How to welcome a baby into the family and stay on budget

How to welcome a baby into the family and stay on budget

Welcoming a baby into your family is one of the most joyous occasions of your life. But just like anything worth celebrating (such as your wedding day or buying your first property), it’s not without its expenses.

How quickly they grow! The bills, that is.

Did you know it costs roughly $300,000 to raise a child from birth to age 17?

If you break that down, that’s $1470 a month.

This can put a significant strain on your monthly budget and mortgage repayments.

Rest assured, however, there are several steps you can take in advance to minimise the impact on your new family’s bottom line.

  1. Obtain the essentials in advance

The upfront expenses are really going to whack your budget hard. So it’s best to obtain the items you’ll need well in advance to spread the cost.

Of course, you can purchase a brand new bassinet, playpen, clothing, car seat, cot, stroller, toys, high chair and changing table.

But chances are you don’t really need that fancy, brand new $1,000 cot. Focus on your needs instead of your wants, because wanting can quickly add up.

There’s absolutely nothing wrong with obtaining gently-used items second-hand, either at a substantial discount through trading websites or for free from a family member or friend. Remember that bub outgrows everything quickly anyway.

  1. Check into paid paternal leave and corporate leave

If you worked before having your baby and made under $150,000 annually, you could be eligible for the government’s Paid Parental Leave program.

You do have to apply, but you get 18 weeks of minimum wage benefits (amounting to $719.35 per week before taxes).

There’s also a two-week partner and dad pay option available, and take time to check into your company’s leave programs.

  1. Get on childcare waiting lists

Unless you plan to stay home with your children or have family members who will help provide childcare, get your name wait-listed at several childcare facilities.

Availability is a huge issue, so getting on the lists quicker will help in the long run. You can use the Childcare Subsidy Estimate Calculator to figure out if you’re eligible for entitlements.

  1. Update your life insurance

It’s common for Australians to have total and permanent disability and death benefits through their super fund.

However, while the life insurance coverage may have been adequate pre-children, there’s a good chance it won’t be enough for a single parent to comfortably raise a child.

Additionally, you don’t want to fall into the trap of just insuring the breadwinner in your family. Everyone should have coverage in case something happens to one, or both, of the parents. This can be a complicated area to navigate alone though, so be sure to seek financial advice.

  1. Make a will

Even if you don’t have significant assets or debts, you need a will if you have children.

Not only does a will specify what your family does with your belongings (including your super and insurance), but it also specifies who makes decisions if you can’t make them yourself, any wishes you may have, and who will take over raising your child or children if both parents pass.

  1. Prioritise existing debt

If it’s possible before the baby comes, prioritise your existing debt and work on paying it down – or off – before the baby is born.

Once the baby arrives, you may not have a whole lot of spare cash to put toward any existing balances. Consider consolidating your debts or speaking to us about refinancing your loans or mortgages to one with a lower interest rate.

  1. Update your monthly budget

One of the best things you can do is update your monthly budget with your newest family member in mind. It’s also great to start living on this budget before your bundle of joy arrives – start practising living on less.

You can update (or create) your budget using our Budget Planner. Don’t forget to include your quotes for childcare and any new miscellaneous expenses you’re likely to incur.

  1. Start an emergency fund

If you don’t have an emergency fund, start one. You’ll want to have at least three to six months worth of living expenses saved, with the goal of at least a year’s expenses.

This can provide a buffer that you and your family fall back on if you run into unexpected expenses like an accident, the car breaking down, or something in the house needing immediate replacement.

Final word

The last thing you want during this happy time is to worry about your finances. That’s why it’s so important to prepare as early as possible.

If you’d like help with any of the steps above, then please get in touch. We’d love to help make sure that your first few months as a new family are enjoyable ones!

5 ideas to help first home buyers break into the property market

5 ideas to help first home buyers break into the property market

While housing affordability is improving across the country, for many young first home buyers cracking into the property market can feel like breaking into a fortress. Here are five ideas that can help bust down that door.

Housing affordability for new mortgage borrowers in Australia will continue to improve over the next 12 months because of declining housing prices, shows the latest research from Moody’s Investors Service.

That said, there’s no denying that hopeful first home buyers have a much harder time breaking into the market than those who house-hunted in decades past.

In fact, the dwelling price to income ratio showed a 78% increase between 1980 and 2015.

With that in mind, here are five tips to help you bang down the property market front door.

  1. Consider “rentvesting”

Rentvesting is a term used to describe the act of renting a property in the neighbourhood you’d like to live in, while purchasing an investment property in a more affordable neighbourhood and renting it out to a tenant.

