Seven in 10 homeowners have recently used the equity in their home to renovate, invest in property or shares, or boost their superannuation. Have you thought about how you could take advantage of last year’s property price spike?

You might have heard that property prices spiked 23.7% in 2021, yeah?

That’s quite the growth spurt!

So how do you take advantage of that growth without (or before) selling your home?

Well, one way to do so is to cash out equity while property prices are high (which we’ll explain in a little more detail below).

Got your eye on a luxury car that’ll make your mates jealous? Or perhaps something that’s a little more fuel-efficient and environmentally friendly? Today we’ll run you through a new tax change that could help you buy something a little more la-de-da.

Have you heard about the luxury car tax (LCT) threshold?

Basically, if you buy an imported car with a GST-inclusive value that’s above the LCT thresholds, the tax man slugs you with an extra 33% tax on the exceeded amount (minus the GST component).

But the good news is the LCT thresholds have just been given a pretty decent boost – the third one in a row.⁣From July 1, the threshold has been boosted by $5,257 to $84,916 for fuel-efficient vehicles, and by $2,697 to $71,849 for other regular vehicles (all inc. GST).

According to the ATO, a fuel-efficient vehicle is one with fuel consumption that doesn’t exceed 7.0L/100km on the combined cycle.

Single Australians under 30 snare the lion’s share of spots in the federal government’s 5% deposit first home buyer scheme, according to new data. Here’s how to secure one of the highly coveted 35,000 scheme spots released on July 1.

Long gone are the days when you had to scrimp and save for a 20% deposit to buy your first home (that’s so 2019).

These days, you can crack the property market with just a 5% deposit and pay no lenders’ mortgage insurance (LMI), thanks to the federal government’s First Home Guarantee (FHG) scheme.

NAB – which is one of two major lenders (alongside dozens of non-majors) that provides finance under the scheme – recently released some pretty insightful data on just who is jagging the limited spots each year.

The data shows almost two-thirds of people (63%) who purchased a house under the scheme were single buyers – whereas for non-scheme purchases, single buyers only made up 49% of borrowers.

The Reserve Bank of Australia (RBA) has increased the official cash rate by another 50 basis points to 1.35% amid continuing inflation pressures. How much will this third consecutive rate hike increase your monthly mortgage repayments?

At the beginning of May, the cash rate was 0.10%.

Today, it was increased by the RBA to 1.35% – the second double-barrel 0.50% hike in a row.

RBA Governor Philip Lowe said in a statement that the cash rate rise was the result of high inflation, both in Australia and around the world.

“Global factors account for much of the increase in inflation in Australia, but domestic factors are also playing a role,” said Governor Lowe.

We’re just days away from 35,000 first home buyer scheme spots becoming available on July 1. If you’re keen to snare a place in the scheme – and buy your first home sooner – here’s how to get ahead of the pack.

Have you heard about the federal government’s Home Guarantee Scheme? (previously called the First Home Loan Deposit Scheme).

It allows you to buy your first home with just a 5% deposit and pay no lenders’ mortgage insurance (LMI)

First home buyers who use the scheme fast-track their property purchase by 4 to 4.5 years on average, because they don’t have to save the standard 20% deposit.

With interest rates on the way back up, there’s no doubt some households around the country are starting to do it a bit tough. Coincidentally, some big changes kick in on July 1 when it comes to recording financial hardship arrangements.

In the past, if you were unable to meet your loan repayments, you could enter into a financial hardship arrangement with your lender and it couldn’t be reported in official credit reporting systems.

In many cases, the repayment history in your credit report would show a blank month or possibly a missed payment during the hardship arrangement period.

Neither of these two approaches told the full story about your credit history and that a financial arrangement had been agreed upon with your lender.

When selling one property and purchasing another, the funds from the sale may not be available in time to use for the purchase deposit. There are typically two options in this scenario: a bridging loan or a deposit bond.

Bridging loan

A bridging loan is a short-term home loan designed to allow you to initiate the purchase of a property before you have sold your previous one.

