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The dream of home ownership is a tough one for many Australians to fulfil. After all, Australia is one of the most expensive countries to live in. But it’s not just the cost of living and property pricing that delays our property buying.

The road to home ownership can be a long and winding one for most. Considering the affordability of repayments, the location and lifestyle balance of the property, saving up the baseline entry level 20% deposit (if not, having to absorb further costs by paying lenders’ mortgage insurance (LMI)) and stamp duty are just some of the other factors to consider. In Australia, depending on age of the borrower and purchase price, it can take anywhere from two years to over six years to save for a deposit. This of course is also dependent on the income and expenditure of individuals.

Yes, it can be tough to get a foot on the property ladder, but first home buyers (FHBs) are not deterred.

About a third of millennials and a quarter of all Australians plan to buy a property in the next two years with many using the lockdowns in 2020 to up the ante on their savings.

There is no better time than now for FHBs to dive in and make that commitment – if possible.

Here is why:

1. Only a 5% deposit and no lenders’ mortgage insurance (LMI) – until 30 June 2021 and only through certain lenders – for those who are eligible!

Under the First Home Loan Deposit Scheme (FHLDS) eligible first home buyers can buy or build a new home with as little as a 5% deposit

Usually, a 20% deposit is required to avoid LMI costs (which can cost tens of thousands of dollars). But under the FHLDS, the government guarantees the remaining 15% of the value of the property purchase financed by the eligible first home buyer’s loan. Eligibility, property price thresholds and conditions apply.

2. One-off $15,000 grant to eligible owner-occupiers, including first home buyers

The Australian Government HomeBuilder grant provides eligible owner-occupiers, including first home buyers, with a grant to build a new home, substantially renovate an existing home or buy an off the plan home/new home. A $15,000 grant is available for contracts signed between 1 January 2021 and 31 March 2021.

The government has also extended the deadline to 14 April 2021 (inclusive) for those applying for the $25,000 which applies to eligible contracts signed on or after 4 June 2020 until 31 December 2020³. They have even lifted the property price cap for new build contracts in New South Wales to $950,000 and Victoria to $850,000 ($750,000 in all other states and territories).

Caution: lenders won’t assume you have this money because the grant is paid to you and not the bank – so be careful when working out how much money you have for the build (or even if T&Cs apply)!

3. Some lenders are offering bonus first home buyer incentives

From bonuses offered at settlement, conveyancing fee rebates, no account keeping and establishment fees, to no application and valuation fees – these are a few of the incentives offered by some lenders to attract first home buyers (however these include specific criteria and conditions).

4. Lenders’ mortgage insurance discounts are being considered by select lenders

Some lenders have been known to reduce the LMI to just $1 for eligible first home buyers! Others offer a percentage discount on LMI fees following settlement. Minimum deposits, maximum loan size and T&Cs apply.

5. Cash in on cash backs – certain lenders offer cashback incentives to first home buyers

Thousands of dollars of cashback to an eligible first home buyer with LMI and new purchase rebates are just some incentives that are on offer from some lenders.

Nabbing a great deal or incentive on your home loan could help you save money, but it is even more important to consider price (interest rates and fees) and features when choosing the right home loan.

6. Stamp duty concessions are available in some states

Besides saving for a deposit, stamp duty can be another big barrier to home ownership. However, most states and territories offer some assistance on this cost, including some exemptions, for eligible first home buyers.

Accessing one or more of these schemes or incentives could provide the assistance you need to buy your first home. It could also potentially save you tens of thousands of dollars.

But before considering any of these options, CONTACT US, so we can help steer you through the various options that may be appropriate for your specific situation. It is important to understand the various terms, conditions and eligibility criteria.

A FHB opportunity awaits

If you are one of the lucky ones who have remained financially stable, this could be your opportunity.

While there are always varying peaks and troughs in different property markets across the country, now could be an ideal time for FHBs to get into the market… Why?