That way, you’re able to live where you want while building equity in a home at the same time.

This tactic has become so popular in recent years that conventions, seminars and dedicated property investment businesses have begun popping up to help people do it effectively.

  1. Take advantage of government schemes and incentives

Government schemes and incentives, such as the First Home Owners Grant (FHOG), can be a great way for first-time home buyers to offset some of the cost of purchasing their first home.

Similarly, many states and territories offer stamp duty discounts for first home buyers, which can also save you thousands of dollars.

Each state and territory has different rules around who is eligible to apply for them, but by and large, they make buying your first home more affordable.

  1. Live at home while you save for a deposit

As unappealing as it may first seem to live with your parents while saving for a home, the idea becomes a lot more digestible when you consider that the national median rental price in Australia is $450 a week.

That’s $23,400 a year.

If you include all the money you’ll save by splitting food and utility costs (including water, gas, electricity, internet and phone bills) with your parents, you could save up to $30,000 a year.

  1. Share the cost of ownership with a friend

If the property you want is out of your reach, why not consider going in on it with a friend or relative?

Splitting the cost of a home purchase with another person can allow you to build equity in the home of your choice, without overstretching your resources.

Just keep in mind that you’ll want to speak with a lawyer and draw up an agreement regarding ownership and mortgage liability, plus things like how maintenance costs will be met and what happens if someone wants to sell in future.

  1. Rent a room in your house out to a tenant

If you want to own the property you live in and don’t want the mess that can come with sharing ownership with another individual, then renting out a room in your house can be another great option.

By renting out the room for $200 a week you can make $10,000 a year – plus you’ll save on utility bill costs.

If you’re not too fond of having a full-time housemate, consider creating a guestroom and leasing it out on Airbnb.

Just be sure to take out appropriate insurance and keep accurate records of the income you earn from Airbnb as the ATO is cracking down on undeclared income from the platform.

Final word

The Australian housing market may have cooled off in recent months, but pricing is still high enough that it can be very challenging for first-time home purchasers to break into the market.

By getting creative with some of the tips in this post, you’ll stand a better chance at turning your dream of owning your first home into a reality.

If you’d like any other help cracking into the property market then please get in touch – we’d love to help out any way we can!

Interested in increasing your rental returns by up to 30%?

Interested in increasing your rental returns by up to 30%?

What would you say if we told you that you could potentially increase your rental returns by up to 30% simply by ticking a box? You’d probably call us ‘barking mad’.

But according to new research by Domain Group data, median asking rents for pet-friendly properties are higher than for homes that don’t allow pets in almost every capital city.

Take Melbourne’s inner city, for example, where just 1% of apartments allow pets.

The median rent for pet-friendly apartments is $550, whereas the median rent for apartments that don’t allow pets is $422.50. That’s a $127.5 difference, or 30%. Think about how much quicker that could help you pay off your home loan.

It’s a similar trend around the nation, too.

In many Sydney suburbs the median rent difference ranges from 12-26%, Brisbane’s southern suburbs have a difference of 13%, and so too do Perth’s western suburbs.

Houses are no different

When it comes to the difference in house rental prices, Brisbane’s inner city leads the nation where houses allowing pets fetch 21% higher rent. Meanwhile, the Canberra suburb of Gungahlin (13%) slips into the nation’s top five among a number of Sydney suburbs.

The recurring theme seems to be that the lower the proportion of properties advertised as pet-friendly, the higher the difference in median rental prices.

“We definitely see an increase in rents when properties are pet-friendly,” one Sydney real estate agent told Domain. “Hands down it’s the biggest inquiry we get for any property.”

Here’s what a Brisbane real estate agent added: “I love to give out a property which is pet-friendly because I know I’ll have a bigger pool of people coming through and the take-up is much faster.”

Factors to consider

Ok, so not every property is suitable for a pet. Not to mention that some strata bylaws don’t allow pets.

But if it’s something you’re interested in looking into, here are some important factors to keep in mind.

– Put in place a pet agreement: Have your tenant sign an agreement that outlines how many pets are allowed, what breeds, and what rooms they cannot enter (ie carpeted rooms). It can also stipulate that the pet should not annoy neighbours, not damage the property and that the tenant should take pest control precautions to keep the property free of fleas.

– Ask for a pet reference: There’s a good chance that the people moving into the apartment have rented another property before. Therefore be sure to ask their previous property manager how the pet behaved at that premises.