Loan terms are often between six and 12 months and bridging loans generally have a higher interest rate than traditional home loans.

This can be a great option but carries some risk. It’s important to know that you will be able to make the repayments even in a worst-case scenario where your old house doesn’t sell as quickly as you’d hoped or where property values may change unexpectedly.

 

When you consider that a small flat in Sydney could set you back half a million dollars at the moment, saving a 20% deposit to buy that flat – $100,000 – can seem an insurmountable task. That’s where insurance can help.

Lenders mortgage insurance (LMI) may be an added expense, but it offers buyers the opportunity to dive into the property market earlier, without saving up an entire 20 per cent of the property’s purchase price as a deposit.

What is it?

LMI protects the bank or lender, should a home loan go into default, guaranteeing that the lender will get its money back if the property needs to be sold and there is a shortfall in repaying the loan.

Refinancing a loan can take advantage of lower interest rates to bring down the overall cost of servicing a loan. But it’s not always the best, or the only, option.

There are many different factors borrowers need to consider when thinking about refinancing a loan.

The first step is to speak to an expert about your needs and whether you can afford to service a different loan structure.

At this point, CBM Mortgages will also need to find out about your existing loan, repayments and the structure of the facility.

The current value of the property is also taken into consideration, so the Broker will have access to current data that will indicate what the asset is worth.

It seems like a no brainer, right? You are buying a home, so you’ll pay off your credit cards to reduce your debt, but keep them active so you can buy some furniture or deal with emergencies even when you have a mortgage to pay. Wrong.

It’s obvious that a lender will consider your credit card debts and the monthly repayments on those when you apply for a mortgage. But what many people do not realise is that credit cards that don’t have any balance owing can also impact a lender’s assessment of what you can afford to borrow.

If you have a high credit limit, you also have a high debt risk in the eyes of your lender. As the logic goes, there is no stopping you from racking up debt on your credit card the day after your loan is approved. Say, on lovely furniture to fill that new house.

“We have to take account of three per cent of the total credit card limit, regardless of what the applicant owes,” says the finance broker.

“If they had a $10,000 limit but they only owe $1000, we still have to assess $300 a month and that comes directly out of their liability. It does make quite a difference” , says the broker.

If you’re looking for a home loan but are inexperienced with finance brokers, attending your first appointment with a broker can be a nervous experience. Getting a home loan, after all, can be quite complex for a first-timer. There are lots of brokers around and there is a lot to learn so it pays off to be prepared.

A good starting point is to familiarise yourself with the expectations of the first appointment between brokers and yourself. Your broker is very likely to ask you about your medium and long-term financial goals, the amount you want to borrow, comparisons of your home loan options and your understanding of the fees, costs and conditions attached to home loans. Knowing the direction the appointment will likely take lets you participate more actively in the conversation. This means you can better articulate your needs to your broker.

It’s also recommended that you give some consideration before the meeting to the types of questions you wish to ask your broker. Questions that can be of use include such things as loan types (such as term, repayment options and interest rate types), the types of ongoing fees attached to various loans (such as early exit, late payment, break and redraw fees) and the typical timeframe for a loan settlement.

These questions might pop into your head spontaneously during the meeting but preparing them in advance is a good way to refine them. By doing so, you are in a position to get more specific information from your broker.

It is common practice, too, for your broker to conduct a needs assessment prior to your face-to-face appointment – so you may be asked some pre-appointment questions.  To assist in answering these, you’ll need to supply information about your employment history, assets and expenses.

There are plenty of upsides to buying an investment property that already has a tenant, as well as a raft of risks. Here’s how to minimise them.

