, selling the property, or switching to variable interest during the fixed-rate period. However, locking in the interest rate on your home loan can offer stability. For those conscious of a budget and who want to take a medium-to-long-term position on a fixed rate, they can protect themselves from the volatility of potential rate movement. Fixed rates are locked in for an amount of time that is prearranged between you and your lender. Some lenders that offer seven-year or 10-year fixed terms, but generally one to five years are the most popular. The three and five-year terms are generally the most popular for customers because a lot can change in that time. Further to this, fixed-rate loans can also be pre-approved. This means that you can apply for the fixed-rate loan before you find the property you want to buy. When you apply for a fixed rate, you can pay a fixed rate lock-in fee also known as a ‘rate lock’, which will, depending on the lender, give you between 60 and 90 days from the time of application to settle the loan at that fixed rate. With some providers, this fixed rate lock in may be free, such as with Adelaide Bank or Macquarie Bank. With other providers, the fee could range between 0.12% of the loan amount or more, or a flat fee of anywhere between $350-$750. If this is an important feature for you, then the cost of the fixed lock in should absolutely be factored into your understanding of what the proposal will cost you all things considered. It will also depend on the lender as to whether the rate lock will be applied on application or approval. It is important to be really clear on this element, to ensure there is no uncertainty. Pre-approval helps you to discern how much money you are likely to have approved on the official application. Knowing that your potential lender will offer a fixed-term, fixed interest loan gives further peace of mind for those borrowers looking to budget precisely rather than be susceptible to rate fluctuations. Borrowers should also consider the possibility of arranging a ‘split’ loan. This option allows you to split your loan between fixed and variable rates – either 50/50 or at some other ratio. This can allow you to ‘lock-in’ a fixed interest rate for up to 5 years on a portion of your loan, while the remainder is on a variable rate which may give you more flexibility when interest rates change and potentially minimize the risks associated with interest rate movements. Also, be aware that at the end of the fixed-rate term, your loan agreement will include information about how the loan will then be managed by the lender, usually to a ‘revert’ variable rate – which may not be the lowest the lender offers. You should be absolutely discussing your plans for your loan with your broker in the lead up to the expiry of your fixed rate, to ensure that you achieve the best possible outcomes! Want to know more about how to finance your property purchase and whether or not you're eligible for pre-approval, or to review your existing lending? Feel free to reach out, book a meeting and let's chat! One big perks of owning an investment property is claiming depreciation, which is the assessed annual decline in the value of fixtures, fittings, and buildings, which you can claim as a tax deduction to reduce your taxable income.
Surprisingly, many property investors are missing out on major tax deductions that can save them so much money in claiming this depreciation. Claiming depreciation is a great way of minimising your tax, to maximise your cash flow return. This is one of the most under utilised claims available to property investors. Generally, there are two types of depreciation available for property investors, depreciation on building allowance and depreciation on plant & equipment. Commonly known as a building write off, building allowance is the deduction on the building structure. On the other hand, plant and equipment is the deduction for removable items within the building itself, such as tools and equipment. A depreciation schedule includes the breakdown of all building allowance costs, plant and equipment costs, the rates and effective lifespan estimate for each item, and a breakdown of how much you can claim at the end of the financial year. There are two methods of a good report, diminishing value method and cost value method, so it gives you different options for claiming depreciation on your assets. The cost in preparing your depreciation report varies depending on the type of property, it's location, size, and all other factors. Tons of notable quantity surveying companies offer a money-back guarantee, so you have nothing to lose and possibly thousands to gain! Still have more questions in claiming depreciation? Book a Zoom meeting so we can chat! The First Home Loan Deposit Scheme is here to assist eligible first home buyers in purchasing a home sooner with a smaller deposit than what was previously required.