– Insurance and tax implications: While the tenant will be liable for most property damage (except general wear and tear), it’s worth double checking your landlord insurance policy to see what you’ll be covered for. And when it comes to footing the bill for general wear and tear, the good news is that it can be deducted from your rental income come tax time.

Final word

As you can see, there are some pros and cons to weigh up.

Sure, advertising your property as pet-friendly when seeking a new tenant can increase your rental return, but you’ll want to ensure you’re welcoming a pet into your investment that won’t be destructive or keep the neighbours up at night.

If you’d like to find out any other tips about potentially increasing rental returns on your property, then don’t paws for thought – give us a call right meow!

APRA suggests banks relax key lending criteria

APRA suggests banks relax key lending criteria

Here’s a bit of good news: you may be able to borrow more for your next home loan after the prudential regulator sent a letter to the banks asking them to relax a key lending criteria.

In a letter to lenders, the Australian Prudential Regulation Authority (APRA) has proposed removing its guidance that lenders should assess whether borrowers can afford their repayment obligations using a minimum interest rate of at least 7% (although most ADIs currently use 7.25%).

Instead, APRA has proposed that authorised deposit-taking institutions (ADIs) use an interest rate buffer of 2.5% over the loan’s actual interest rate when assessing a customer’s ability to manage repayments.

How you’ll be assessed

CoreLogic research analyst Cameron Kusher has done a pretty good job of breaking down how you’ll be assessed under these proposed changes:

“If someone is looking to borrow at an interest rate 3.9%, the borrower would previously have been assessed on their ability to repay the mortgage at an interest rate of 7.25%,” he said.

“Now they would be assessed on their ability to repay at a lower 6.4% (3.9% + 2.5% buffer).”

Kusher added that the proposed APRA changes seem sensible given the interest rate environment with the expectation that rates will fall from here and remain lower for longer.

“Furthermore, since 2014 it has become much more difficult to get a mortgage, that is partly because of this serviceability assessment,” he said.

Why the change?

APRA chair Wayne Byres said the operating environment for ADIs had evolved since 2014, prompting APRA to review the ongoing appropriateness of the current guidance.

“APRA introduced this guidance as part of a suite of measures designed to reinforce sound residential lending standards at a time of heightened risk,” said Mr Byres.

“Although many of those risk factors remain – high house prices, low interest rates, high household debt, and subdued income growth – two more recent developments have led us to review the appropriateness of the interest rate floor.”

Mr Byres said with interest rates at record lows, and likely to remain at historically low levels for some time, the gap between the 7% floor and actual rates paid had become quite wide in some cases, and “possibly unnecessarily so”.

What does this mean for borrowers?

Mr Byres said the changes are likely to increase the maximum borrowing capacity for a given borrower.

However, he warned banks that the changes are not intended to signify any lessening in the importance that APRA places on the maintenance of sound lending standards.

“The proposed changes will provide ADIs with greater flexibility to set their own serviceability floors, while still maintaining a measure of prudence through the application of an appropriate buffer to reflect the inherent uncertainty in credit assessments,” Mr Byres said.

What next?

A four-week consultation will closed on 18 June, ahead of APRA releasing a final version of the updated guidance.

CoreLogic’s Kusher said the changes will allow some borrowers who can’t quite access a mortgage currently to get one.

“Overall for the housing market, it will mean more people are able to get a mortgage. These proposed changes in conjunction with the uncertainty of the election now behind will potentially provide additional positives for the housing market,” Kusher said.

In the meantime, if you’d like to find out if these changes might help increase your borrowing capacity, then get in touch. We’d be more than happy to run through your situation with you.

Your home is not perfect: the value of pest and building inspections

Your home is not perfect: the value of pest and building inspections

They say that home is where the heart is. And it’s true that we spend so much of our time, money and emotions in our homes. So it can be hard to truly look at them and think that something could be wrong.

But when you’re selling your home, or looking to rent it out as an investment, any faults or flaws can cost you money.

That’s why it’s a good idea to have a building and pest inspection done before you list your home.

If any problems are uncovered, they can be dealt with there and then; if there aren’t any problems, you’ll be able to show potential buyers or renters the inspection results.

This will potentially help you get more value from your property.

Pesky pests

There are a number of common pests in Australia that can affect homes and cause problems for homeowners.

The ones most likely to cause trouble are cockroaches, rodents, and bedbugs. Destructive termites are also a serious issue in some areas of Australia, mainly in coastal areas and especially up north.

