• Here’s why your borrowing power might soon get a lift

    Here’s why your borrowing power might soon get a lift

    Who doesn’t love a tax cut? Most of us are now only weeks away from saving on our tax bills, with Stage 3 tax cuts to kick in from 1 July. But another key advantage is that the tax cuts could give your borrowing power a nice boost.

    The upcoming Stage 3 tax cuts have received plenty of attention – some good, some bad – so we won’t focus on the politics of it today.

    But they are still expected to benefit about 13.6 million Australians, and how much tax you might save depends on your income.

    A person on the national average wage of around $73,000 will pocket a yearly tax saving of $1,504, says the federal government.

    If your income is, say, $100,000, you could expect to save $2,179 in tax each year.

    For households juggling a cost-of-living crunch, the tax cuts can’t come soon enough.

    But if you’re in the market for a new home, the tax cuts may offer an unexpected sweetener: a handy boost to your borrowing power.

    What is ‘borrowing power’?

    Your borrowing power, or borrowing capacity, refers to the amount a lender is willing to lend to you.

    It’s based on several factors including the size of your deposit, your household expenses, and your after-tax income (or take-home pay).

    The higher your after-tax income, the more you may be able to borrow.

    That could mean being able to buy a home sooner, or buying a more expensive property.

    How the tax cuts might affect your borrowing power

    RateCity has crunched the numbers, finding that for a single person on an income of $100,000, the Stage 3 tax cuts could add an extra $21,000 to their borrowing power.

    A couple with a combined annual income of $150,000 could see their borrowing capacity jump by almost $30,000.

    It makes the upcoming tax cuts great news if you’re in the market for a first home, or if you’re upgrading to your next place.

    Even if you don’t plan to borrow more, the increase to your take-home pay may make your current home loan repayments more manageable.

    Other ways to boost your borrowing power

    You may not need to wait for the Stage 3 tax cuts.

    It is possible to increase your borrowing capacity in other ways, including:

    1. Trim spending

    Cutting back on non-essential expenses could free up extra cash to grow your deposit.

    As household expenses are a factor many lenders look at when determining loan eligibility, trimming back regular costs could add to your borrowing power.

    2. Cut back your credit card limit

    When you apply for a home loan, lenders will look at the maximum limit on your credit card – not the outstanding balance.

    That’s because you could max out the card just after buying a home, leaving less cash to manage mortgage repayments.

    Contacting your card issuer to request a lower credit limit – or cancelling it altogether once paid off – could raise your borrowing power.

    3. Increase income

    Sure, it’s easier said than done.

    But if you can take on extra shifts for a few months, convince the boss you deserve a pay rise, or start a side hustle, your bank balance – and borrowing power – could both benefit.

    Find out how much you could borrow

    Yes, there are online calculators that roughly estimate your borrowing power.

    The catch is that these don’t take into account the different criteria applied by each lender. And they don’t know you, your expenses and your goals.

    That’s why it’s important to talk to us to get a more accurate picture of your borrowing power.

    We can get to know you, your expenses, and the kind of property you have your eyes set on, and then help you come up with a plan to try and make it happen.

    Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

  • How to know if you’re paying a fair price

    How to know if you’re paying a fair price

    We all love the idea of nabbing a bargain property, but for most home buyers the real issue is whether they’re overvaluing a place – and paying too much in the process.

    Buying a home is an exciting prospect, but it’s perfectly natural to have a big dose of nerves given that you’re likely committing to spending hundreds of thousands of dollars (or millions!).

    But with a bit of research, and some other handy tips below, you can help protect yourself when the bidding or negotiations begin.

    Why it’s important to pay a fair price

    Paying above the odds for a home can have serious financial impacts.

    The more you pay, the more you may need to borrow to fund the purchase. That can mean paying higher loan repayments, potentially leaving your budget thinly stretched, especially if interest rates rise again.

    Worst case scenario, you could get caught out by a bank valuation that comes in lower than the purchase price – leaving you facing a funding shortfall.

    The question is, how do you know if the asking price for a home is in line with the market, or if it’s completely over the top?

    Research helps you nail the market

    One way to hone in on what a home is worth is to have a pre-purchase valuation.

    This involves a professional valuer examining the property and arriving at a value based on factors such as the location and size/condition of the home.

    The catch is that a valuation can cost between $200 to $600.

    It also takes time to organise, and in a fast-moving market the delay could see you miss out on a property.

    A cheaper option is to do plenty of your own research.

    Websites like realestate.com.au or domain.com.au can show the median house and apartment values for individual suburbs.

    This gives you a good starting point, though as each home is different you’ll need to drill down further.

    Factors that can impact market value

    Some factors can see broadly similar properties have very different market values. Things to watch for include:

    – The lot size a house sits on.
    – The number of bedrooms and bathrooms.
    – The condition of a home.
    – Availability of parking (off-street parking is a plus!)
    – Orientation. North-facing homes receive more natural daylight, and so often require less artificial lighting or heating.
    – Energy efficiency. PropTrack found three out of five (59%) buyers say eco-features such as solar panels are important to help save on power bills.
    – The street. Be wary of streets that become a commuter parking lot on weekdays.
    – Views and outlook.
    – Zoning and planned developments.