Steps you can take to minimise your risk:

Make sure the bond has been lodged properly. Your agent will arrange for the bond guarantee to be transferred into your name on settlement.Check the property condition report, making sure that it is a complete and accurate record of the property as you inspected it.Ensure there are no rental arrears. If there are, or if a landlord has agreed that rental arrears can be taken out of a bond payment, stipulate that this amount is deducted from the purchase settlement amount.Ask the leasing agent about the tenants and their payment record. You cannot demand that you meet the tenants, but attending the open house will give you a sense of how they live in the property. If possible, sight the tenants’ original application for the property and rental ledger.Look at the yield for rental properties in the area and compare them to yours. You won’t be able to increase the rent until the end of the lease.Be aware of any concessions or conditions that are either in the lease or have been agreed with the landlord or property manager, because these will become your responsibility. For example, does rent include electricity or other utilities? Has the landlord agreed to install a new oven or paint a room?

Of course, if you love a property but have doubts about the tenants, the lease or the managing agent, all is not lost. You can easily change the managing agent when you settle. You can also make vacant possession of the property a condition of settlement. You may need to wait until the lease expires to settle, but you aren’t taking on the previous owners’ problems and responsibilities.

If your only problem with a tenanted property is the rental yield, keep in mind that increasing rent on a good, long-term tenant may well drive them away anyway, so do your sums. Work out whether the amount you’d like to increase the rent by equates to more over the year than the lease fee plus any rent lost if your property is vacant for a few weeks.

Speak to CBM Mortgages today and they can help you finance your investment. <This email address is being protected from spambots. You need JavaScript enabled to view it.>

Entering the property market is no easy feat for a first homebuyer, but even parents who aren’t prepared to hand over cash for a deposit may help by being a guarantor on a loan. Before taking the plunge however, it’s crucial to be aware of the implications involved. Here are three questions to ask yourself to see if a family guarantee is right for you:

1. Am I financially fit to be a guarantor?

The very first thing you should be certain of is whether or not you are in a financially capable position to pay off the loan if the borrower finds that they can no longer do so. There can be many disruptions to an income, such as loss of employment or a serious accident, and some types of guarantor loans hold the guarantor legally accountable to ensure the mortgage is paid off.

“You need to be in a strong financial position and have enough equity in your property to be a guarantor,” says a finance broker. “Some banks even want to make sure that the guarantor can service the full debt as well, so it’s always advisable to get independent legal or financial advice if you’re considering it.”

 2. Do the benefits outweigh the risks?

Every client has different requirements and circumstances - a mortgage broker can help you find the perfect match 

When Craig from CBM Mortgages met with husband and wife duo, Amanda and Mark, he was told that their vendor had requested them to waive their right to a cooling-off period.

“While Amanda and Mark had pre-approval with one of the major banks, they didn’t have formal approval, and this could only be effected after contracts were exchanged,” Craig explains. Unfortunately, their lender wouldn’t issue formal approval without conducting a property valuation first, and to do this, the lender required an exchanged contract of sale. It was a catch-22 situation.

While Amanda and Mark still had the traditional six-week settlement period to organise formal approval, they didn’t want to exchange contracts. If the bank decided at the 11th hour not to approve their loan, Melissa and Andrew ran the risk of losing their 10 per cent deposit.

They explained their situation to their lender, but the bank did not want to budge on its policy.

When purchasing an investment property, there are a number of factors that could increase or reduce your potential return on investment. In this case it's not just location, location, location.

When considering a property for investment purposes, the most important question to ask is 'will it be attractive to tenants?'.  But how do you know what will appeal to someone you've never met? Settling on a handful of locations is a good start. “Young families and couples are the ones that drive capital growth and so a location that is within a reasonable distance to schools, entertainment, transport, and an employment hub is one to look out for,” says the finance broker. Other ideal factors are a low vacancy rate and relatively high rental yield.

Although location plays a major role, it's by no means the only defining factor. “There is a mistruth a lot of people subscribe to when selling investment properties, which is to disregard the quality because you don’t have to live in it,” advises the finance broker. “You have to buy a homeowner quality property, because someone has to live in it,” he says. “And when buying an investment property, you have to have an exit strategy, which will generally involve selling to homeowners as well as investors.”

To get the most value, you need to think about the demographic of renters who are likely to be living in the area. “You have to match the property with the area,” says the finance broker. “If you put a good quality, decent sized, one bedroom apartment in the inner city, it would be a great investment, however if you put it 30km out, it wouldn't garner as much interest.”