Cockroaches and rodents carry disease, get into and ruin food supplies, and leave droppings behind, making homes unsanitary. They are particularly dangerous to children and pets, though adults can also become sick from contact with these animals or their faeces.

Bedbugs aren’t likely to carry disease, but their bites are painful and itchy, and their life cycle makes it extremely difficult to remove them from a home. Like fleas or lice, their eggs are basically impervious to chemicals.

This means that a home must be treated multiple times; the first treatment will kill any adults and nymphs that are currently present; the second treatment is designed to kill any eggs that have hatched into nymphs before they can become breeding adults.

Each of these pests can be difficult to manage on your own, and often require professional treatment to eliminate the problem.

Demonstrating that your home is clear of them can make it possible to sell your home for a higher price.

If you’re renting your place out, on the other hand, you’ll know if the pests entered the property before or after your new tenants.

Building inspections

Many buyers will want their own inspector to survey the building before they place a bid, but you can sometimes skip that process by having your own inspection completed.

You can also have a building inspection completed before you even consider listing your home for sale.

Building inspectors look for all sorts of faults in a home, from major structural damage to leaking pipes.

Once any problems are identified, you can make a decision about whether it’s better to disclose the issue and lower the selling price on your home, or fix the problem before you sell the house.

Which solution is right for you depends on the specific damage and the cost of repair.

The one thing you should absolutely not do, as you prepare your home for sale, is to take the ‘she’ll be right’ approach.

There’s nothing worse than having a potential buyer uncover something you should have known about. This immediately makes the buyer wonder what else you don’t know about – or worse, aren’t telling them about.

Final word

Whether you’re looking to sell, or simply looking to get in new tenants, knowing that your property is in tip-top shape can help you maximise the return on your investment, and make smart decisions about repairs and pricing.

If you’d like to find out more about this topic, or others that may help increase the value of your property, then get in touch – we’d love to help out.

With interest rates dropping, is it time to pull the cord?

With interest rates dropping, is it time to pull the cord?

interest rates fixed variable

Fixing your home loan while interest rates are dropping is a bit like pulling the ripcord on a parachute. If you do it early you’ll get a steady ride but may miss out on a bit of action. But if you leave it too late things might get a little messy.

To fix the rate or not?

That seems to be the question on a lot of people’s lips at the moment.

We’re half way through 2019 and already 44 lenders have dropped rates on more than 500 fixed-rate home loan products.

These discounts aren’t just being offered by smaller lenders trying to attract new customers, either.

Commonwealth Bank, Westpac and NAB have all announced significant fixed rate cuts, over the last couple of months.

To fix or not to fix?

When there are so many lenders scrambling over each other to cut rates, a question we often hear from clients goes something along the lines of: “Is now a good time to lock in a rate?”

While we’d love to be able to give you a definitive answer on this, the fact of the matter is that it depends on your individual circumstances, preferences and home loan.

Let’s quickly run you through a few important considerations below.

What will the RBA do?

The first factor to consider is that these cuts were made out-of-step with the RBA.

That’s because June was the first time that the RBA has changed the cash rate since August 2016, to 1.25%.

Some economists, including AMP’s Shane Oliver and NAB’s Ivan Colhoun, predict the RBA will cut the official cash rate twice to 1% before the year’s end.

With that said, nothing is certain. It wasn’t too long ago that most pundits were predicting that the RBA was going to move the cash rate upwards rather than downwards.

The pros and cons

Locking in a fixed home loan means that it doesn’t matter whether or not the official rate goes up or down, you won’t be affected.

It can give you a sense of clarity and certainty, and as such, can help you budget and plan ahead for up to the next five years.

You might prefer a fixed home loan rate if you:

  • are comfortable with the interest rate offers being currently spruiked by lenders and won’t suffer from FOMO (fear of missing out) if rates drop further
  • prefer to accurately plan your finances in the short and mid-term
  • are concerned that you would be unable to make your repayments if rates were to rise.

However, you might prefer not to lock in a rate if you:

  • are confident interest rates will continue to fall over time
  • don’t mind having some unpredictability in your financial planning
  • prefer to go with market rates.

Give us a call

If you’re still unsure on what’s the best option for you, or you’d like us to run you through some of the home loan rates currently on the market, then give us a call.

As we touched upon earlier, lenders have dropped rates on more than 500 fixed rate home loan products so far this year, so the market is constantly shifting.

We’d be happy to look at your current home loan and run you through how it compares to some of the other products on the market.

Social media teaser: Lenders have dropped rates on more than 500 fixed-rate home loan products this year, but is now a good time to lock in a rate? We discuss in our latest article.