Buying your first investment property is a big achievement, but becoming a landlord can seem overwhelming at first. Before collecting rent and watching your investment grow, you need to get things in order. Here is our checklist to help you.

1.    Consider who manages the property

While it’s possible to manage your property, it is worth hiring an agent who can take care of the ins and outs of renting out your home. This includes finding suitable tenants, collecting the rent, and dealing with issues like maintenance and repairs.  

When looking for a property manager, find someone local and experienced. Reach out to a couple of agents for a chat to see if they meet your requirements.

2.    Get landlord insurance

Landlord insurance protects your investment property from any loss or damage caused by a tenant or natural disaster.   

It’s not compulsory, but taking out insurance will give you peace of mind, and you won’t have to worry about any possible setbacks from issues that arise.

Compare different insurers as not all policies are the same. Make sure you understand what you’re covered for before signing anything.

3.    Inspect regularly

Even if you have a property manager, you should attend rental inspections. You’ll be able to see that your property is being looked after well and monitor for any maintenance issues.

4.    Know your rights

Spend some time to understand your rights and responsibilities as a landlord. It will prevent you from ending up in costly situations.

A good starting point is your state’s tenancy legislation, which covers things like rental payments, access to a property, and ending a tenancy. You should also look at your rental agreement, which sets out what you and a tenant can and cannot do.  

5.    Look after your tenants

If you are lucky to have good tenants, do what you can to look after them. Ensure the property is well maintained, be reasonable with any rent rises, and promptly address any issues.

We can help connect you to local and experienced property managers. Get in touch with us today for our recommendations.

With inflation smashing market expectations, economists are tipping a rate rise this year.

The latest Australia Bureau of Statistics data found that the consumer price index for the December quarter was up 3.5% over 12 months. This was above the Reserve Bank of Australia’s (RBA) 2 to 3% inflation target, which they forecasted for 2023 or 2024.

The RBA has stated that a rate rise would be unlikely before 2023, but economists are forecasting a move around the middle of the year.

Should the RBA increase the cash rate, lenders will typically respond by increasing the interest rates on their home loans.

If you own a home or want to get onto the property ladder, a rate rise will have implications.

Homeowners with a variable home loan will see a rise in their repayments, which in turn will affect their household budgets.

Those on a fixed rate home loan may not feel the pinch right away. Their repayments will remain the same until their fixed period ends. But once the loan reverts to a variable rate, they may be shocked by the price increase.

For those looking to buy their first home, a rate rise will make borrowing money more expensive. It may mean buying in a more affordable suburb or opting for an apartment over a house.  

The silver lining is that it may take some of the heat out of the property market, which has been mainly fuelled by low interest rates.

While news of a rate rise may come as a shock, it’s important to remember that they will remain at historic low levels for some time.

So, what can you do to prepare for future hikes? 

If you’re paying off a home loan, get ahead on your repayments while rates are still low. Ask your lender for a better rate or switch to a different lender.

Consider locking in a fixed rate for a set period. This will give you peace of mind that your loan repayments will remain the same regardless of rate rises.

If you’re planning to buy a home, don’t be complacent but don’t be reckless either. If you’re in a healthy financial position, try to secure a home sooner rather than later. Consider your options, such as first home buyer grants and parental guarantors, to help you enter the market.

Whatever your home loan needs are, get in touch with us today. We will find the right loan for your needs and ensure that you’re well prepared for any future rate rises.

Has speculation about a rate rise this year got you thinking if you should fix your home loan?

A fixed rate home loan has its pros and cons, and your decision will depend on your personal preferences.

When you choose a fixed mortgage, the interest rate stays the same for a set period – generally between one and five years. At the end of the fixed term, your loan will revert to a standard variable rate unless you choose to fix it again.

The benefits of a fixed loan are:

·      Certainty around repayments ­– A fixed mortgage gives you assurance of your regular repayments during your fixed period. This is helpful when it comes to budgeting and planning your expenses.

·      Protection from interest rate rises – Your repayments will stay the same during your fixed term, regardless of interest rates going up or down. It means you’re protected from the impact of higher mortgage repayments.

There are disadvantages to keep in mind:

·     Less flexibility – With a fixed rate, your ability to pay off your loan faster will be limited by restrictions and annual caps on additional repayments.

·     Break fees ­­– If you refinance your mortgage or pay it off before your fixed term ends, you’ll need to pay a break fee, which can be hefty.   

·     Fewer features ­– Fixed mortgages generally have fewer features, such as redraw and offset accounts.

Luckily, you aren’t forced to choose between variable or fixed. You can opt for a split loan, which allows you to fix a portion of your loan.

You can enjoy the benefit of knowing what your fixed loan repayments will be, while on the variable part, you can use an offset or redraw account or make extra repayments.

Our team can help you decide if a fixed home loan is the right choice for you. We’ll also take the guesswork out of comparing lenders in the market. Call us today.

Before making an offer on a property, it’s a good idea to get a pre-approval for a home loan. A pre-approval, also known as conditional approval, indicates that a lender is willing to lend you an amount of money to buy a property. Here are five key things to know about a pre-approval.

1.    A pre-approval tells you what you can afford

From a buyer’s perspective, knowing how much you can borrow from a lender gives you an idea of what you can afford. It means you can focus your search on properties within your budget and not waste time on unaffordable properties.

2.    A pre-approval lets you buy with confidence

With a pre-approval, you can make an offer or bid at an auction with confidence. Agents and sellers will also see you as a serious buyer and are more likely to accept your offer. As a result, you may have more negotiating power over a buyer who doesn’t have a pre-approval.  