    Bearing all these features in mind, check out recently sold properties similar to the one you’re planning to buy.

    Pay particular attention to the final sale price – not the asking price. It is the selling price that sets the market.

    Don’t be afraid to negotiate

    If you have done your homework, you should have a reasonable idea if the asking price of a place is close to the mark or wishful thinking.

    Remember, you may also have scope to pay less by negotiating on price. Bear in mind though that the longer negotiations take, the greater the danger of someone else jumping in and snatching the property from under you.

    Get in touch with us about pre-approval

    Last but not least, give us a call to discuss some of the benefits of home loan pre-approval.

    It can help you act quickly when you see a home you’re interested in buying, and it sets a buying limit so you can negotiate with confidence.

    Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

  • Can you remember your home loan interest rate?

    Can you remember your home loan interest rate?

    Where you put your car keys, who won the footy premiership three years back, the new prime minister of New Zealand’s name – all very much socially acceptable things to forget. Your home loan rate shouldn’t be on that list.

    It’s a fair bet that your home loan repayments are one of your biggest household expenses.

    Yet it’s surprising how many borrowers haven’t kept up with what their home loan rate currently is.

    In fact, a new report by Mozo shows that 42% of mortgage holders have no idea what interest rate they’re paying on their home loan.

    And it’s an oversight that can cost home owners dearly.

    How does your loan rate shape up?

    It’s not just that large numbers of borrowers can’t pinpoint their loan rate.

    Mozo also found one-in-five home owners have never compared rates since taking out their loan.

    Your home loan may have had a competitive rate back in the day, but in a rapidly changing mortgage market, that may no longer be the case. And with the cash rate at its highest since late 2011, there’s little room for complacency.

    For a quick check of how your home loan rate stacks up, head to your latest loan statement to find out what it is. It should show the rate you’re paying. Or call us, and we’ll let you know.

    By way of comparison, the average home loan interest rate for owner-occupiers is currently 6.4%, and 6.3% for new home loans, according to the Reserve Bank of Australia.

    Why it pays to regularly review your home loan

    Staying on top of your loan isn’t just about the rate you pay.

    Your loan might have been the right choice for you a few years ago. But our lives evolve, and your mortgage may not have the features you need for your current lifestyle and budget.

    That’s why it’s worth taking a close look at your loan at least annually, or whenever you experience a major life change such as starting a family.

    Understanding how your loan is performing for both rate and features is easy. Speak to us about a home loan review.

    As part of our review, we can let you know:

    – the rate you are paying;
    – if your loan offers the features you want; and
    – whether you could save by refinancing.

    Is refinancing right for you?

    If you’ve been wondering if you could do better on your home loan, give us a call today to discuss your refinancing options.

    We’ll help you work out if refinancing is the right step for you and how much you could save by switching to a new loan and/or lender.

    Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

  • Plot twist: Millennials are Australia’s most active property investors

    Plot twist: Millennials are Australia’s most active property investors

    When it comes to buying investment properties, younger Australians are punching above their weight, with Millennials taking the title as the nation’s most active generation for property investment.

    Investors are continuing to flock to the property market, with the Australian Bureau of Statistics saying the volume of new investor loans in February was 21.5% higher compared to a year ago.

    Investment loans now make up over half of the growth in new loans over the past year.

    But in an unexpected twist, it isn’t older generations of Aussies who are leading the charge to buy rental properties.

    Younger investors flex their muscles

    New data from the Commonwealth Bank shows Millennials (those born between 1981 and 1996) accounted for almost half (46%) of the bank’s new property investors in 2023.

    And almost one in three of those buyers purchased an investment property on their own, without the help of a partner.

    Gen Xers (1965 – 1980) are also snapping up rental properties, accounting for 37% of CommBank’s new investment property loans throughout 2023.

    Rentvesting – get into the market sooner

    Rentvesting is buying property where you can afford, possibly a smaller property in a lower-cost area, and then renting where you want to live.

    The CommBank data shows plenty of investors are taking this approach and it makes sense: the average investment loan size is just over $528,000 compared to $624,000 for owner occupiers.

    And remember, if you purchase the right property, as an investor you could expect to earn rental income. That’s extra cash for loan repayments.

    In this way, rentvesting could be an opportunity to get started on the property ladder sooner rather than later, without having to make too many lifestyle sacrifices. As the investment property grows in value over time, it can become the stepping stone to buy an owner-occupied home.

    The market seems attractive for investors right now

    The property market offers plenty of appeal to investors right now.

    Rental vacancy rates are at a record low of just 0.7% nationally. Property listings have increased in most cities, giving buyers more choice, and the past 12 months have seen rents skyrocket 11.4% across our state capitals.

    Add in growing expectations that interest rates will start to fall later this year, and CoreLogic says it’s likely that property values will continue to rise, giving those who buy today the potential to notch up handy capital gains.

    Are you ready to become a property investor?

    Talk to us today to find out how much you could borrow, and your likely loan repayments. It could help you become a property investor sooner!

    Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

  • Homeowners now an extra $71,000 richer (on average!)

    Homeowners now an extra $71,000 richer (on average!)

    You may not feel richer, but if you’re a homeowner, there’s a decent chance your personal wealth has surged over the past 12 months thanks to soaring property values. And it could open up a world of exciting possibilities.