When investing in any kind of property, be wary of any danger signs. One of the biggest mistakes Australians make is not knowing what their cash flow is. “Bad cash flow is worse than paying too much for the property,” advises the finance broker. “It is vital to know how much your chosen property is going to cost after tax, every week after you settle. There’s no point in buying a top quality property if it’s going to send you broke.”

 

Having a mortgage expert on your side can be the key to getting your finance over the line, and may save you thousands in interest and fees.

When Philip was offered the opportunity to purchase his mother’s property in Tasmania at a favourable price – just $180,000 for a house worth $350,000 – he wanted to take the opportunity to consolidate other debts. Using the equity available in his own property, he applied to refinance to cover both the debts and the favourable purchase, expecting to have all the loose ends tied up relatively quickly.

This was not the case. When Philip tired of waiting for the bank to sort out the valuation on the Tasmanian property and decide whether it would approve the loan, he visited an MFAA Approved Finance Broker.

“He said it was taking forever, so he came to see me,” says Philip’s finance broker.”

Pest inspections are an essential part of the home-buying process. Mortgage and Finance Help spoke to Justin Hammerschmidt, an Inspector at Sydney PrePurchase, about what pest inspectors are looking for and how to interpret their reports.

Q What pest inspections need to be carried out prior to purchase?

A pest inspection, officially known as a ‘Timber Pest Inspection’ should be carried out prior to purchase. It will detail any timber pest activity such as termites, timber borers and wood decay.

These pests can cause significant structural damage to the timber elements in buildings such as wall, floor and roof framing. They can also cause serious safety hazards such as collapsing balconies and unsafe decks.

This type of damage is often difficult to locate, requiring the skill of a trained timber pest inspector. It is important to understand that other pests such as cockroaches, rodents and spiders are not covered by this inspection, as they are not capable of causing structural damage to buildings.

 

Paying off your education is no reason to put off buying property.

You can remember it now: sitting in a chair at the back of the lecture theatre, chatting to your friends and ignoring the debt that each day at university was plunging you into.

But now you’re older and wiser, and reality has set in. You want to buy a property, but you’re unsure how your student HECS/HELP debt could impact your ability to take out a loan.

When you apply for a home loan, you’ll need to reveal information about your liabilities, poor credit ratings and any other debts you have. This is where your student debt can affect things.

While spring is renowned as the time that sellers dust off their properties and place them on the market, this doesn’t mean it is necessarily the best time for buyers to go shopping.

One of the biggest issues with househunting in spring is the flood of other buyers looking to snag their dream homes, which increases competition and housing prices.

“There is typically a seasonal uplift in buyer numbers over the last quarter of the year, which means the benefits of a higher number of options to choose from are offset by a higher number of prospective buyers,” explains CoreLogic RP Data’s John Wright. 

“Buyers may be better off when there are fewer buyers around in the winter months, at least from the perspective of being able to negotiate hard on price.”

Although there is a lot more to look at during spring, there isn’t necessarily more to choose from, depending on your individual circumstances and finances.

Stamp duty is a charge which is applied by state governments in Australia  on transactions relating to the transfer of land or property. It is paid upfront and needs to be budgeted for in addition to your loan deposit.

The amount of stamp duty you are required to pay differs in each state, however there are three factors, along with the value of the property, that determine how much stamp duty you will pay. Contributing factors include:

whether or not the property is a primary residence or investment property;whether or not you are a first home buyer; andif you are purchasing an established home, a new home or vacant land.

There are a number of stamp duty calculators available online (including one here on cbmmortgages.com) that take the guesswork out of budgeting for a property. Factoring in this additional cost cannot be overlooked when you are considering your capacity to repay a loan.

However, in a bid by state governments to stimulate home ownership and growth, there are a range of tax concessions available to reduce stamp duty.

Again exact amounts differ across each state, but those who benefit the most are first home buyers and those opting to buy a new home.