3.    A pre-approval isn’t a guarantee

A pre-approval means you currently satisfy a lender’s requirements for a loan, but it is not set in stone. After your offer is accepted, a lender will assess your financial circumstances, and they may reject an application if your situation changes and you no longer meet their requirements. Changes include switching jobs, reduced income or savings, and increased debts. Lenders will also assess the value of the home you intend to buy.  

4.    A pre-approval gets some of the paperwork out of the way

A pre-approval application requires you to get your paperwork in order, which saves you time and stress down the track. When it’s time to get formal approval (also known as unconditional and full approval), most of the hard work is done already.

5.    A pre-approval has an expiry date

Generally, a pre-approval lasts around three months, but it can vary from lender to lender. If it expires and you haven’t found a property, you’ll need to apply for another one.

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If you’re looking to get a pre-approval, we can help you with the process. Get in touch with us today.

There’s a lot to consider when choosing a home loan. From securing a fair interest rate to making sure you’ll get approved, and in time! Here are our top tips on what to consider when choosing a home loan:

Am I getting a fair rate?

Making sure you get a competitive rate will have a big impact on the overall cost of your home loan. Lenders will generally advertise the current interest rate and a comparison rate. So, be sure to check out your options. Some lenders may even have an introductory — or honeymoon — offer that provides low short-term interest rates. 

Will I use all the bells and whistles?

Home loans can come with many bells and whistles, but will you use them all? It depends on your financial habits and what your needs are. Home loan features can include mortgage offset accounts, redraw facilities, repayment holidays, interest-only payments, credit cards, and waived exit fees. 

Does the lender align with my values?

Finding a lender who aligns with your values is becoming an essential part of choosing a home loan — together with ensuring you still get a good deal, of course. So, for example, you might consider choosing a bank that doesn’t invest in fossil fuels, or one that’s committed to gender equality, if these are issues that are important to you.

Will I get approved and in time?

Generally, getting your home loan approved will take anywhere between 4 to 6 weeks from submitting your application to securing settlement on your property. However, remember that time frames will vary, depending on demand, and the complexity of your situation. 

What fees and charges will I have to pay?⠀

Fees and charges can make a big difference to how much you end up spending on your home loan. Take note of the many types of fees and charges there are, and how often they’re accrued. Also, consider asking your lender for a better deal. Find out if there are any interest rate discounts or fees that can be waived. Common fees include establishment fees, monthly or annual fees, valuation fees, legal fees, exit fees, and lender’s mortgage insurance. 

We can help you uncover the answers to these questions and more, plus narrow down the thousands of home loan options available.

Get in touch to understand your options.

Rising house prices and ballooning household debt levels have prompted APRA to tighten up lending regulations. This comes about as more than 1 in 5 mortgage holders have borrowed more than 6 times their income, which APRA see as being too risky.

Recently, the regulator wrote to Australia’s banks to let them know they need to apply a bigger buffer when calculating how much someone can afford to borrow.

The old stress test

Before this announcement, banks had to apply an extra 2.5% buffer to their base variable interest rate when working out someone’s borrowing capacity.

For example, if the bank’s base variable interest rate was 2.69%, they had to calculate the applicant’s borrowing capacity based on whether they could afford to pay back their loan assuming a 5.19% interest rate (2.69% + 2.5%).

The new stress test

APRA now want banks to add a 3% buffer (instead of the usual 2.5%). In the example above, this means the applicant’s borrowing capacity needs to look at how much they can afford to pay back based on an interest rate of 5.69% (2.69% + 3%).

Impact on borrowing power

APRA estimates these changes will lower people’s borrowing power by about 5%. So if you were previously able to borrow $1M, you may now only be able to borrow $950k. And if you hadn’t planned to borrow right up to your maximum amount, these regulatory changes may not impact you at all.

Speak with an expert

You only ever want to borrow what you can afford to pay back, but we also want to help you borrow what you need to make your property goals a reality.

Get in touch to discuss how to put your best foot forward when it comes to applying for a home loan.

Let’s start with a caveat: choosing a home loan that’s best for you will depend on your unique situation. Of course, you’re welcome to get in touch with us for expert guidance. But first, let’s take a look at some popular home loan features, such as an offset account and redraw facility.

Both an offset account and redraw facility offer borrowers flexibility and, if used wisely, the potential to save money. But, how do these features work?

Offset

An offset account operates like a transaction account, but with one difference: the funds in your offset account are ‘offset’ against the balance of your loan. Interest is calculated against this lesser amount, so the more funds in your offset account, the less interest you pay.

To maximise the interest-saving benefits, you may want to have your salary deposited straight to your offset account and/or any big one-off payments — like your tax cheque. And, with an offset account, you can withdraw money via a debit card, just like you would an everyday transaction account. 

Redraw

On the other hand, a redraw facility allows you to make additional repayments on your loan, which you can access later if you need to, for renovations, holidays, purchasing a car, or for emergencies, etc.

Making extra payments towards your home loan means you can reduce the total balance of your loan rather than simply paying off the interest. ⠀⠀⠀⠀

So, how to choose?

Both of these options have distinct advantages and disadvantages. It all comes down to being smart about using them and being aware of all the fees, exceptions and tax implications (speak to your accountant on all tax matters).⠀

Choosing one – or both – of these options means you could reduce the interest you pay while still being able to access your money regularly. You could also pay off your loan faster. 

Get in touch with us to find out which home loan will suit your unique situation.