• Historically low interest rates make borrowing cheaper than it has ever been
• Government incentives, spending and infrastructure initiatives continue
• Consumer confidence is returning as we adapt to the new normal
• Simpler lending rules for home loans are expected shortly

Knowing where to start, taking the initial steps and navigating through the whole process can be overwhelming. We can step you through the process from the initial stages so you can rest assured you will be well informed for one of the biggest decisions in your life. We have the experience and knowledge, along with access to a wide array of lenders, to ensure you are successfully guided through your first home buying journey.

Well, 2020 was a year we will never forget. Many of us endured
personal and financial challenges that forced us to adjust our
lifestyle and priorities – some significantly and some for the
better!

While we adapt to a new COVID-normal, life should prove to be
more stable and positive this year. We can use our experiences
of 2020 to get us back on track with new perspectives on life
and money.

Now is a good time to set some personal financial goals for
2021. But first, we need to learn some lessons from 2020.

A consumer survey conducted in late 2020 identified
Australians’ top financial concerns were debt worries, savings
goals and property market outlook.

Some of the concerns and trends from this survey show that:

• The piggy bank took a hit – 30% of Australians dipped into
their savings to cope in 2020.
• There were two big pain points – Job security and price of
groceries were Aussies’ biggest financial concerns.
• We accumulated more debt in 2020 – 40% of the average
debt was accumulated in 2020.
• Credit card debt remains high but has lowered –
Australians have knocked $7.31 billion off personal credit
debt BUT there has been a shift to using more buy now pay
later services. Beware of the BNPL trap!
• Majority of our savings are sitting in a savings account
– 47% of Australians keep their savings in savings accounts
compared to only 7% in an offset account linked to a home
loan. 4% made extra payments on a home loan and another
4% salary sacrificed extra superannuation contributions.
• We took advantage of low interest rates – 32% of
mortgage holders negotiated a lower home loan rate with
their current lender, 14% switched home loan lenders and a
further 17% intend to switch.

Australians appeared to be in survival mode by sticking to the
basics of putting food on the table and holding down a steady job.

But by making small shifts in your spending habits and financial management techniques, you can shift from just surviving to thriving.

Here are a few ways we help our clients to thrive:

1. We can help you clear your credit card debt

While credit card debt is easy to rack up, it is not so easy to clear and it can have detrimental effects on your cash flow and your future borrowing power.

What is the best way to clear credit card debt? This will depend on your level of debt, the number of cards and your individual circumstances. However your choices might include:

• paying out the balance in full before interest accrues

• paying the maximum amount you can afford each month to clear the debt as quickly as possible

• if you have more than one card, paying at least the monthly minimum on each card while allocating a larger payment to the card with the highest interest

• transferring your balance to a new credit card offering a lower interest period

• if you are a home-owner, consolidating your debt into your home loan

You should avoid paying ONLY the minimum monthly repayment or you could be in a cycle of debt that is NEVER resolved.

There are other ways to free up cash for the essentials, nice-tohaves or big-ticket items.

Together, we may consider consolidating all your debt (credit card balances, personal loans, car loans etc) into one loan with a lower interest rate. If you are a homeowner, your home loan usually has the lowest interest rate, especially during this time of historically low rates.

We can help our clients decide which type of debt best suits them and help them minimise ‘debt lag’ – especially after festive season spending!

2. We have the power to negotiate

By refinancing, switching lenders or simply negotiating a better rate with your existing lender, you can potentially save thousands of dollars in interest, repay your home loan quicker, or lower your repayments. By securing a lower interest rate and still making the same repayments, you can pay down your debt sooner. We can step you through refinancing should you go down that path.

Here is a quick calculation to show how you could save almost $52,000 in interest.

Of course, interest rates do fluctuate over time, fixed and variable rates vary from lender to lender as do rates for owner-occupiers or investors.