10,000 more opportunities are now available to help Australians buy their first home! It provides a guarantee to participating lenders that allows eligible first home buyers to purchase a home with a little deposit of 5 percent without needing to pay the lenders mortgage insurance for having less than a 20 percent deposit. With the current challenges posed by COVID-19, NHFIC anticipates the continued demand for these new 10,000 places to continue. There are a number of select lenders that have been provided quota for the 10,000 Scheme places for the 2020-2021 financial year, and we can assist by guiding you though your lender options, and their respective process, to achieve the best outcome possible. Applications will require a 2019-2020 Notice of Assessment from the Australian Taxation Office to demonstrate that their taxable income is no more than $125,000 for individuals and $200,000 for couples. You could be in your first home with as little as 5 percent deposit. Want to know more? Hit me up and let's chat! When we are assessing an application for finance, we generally align with the banks and what they request in support documentation in assessing an application for finance. While clients often have ready access to their latest 2 payslips, they sometimes need to go digging a little to find the last 1-2 years of income history for us, being likely what the banks will ask for, and sometimes some confusion as to the difference to a Notice of Assessment, a Payment Summary / Group Certificate, and a Full Tax Return. For context, the difference between the ATO notice of assessment, and the tax return, is that the ATO notice of assessment reflects your taxable income after deductions, not your gross income and the sources it came from. The banks also use the Notice of assessment as proof that what is lodged with your tax return, is in fact what the taxation office actually processed. The full tax return is comprehensive, in providing detail of who you are, where you lived, dependants, health insurance premiums paid, and gross income earned and the businesses earned from. It also details what tax concessions you received, and what tax deductions were claimed. I have attached an example (thanks google!) of each for your reference. The banks will either accept a copy of the PAYG / Group Certificate / Payment summary for the year, OR tax return + ATO notice of assessment. You may be able to download your Payment Summary from here also: https://www.ato.gov.au/individuals/working/working-as-an-employee/accessing-your-payment-summary/ The motivation behind asking for this additional information, is to:
Having trouble to find what we need? Talk to us, let’s work through it together! With the rapid increase in the number of mortgage lenders offering home loans to consumers, the process is even more complicated than in years past. Fortunately, Get Smart Financial is here to help. We have regular contact with a wide variety of lenders, some of whom you may not even know about. Working with us can save you time! Purchasing a property can be a life-changing experience but the home loan application process can be really daunting if you’re new to the process. We can prepare your application on your behalf and mitigate the risks in your request. See below banks for the current turnaround times. If you have any questions, book in a time with me below.
Thinking about growing your wealth through property is always the very first step in the process. Entertaining the thought, and wondering if it is possible, however seeing your dreams and goals come to fruition will always require planning, and working with specialists that support that dream and goal. While the property and the related benefits may be the bigger picture goal, The logistics need to be considered, such as where the deposit will come from (equity, or savings?), and what needs to occur in order to pass the bank's loan assessment, in order to obtain the finance. So, with lots of moving parts, and elements to understand, best you get into the driver's seat with having us look at what you need to do in order to occur your dreams! So, some steps, to get you thinking! Step 1: Speak with a Mortgage Broker When considering an investment property, your first port of call should always be your mortgage broker. We will review your assets and liabilities to determine how much you can borrow, which will, in turn, give you a general idea of your target price range, so you can narrow your property search within your purchase budget. Step 2: Budgeting Just like buying your first home, when purchasing an investment property, it’s essential to budget. If you’re unsure of the best way to budget for an investment property, speak with your mortgage broker to help you to get on the right path. Step 3: Important conversations Your broker will discuss your plans and your circumstances with you to determine what you can afford. Your broker will also provide statutory documentation to initiate the lending process and discuss with you what loan products will be appropriate to your specific circumstances, based on your goals and objectives. Want to know more? There is so much to know, and understand.... want to get into the drivers seat and take control of your financial future? Let's have a chat to find out more! Amidst the roller coaster ride of 2020, we reached a silver lining. The Australian government announced HomeBuilder: a $700M housing package for Australians to access $25k grants for building a new home or substantially renovate an existing home. This is available to eligible owner-occupiers including first home buyers and is a time-limited, tax-free grant program to help the residential construction market to get through the Coronavirus pandemic by encouraging the building of a new home and renovations this year. HomeBuilder is available for building contracts signed between 4 June 2020 and 31 December 2020, where construction or renovation commences within three months of the contract date. Owner-occupiers must meet the following eligibility criteria:
If you want to know if you meet the eligibility requirements or just want to know more about the HomeBuilder grant, book a Zoom meeting for us to discuss! With the rapid increase in the number of mortgage lenders offering home loans to consumers, the process is even more complicated than in years past. Fortunately, Get Smart Financial is here to help. We have regular contact with a wide variety of lenders, some of whom you may not even know about. Working with us can save you time! Purchasing a property can be a life-changing experience but the home loan application process can be really daunting if you’re new to the process. We can prepare your application on your behalf and mitigate the risks in your request. See below banks for the current turnaround times. If you have any questions, book in a time with me below. How debt impacts your home loan application
Almost everyone has a debt of some sort - whether it be paying off a student loan (HECS or HELP debt), tax debt, credit cards, personal loans, car loans, or an existing home loan. These debts can affect your proposed home loan application not only impacting your borrowing capacity, but also what type of product you are offered by the bank, depending on your repayment history. A lender will factor in your need to continue to service or meet this regular repayment obligation, in assessing your borrowing capacity or to determine your ability to service a new loan. Further, your repayment history on your existing debts plus the number of times you've applied for credit will affect your credit score. Your credit score will be a guide for lenders to examine how responsible you are with money and to qualify for a home loan. If you have a lot of unsecured credit, then this can be interpreted by a bank as a potential that the client is living beyond their means, and care must be taken to ensure that this discussion is managed carefully. Often we will see clients having taken up a number of credit cards, to take advantage of Award point offers for travel redemption or the like, without understanding the potential implication to their Credit Score or borrowing capacity. Personal loans Whether secured or unsecured, a bank or lender will consider repayments you have to make on personal loans. Same with home loans, they may factor in a buffer on your monthly repayments to stress test the repayment, should the interest rate change. Student loans Any outstanding debt like HECS debt may affect your loan application because it impacts the amount of money coming into your account each month. If you happen to have one, you'll need to start repaying HECS debt once your income reaches a certain threshold that's currently $45,881 a year, and the repayment is based on a percentage of your earnings, depending on what your annual gross earnings are. You can find out more about HECS debt repayment obligations here. Existing mortgage or home loan The first thing a lender will want to know is whether you plan on keeping that existing loan or discharging it. If you plan to discharge the loan, the lender will not factor in the cost of those repayments each month in assessing you for your proposed new loan. If you plan on keeping your existing loan, the bank will factor your need to keep paying the loan into your calculated borrowing capacity - this may or may not impact your application. The lender will also include your ability to service any loans over your investment properties (and include a proportion of the rental income you receive, as well as some tax benefits). Car loans A lender will factor in your car loan repayments. Even if you took out that loan with another person, a lender may treat the debt as it's entirely yours thus reducing your borrowing capacity, or they may split the loan proportionately, depending on that specific bank’s policy around the same. If you have a novated lease over your vehicle, it will likely come out of your pre-tax and possibly also your post-tax income and reduce the amount of money in your pocket each month. This would also need to be considered as an ongoing liability. As a general rule, if you have a car loan of $30,000, then it is likely that this monthly obligation will reduce your borrowing capacity for lending for residential purposes, by approximately $150,000. Careful discussion should be taken before applying for vehicle finance, and considered within the scope of what you are looking to achieve within property and property lending for the coming 5 years, given the potential implications. It is imperative you speak with a finance specialist to ensure that you are planning and mitigating any potential issues. Credit cards have a major impact on your home loan Lenders are less interested in how much you owe, and rather more focused on how much you can possibly owe! They're generally more interested in the credit limits than your credit card balance. The best practice for this is to consolidate your debts or reduce multiple credit cards. Consider closing some cards down, reducing the credit limit of any cards you keep, or consolidate your debts into your new home loan. It is notable that most banks will assume that your monthly repayment to a credit card, is between 3% and 4% of the limit of the card. If you have a credit card with a limit of $20,000 and the bank assumes a 3.5% repayment obligation if you were to max out that facility, then the monthly repayment could be around $700 per month. $700 per month, is equal to around $100,000 in residential finance borrowing capacity, so credit card limits can have a major impact on your borrowing capacity. Building your Credit Score Over the years, I have had so many discussions with clients, who think they should apply for a credit card, a personal loan, or a car loan, to build a credit score, but the complete opposite is true and this is an Urban Myth! For every application for unsecured credit or finance, your credit score is diminished, not improved. So, before you apply for credit to build a credit history, please speak with us. The truth is, you are far better off to put your effort into creating a savings history instead. Last but not least… A lender will always look at your income, your ability to service a loan, and your credit score. Any other loans could affect all three. Before applying for a home loan, make sure you talk to us, so that we can support and guide you towards planning and achieving the outcomes you want and need! Let's have a chat to discuss options on how we can help you save more! |
AuthorRachael Bland – Founder & CEO Archives
February 2024
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