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.
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.
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.
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.
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.
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.
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!
Whether it’s unrequited love, or an unsuccessful home loan application, getting your heart broken is never easy. Here are five common reasons home loan applications are rejected.
Due to the banking royal commission, lenders are cracking down on home loan applications.
Applications that would have been approved in a just few days last year are now being put under the microscope for much longer periods.
To help you in your quest to secure an approval, here are five common reasons a lender may reject your loan application.
1. No proof of genuine savings
Lenders use the term ‘genuine savings’ to describe funds you’ve saved over a period of time.
Basically, if you can’t prove to them that you can knuckle down and save for a home loan, they’re going to baulk when it comes to believing that you can pay one off.
Here are seven ways to prove ‘genuine savings’.
– Regular deposits into a savings account over 6 months.
– Term deposit savings accounts held for at least 3 months.
– Shares or managed funds held for at least 3 months.
– Rental history for the past 6 months.
– Salary sacrificing through the First Home Super Saver scheme.
– Additional repayments into a car loan or personal loan.
– Deposit paid to a real estate agent, builder or developer that was originally in your savings account prior to being paid (ie. not borrowed from somewhere else).
2. You spend like a drunken sailor
Lenders not only want to see you save money. They also want you to demonstrate that you can exercise discipline when it comes to your spending habits.
Therefore lenders will trawl through your spending accounts hunting for any big-ticket items that are out of the ordinary.
This might include a $400 ATM withdrawal at a casino, or a $100 purchase at a baby store if your application says you don’t have children.
3. Your credit history ain’t so hot
Since Comprehensive Credit Reporting was introduced in July, lenders have been sharing a lot more of your credit history.
You can get a free credit report once a year from one of three national credit reporting bodies, which are listed on this government website.
If you find errors in your report, you can get them corrected. You can also take steps to improve a ‘poor’ rating by clocking up a period of consistency and reliability.
4. You don’t have a big enough deposit
Lenders like to see that you’ve saved a deposit of at least 10% to 20% before applying for a home loan.
But all too often people forget to factor in additional funds for other expenses such as stamp duty, lender’s mortgage insurance and removalist costs.
That means, for example, if you have saved $70,000 for a $700,000 loan, you might want to keep saving for a little while longer before you apply for a loan to factor in those other expenses.
5. Your employment situation
Even if you tick all of the boxes above, lenders may also reject your loan application if you haven’t been in your job long enough. And if you’re unemployed, they can’t approve it full stop.
Those who are self-employed are also running into headwinds. Lenders are becoming increasingly hesitant to approve loans unless a steady and reliable income stream can be proven. That said, there are lenders who are more flexible when it comes to self-employed workers, and we can help guide you towards them.
How we can help
We help people who are seeking a home loan overcome all of the above hurdles on a daily basis.
So if you or someone you know has recently had a home loan rejected, or you simply want to nail it the first time, get in touch.
We’d love to help you navigate the tighter lending standards to make your dream of home ownership a reality.
Information is power. Knowing the property valuation can help you secure a great price during negotiations.
Whether you’re a buyer or a seller, having an accurate property valuation conducted can give you the confidence you need to close the deal in your favour.
And it doesn’t matter if you’ve had one conducted recently. The housing market is constantly shifting.
A house worth $600,000 a year ago could be worth much more – or even less – today.
So it’s vital to always obtain reliable, up-to-date advice on the value of a home when buying or selling.
Who conducts a property valuation?
Property sellers can approach either real estate agents or private valuers for a valuation.
While private valuers are not used by banks when lending decisions are made, they are useful for a guide to the estimated market value.
In fact, “bank valuations” are altogether another thing. They’re conducted by a lender to determine their risks when you apply for a home loan. And they’ll usually be more conservative than the market valuation.
What exactly is meant by “market value”?
The market value of a property reflects the price that a willing buyer and willing seller negotiate before a transaction takes place.