Loan Term – 25 years

Loan Amount – $600,000

Repayment Frequency – Fortnightly

Repayment Type – Principal and Interest

Interest Rate – 2.54 % – 3.10%

Total Cost of Loan – $810,810.43 – $862,575.12

Total Interest Payable – $210,810.43 – $262,575.12

3. Structure your home loan and bank accounts for maximum benefit

We mentioned earlier that only 7% of Australians use an offset account for their savings. Many mortgage holders are missing out on potentially massive savings. Here is how:

Let’s say you signed up to a 30-year loan and you are five years into your $600,00 mortgage when you start your 100% offset account. You could save $24,189.03 in interest and cut 10 months off the term of your loan.

Loan Amount – $600,000

Loan Term – 30 years

Interest Rate – 2.8%

Repayment Frequency – Fortnightly

Start Offset ay year – 5 years

Interest Saved – $24,189.03

Time Saved – 10 months 

Now that seems a lot to think about, but as you can see by making a few changes to your financial situation (with our help), you can potentially save yourself a lot of money.

The challenges we have faced over the last year left many of us asking ourselves how we can better prepare for an emergency and take control of our finances.

If you want to improve your finances this year, call us to book a time to discuss what potential solutions are available to suit you.

Asking how long it takes to get a loan approved is like asking how long a piece of string is. Every application is unique, so the time between your first contact with your bank or broker and approval can never be predetermined. There are, however, some things you can do to help hurry your application along.

Although very rare, same-day loan approvals are possible depending on the lender’s criteria, the complexity of the deal and turnaround time. “In my experience, this has been possible when the client’s lending position is fairly straightforward in terms of employment, asset and liability position,” says an MFAA accredited finance broker. “Also, if a valuation wasn’t required due to a low LVR and both parties were happy with the contract price.”

If you’re not prepared, it could take up to a month. The most common reason for a delay is a lender’s turnaround time to assessment, especially when some lenders have competitive offerings and experience larger application volumes, but a lack of preparation can cause this delay to snowball. “When there are such delays and then a lender must organise a valuation or request further information, this can lead to a lengthy process time,” the broker says.

A good finance broker will help you take all the necessary steps to ensure fast home loan approval, but there are simple ways you can help hurry the process along before your first meeting with your broker.

Disclose all information

To avoid back and forth requests, which can delay your application, ensure your lender has a thorough understanding of you as an applicant including appropriate identification of all borrowers. Provide all the supporting and necessary documents upfront to your broker, and convey as much detail as possible in relation to your requirements and objectives and have good, current information on your financial position. The broker will need to not only have your full financial details but will also need to take reasonable steps to verify it.

Skip the valuation queue

Not all applications require a valuation, depending on the property and lending institution, and forgoing this step can save a considerable amount of time. You can also save time by having a valuation completed prior to your application, as long as it’s accepted by your chosen lender – but check with your broker first.

To ensure your application avoids any unnecessary delays, speak to one of our team members today.

Investment in real property, such as residential real estate, is likely to be a lengthy process and one that usually involves a plan for the long term. To ensure you have considered what is required before making the big purchase, we’ve outlined steps you need to take in that process.

1. Make the commitment

A property investment must be a long term commitment in order for it to be worthwhile, so the very first step is to ‘do the numbers’ in order to evaluate your budget, potential constraints and future financial and personal obligations including the potential impact on family members.

“Consider your future as far ahead as you can,” says an MFAA broker. “You need to assess your ability to maintain or improve personal income as well as your commitment and ongoing financial capability to continue to service the financial impact of the investment for a minimum of five to ten years, as that’s what generally brings premium results.” You need to also make the commitment to ‘manage’ the investment – even if you outsource the day-to-day tasks involved including locating suitable tenants, collecting rents, paying relevant costs in rates and taxes as well as ensuring that the property’s repairs and maintenance are kept up to date.