It is not the current listing price of the property or the amount of money that was last offered for the property.
How property is valued
A property valuer takes a number of different things into account before coming up with a figure.
Typically, they look at the number and type of rooms, the size of the property, location, and areas for improvement.
They may also look into whether the building has a sound structure, the quality of the property’s interior design and fittings, ease of access, and planning restrictions.
Outside the property, they will look into any local council issues and compare recent sales figures in the area to understand how in-demand the property may be.
Factors that influence value
Many of the factors that decrease a property’s value are beyond the control of homeowners.
The popularity of a property’s location and surrounds will have a huge impact on its price. For example, a new whizz bang unit block may go up next door making yours look outdated, or a new high rise could block your ocean view.
Government legislation – such as changes to foreign ownership or Labor’s proposed changes to negative gearing and capital gains tax – can also impact the market.
There are, however, ways that sellers can increase the value of their home outside fluctuations in the market. We’ll take a look at a few below.
Kitchen and bathroom: These areas attract the most interest from potential home buyers. Consider allocating a chunk of your budget towards new sinks, countertops and cabinets.
Fresh paint job: Painting can make a property feel new. Neutral creams and whites suit most people’s preferences. Lighter shades also give the impression of spacious rooms.
Get trimming: If your property looks gloomy, try trimming overgrown bushes, mowing the yard, and growing flowers.
Improve energy efficiency: Buyers may dig deeper into their pockets for a home that helps them save on energy costs. Install appliances with positive energy conservation ratings. Also, replace old windows with ones that have a durable sealing.
And a quick warning to the buyers out there. Make sure you don’t allow yourself to get “wowed” by cosmetic upgrades. Remember that there are other important factors you’ll want to consider when you evaluate a property too.
Want to conduct a property valuation?
If you’d like help finding out exactly how much a property is worth, then give us a call.
We’d be more than happy to put you in touch with a reliable, independent valuer who will help give you an insight into the market value of the property you’re looking to buy or sell.
So you’ve decided to finally take the plunge and start saving for a deposit to buy your first home? Here’s a few handy tips to get you started.
Saved for a holiday before? Or a car? What about TV or computer?
The good news is that saving for a house deposit isn’t too dissimilar. It’s just on a much grander scale.
However by following the tips below you can achieve that goal in a year or two.
Step one: Create a budget
Your very first step is to work out exactly how much you can put away in a savings account each month. And to do this, you need to create a monthly budget.
First, calculate your income: Look at your pay slips or your bank statements to see how much is going into your account on an average month.
Second, work out your expenses: Check your bank statements, bills and receipts to calculate how much you’re spending on things like rent, groceries, transport, medical expenses, utilities and clothing. Include payments you make once or twice a year, like car registration, and work out the monthly cost.
Third, set up your budget: Once you know your income and expenses hop online and use our free budget planner to crunch the numbers.
Four, review, cut back and save money: A daily take-away coffee costs $120 a month. So too does about fifteen drinks at a bar over the course of a month. Eating out at a restaurant, or takeaway food, is also much more expensive than cooking at home. Regardless of your vices, the best way to stop any wasted spending is to track your money over a month or two and identify where the leaks are.
Step two: Work out how much you’ll need to save
While most of us dream of living in that $1 million home nestled in an inner-city leafy suburb, set your eyes on something a little more realistic.
Remember, you have to save a deposit of about 10-20% of the property’s value,.
If it’s your first home you’ll most likely aim to save something in the ballpark of $200,000 to $500,000.
That means you’ll be looking to save anywhere between $25,000 to $100,000.
Step three: Set timelines, track your progress
Once you’ve determined a figure you want to save, you now need to create a roadmap to get there.
The first few months will be the toughest, so set realistic expectations to begin with and increase as time goes on. Rest assured however that as you see your savings increase, you’ll be more and more motivated to cut back on your expenses.
For example, aiming to save $1,000 for your first month, and then finding an additional $100 in savings each month means you’ll have saved more than $20,000 (incl. interest) over the course of a year.
Even better news, in 18 months’ time you can have enough for your home deposit if you start saving now.
Sticking to these goals may mean you need to opt for a local holiday camping at a nearby national park instead of jet-setting overseas.
But remember, short term pain for long term gain.
Step four: Look into savings accounts and schemes
Once you’ve started saving you’ll want to make sure you’re not tempted to spend it. Look into a savings account with a good interest rate or a term deposit.
Whatever you choose, make sure it’s difficult to access so you don’t get tempted to spend it.
You might also be eligible for the federal government’s First Home Super Saver (FHSS) scheme, which allows you to save money for a first home inside your superannuation fund.
This, in turn, allows you to save faster due to the concessional tax treatment that super offers.
To be honest, however, this step is very much dependent on your individual situation, so if you want more in-depth tailored advice in this area, give us a call for a chat. We’re more than happy to discuss all your options.
If you had a roadmap for life, buying your first property would fall somewhere around getting married and having your first child. You spend hours upon hours researching up on the first two, so it only makes sense to do a bit of homework on this one, too.
If you’re anything like the average Aussie, you can’t wait to crack into the property market and buy your first home.
And not without reason. Property in this country is not just a home. It’s a secure, long-term investment with clear financial returns.
But before you dive head-first into the property market, it pays to do a bit of due diligence.
Here’s a checklist of what you should always consider before making one of the biggest financial decisions of your life.
Depending on your circumstances, and what state you’re looking to buy property in, you may be eligible for one of the following first home buyer’s grants:
– Queensland and South Australia offer $15,000 to first-timers buying or building a new home under certain value limits.
– NSW, Victoria, Tasmania and Western Australia offer a $10,000 grant for the purchase or construction of new homes (maximum value limits apply). Also a $20,000 First Home Owner Grant is available to applicants in regional Victoria.
– ACT offers grant of $7,000, while the Northern Territory makes $26,000 available to eligible applicants.
Stamp duty concessions
Stamp duty, which is a tax that is levied on documents, is one of the biggest upfront costs when buying property. Fortunately for first home buyers, many states offer a partial or full concession:
NSW: Exemptions offered on new homes valued up to $650,000, and concessions for homes valued between $650,000 and $800,000.
Victoria: Exemptions on new or established homes valued below $600,000, while homes priced between $600,000 and $750,000 also offer stamp duty concessions.
Queensland: Offers a stamp duty concession of $8,750 for homes up to $504,999.99. For homes between $505,000 to $549,999.99, concessions of ranging between $7,875 and $875 apply.
WA: Exemptions and concessions are available when purchasing homes valued at less than $530,000 and vacant land less than $400,000.
NT: Offers a full stamp duty concession to first home owners on the initial $500,000 value of the home, which equates to stamp duty savings of up to $23,928.60.
ACT: A flat $20 fee for properties priced $455,000 or less. An extra $13.60 for each $100 increment for homes up to $585,000.
Tasmania and SA: No first home buyer concessions
Allow for interest rate rises
You may have seen in the news recently that The Reserve Bank kept official interest rates on hold at a record low of 1.5% the longest run since the bank’s independence.
There’s only one way for them to go from here: and that’s up.
In fact, Reserve Bank of Australia governor Philip Lowe is already urging borrowers to prepare for interest rates to be lifted as the economy improves.
“The last increase in the cash rate was more than seven years ago, so an increase will come as a shock to some people,” Dr Lowe told an audience in Perth on Wednesday.
We have a handy calculator that can help you determine how much a potential interest rate rise will cost you. Also, it may also be worth considering locking in the interest rate while you can.
Location, location, location!
When you buy your first home, you may want to make sure it’s in an area that will yield strong rental returns… So make sure you do your research.