2. Obtain Professional advice

You now need to obtain professional advice. An investment in real estate is likely to be significant in relation to your current financial position. If you have already discussed the investment with a licensed financial planner or investment adviser and residential real estate is considered the most appropriate in your current circumstances, you will have considered aspects including rental return, maximum capital growth and/or tax effectiveness.

You next need to locate a suitable property. There are buyers agents now available who can assist you in this process – potentially saving you money by disregarding inappropriate properties and concentrating on those that are more likely to deliver the highest return and capital increase to you over time.

Following that, unless you have cash or other investments that can be converted to cash to make your property investment, the next step is to contact a mortgage broker to help you to secure finance to enable purchase.

This will give you the opportunity to ask the broker as many questions needed to alleviate any uncertainty you may have about securing that finance.

These days, brokers who assist consumers to secure finance for residential property are heavily regulated and must be licensed (or appointed by a licensee). They must also hold membership of the external dispute resolution scheme and must hold appropriate qualifications including maintaining continuing professional development. The broker should also hold membership of an industry body, like the Mortgage & Finance Association of Australia (MFAA) which triggers a requirement of an additional layer of obligations through compliance with its Code of Practice.

Using the services of an accountant, financial planner, solicitor/conveyancer and property manager on your team will also assist you in coming to your decision.

3. Assistance from relatives & friends

Talking to friends, family and acquaintances who have already made such an investment, or are currently considering one, can help your awareness of stumbling blocks and potential issues that you might otherwise miss. While any issues you face may seem new, it can help to bounce these off a trusted friend or relative who has been there before.

4. Collate your information

In order to apply for finance, you will need proof of your current income, employment and your assets as well as all liabilities including debts, loans, rental payment, outstanding credit card obligations and any other due payments, for example, buy now pay later commitments. Collate these and also any paperwork that helps support your personal position. For example, if you have been a long-term tenant, get a 12 month tenancy statement that proves your capacity to make regular repayments. Before applying for a loan, minimise your current debt load, and if possible, reduce the limit on, or cancel any credit cards you have, as this is perceived by lenders as potential for debt.

It is strongly recommended that you have a fully assessed pre-approval before you start your search. This will allow you to know what your financial limits are so that you can make an offer when you’ve found a property you like.

5. Other things to consider

An investment property purchase should not be an emotional decision. It is a business decision. If the property isn’t as clean as you would like, don’t assume that it hasn’t been maintained unless there are other clues to demonstrate that. Cleaning and even simple maintenance tasks are things you can do yourself or have done for you that you can include in your budget.

“Consider choosing a property based on whether you feel like you could live in it. While it’s still a business decision, you also have to adopt the mindset that you could be selling to an owner/occupier down the track, which could be an emotional purchase for the buyer,” says the broker. If however you plan to rent the property, your decision should be based on what would appeal to the type of individual who wants to reside in the area.

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. But there are many steps you can take to be confident that your appointment will be a success.

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.

At the appointment it will save you time and effort to prepare and then bring the required documentation with you. This can include ID, transaction histories, tax returns, rental income statements and borrowing documents such as “contract of sale” and proof that you have the deposit for a property. It’s mandatory for brokers to maintain the confidentiality of information that you provide to them and only pass on information necessary to enable them to lodge your loan application or where required by law.

The other preparation you can make to maximise the success of your appointment is to research your broker. Many brokers provide content on their web pages and social media. This can give you a good indication of their knowledge and expertise and highlight topics to discuss with them. You can also determine if they specialise in any types of loans that match your needs, where they are located and their panel of lenders. Finally, you should investigate their qualifications. Although brokers are only required to obtain Certificate 4 qualifications, it could be argued that the better brokers hold Diploma qualifications. Finding a diploma-qualified broker will help ensure you receive the best credit advice.

Brokers can also be accredited, with accredited brokers held to higher standards. By verifying they are accredited, you can approach the meeting knowing your broker is appropriately educated, adheres to a strict and professional code of practice and is authorised to access a large range of products offered by a variety of lenders.