Also, an investment property is only a good investment if it delivers you a return, so when selecting a place to buy, you need to be confident it will increase in value.
Research the neighbourhood to get an understanding of current price trends, and to see what’s on the cards – roadworks, public transport changes, business or residential developments – which could affect its value in the future.
The type of property
Sure, it’s nice to picture yourself in a giant four bedroom inner suburban home, but you need to be realistic when it comes to your mortgage repayments – especially with interest rates tipped to rise.
Try and live within your means for your first home and then leverage off it later.
If that means considering a smaller inner city apartment, or a modest home in the outer suburbs, at least you’ll be able to afford your repayments if things get tight.
While it’s nice to crack into the property market, you don’t want it to come at the expense of literally everything else in your life.
When you’re crunching the mortgage sums, sure, make sacrifices, but ensure you still have enough to live comfortably.
We have a budget planner that can assist you in this area.
You also need to be sure you have enough money left over to reach your other important short and medium-term financial goals, such as paying off a personal loan or investing in education.
Compare different mortgage options
An investment property brings various potential tax implications so it makes sense to shop around for a mortgage that minimises your tax obligations, and maximises your capacity to achieve other life goals.
All too often people simply go to the bank they have their savings account with, and get ripped off in the process.
This is where we come in.
We have an in-depth knowledge of the lending options that will be available to you, and will act as a middleman on your behalf when dealing with potential lenders.
We won’t stop until we’re confident that we’ve secured a great loan that best fits your needs.
Taking the leap into the world of property investment can be daunting, particularly if it’s your first time.
If you’re still not sure about what you need to consider before signing the paper work, come and have a chat with us.
We’re happy to talk you through your options to help ensure your investment pays off.
They grow up so fast. One minute they’re nagging you for a dollhouse, the next, it’s for help buying a two bedroom unit in an up-and-coming suburb. If you always find it hard to say ‘no’ to your kids, here’s how to say ‘yes’ the right way.
You’ve probably heard your children complain about how hard it is to crack into today’s property market.
And smashed-avocado shenanigans aside, they do have a point. It is tougher nowadays.
With the property market constantly on the up-and-up, reaching that 10% to 20% deposit can feel like a mirage for your child.
The good news is that you can help them obtain that slightly out-of-reach home loan by using the equity in your property.
How it works
Banks find it risky to lend to borrowers who have an unstable job or low deposit. But they do allow seemingly more-reliable immediate family members to guarantee a home loan.
Guarantor loans have huge benefits for your children, including:
No deposit required: If guaranteed against a parent’s property equity, your child may be entitled to borrow 100% to 110% of the purchase price of a property. That means no deposit is required. Instead, your child can focus their savings on white goods and repayments.
Discounted interest rates: Guarantor loans can come with reduced interest rates and we can help you secure a great deal.
No Lenders Mortgage Insurance (LMI): Your child will likely not need to get LMI because the equity is usually enough of a guarantee to protect the lender against losses.
Things parents should keep in mind
Sounds great, right? But it’s not entirely without its risks. Here’s what you as a parent need to keep in mind:
Safeguard your credit report: Be sure that you can honour the repayments in case things go awry and your child is unable to pay. You should be positive that they will uphold their end of the bargain, but also prepare for the unexpected.
Financial risk versus emotional benefits: Going guarantor makes you financially responsible if your child defaults on payments. The emotional benefits, however, can outweigh the risk.
Impacts on your borrowing capacity: Future credit providers will take into account the guaranteed loan. They will assess your borrowing capacity based on it, and whether or not you are an active participator in the repayments of your child’s mortgage.
How we can help
We understand that when it comes to your children, it can be near-impossible to take your emotions out of decision making. That’s where we come in.
We can help you calculate whether or not you have the equity to make this work, and assess your child’s financial capabilities to see if they’re in a position to be making repayments.
We’ll also help you understand your legal liability as a guarantor before helping you make the big decision. So give us a call today.