Realise your property investment goals through capitalising on the equity built up in your home.

The idea of property investment is one that appeals to many Australians but sadly often overlooked because of the misconception that it is only within the reach of the wealthy. The reality is that with the right finance, planning and strategy an investment property may be easier to achieve than you think.

Ease the deposit burden

One of the key challenges to breaking into property investment is raising a deposit, but there are solutions. Property buyers are typically required to contribute 20 per cent of the property’s value, and for some this can be a stumbling block.

But existing home owners may be able to unlock equity – or the increased value – that’s built up in their own home to cover some or even all of the down payment on an investment property. The following scenario illustrates how borrowers can capitalise on the equity in their homes to purchase an investment property.

Example

Dan and Jessica bought their four bedroom family home in Rockhampton in 2003 for $247,000 putting down a $49,400 deposit and taking out a loan for $197,600 The couple recently decided that they’d look at breaking into the investment market so they contacted their mortgage broker to discuss finance.

Their broker suggested that they get a valuation of their home, and they discovered that it was now estimated at $480,000. Over the years Dan and Jessica had paid $48,000 off their original loan leaving $149,600 owing on the property. Today’s valuation of the property, less the outstanding loan, left them with $330,400 worth of equity.

Their broker suggested that they consider refinancing their own home to the loan ratio of 50 per cent to free up some equity for an investment. Based on the current property value and assuming they could afford the repayments, they would be able to borrow $240,000 – making an additional $90,400 available for investment purposes. This strategy appealed to Dan and Jessica because otherwise they would have needed to liquidate their managed funds to raise the deposit for the investment property and this was not a viable option as these fund balances were low due to recent poor performance.

They decided to put down a 20 per cent deposit on a $350,000 two bedroom apartment and take out an 80 per cent loan. The deposit came to $70,000 leaving a further $20,400 to cover stamp duty and other expenses while a $280,000 loan covered the rest of the purchase price.

Now that Dan and Jessica had a bigger loan on their home their repayments had gone up, but they were pleased to discover that the repayment on their investment property was almost covered by the $385 weekly rental the investment property was generating. And because the couple managed their investment themselves they reduced the overheads against the gross rent. By taking out an interest-only loan they also minimised their monthly outgoings and improved their cash flow.

Help for first time investors through LMI

First time buyers can also crack the investment market without having to scrape together a huge deposit. Traditionally lenders would look for a 20 per cent deposit from property buyers but today it’s possible to borrow up to 95 per cent of a property’s value with the help of lenders mortgage insurance (LMI). LMI protects the lender against the risk associated with providing borrowers with a higher percentage loan in the event that they default. The cost of LMI can often be added to the overall loan amount, reducing the initial outlay.

Call us today for a friendly chat on how an investment property may be within your reach.

The first half of the year is traditionally when we see a peak in job seeking activity.

Perhaps a consequence of all those new year’s resolutions for self improvement? Research shows Gen Y is now actively exploring and entering the property market. They are also well known as the job hopping generation with an average of just 20 to 32 months in a job. ¹

In fact, the national average job tenure across all age groups is now 3.3 years. ² Today’s job market is a far cry from the days of a ‘job for life’. So what impact does a new job have on your ability to be approved for a home loan? For younger generations, a stable job with a secure income can sometimes be the catalyst to buying your first home or investment property. But although you may be delighted with your exciting new job, your
lender may not be quite so happy.

When assessing a home loan application lenders will usually consider:

• how often you change jobs
• whether you are staying within the same industry, or
• if you are taking your career in a new direction

These factors influence the lender’s assessment of whether you are a good credit risk. They tend to prefer applicants who have a stable employment history with 1 to 2 years of steady or increasing income to determine the loan amount you are capable of repaying.

Switching jobs shortly before or after applying for a mortgage may make it harder to qualify. Most lenders prefer you to be in your current position for 6 to 12 months to borrow 80% of the property value. There ARE a few lenders who allow you to borrow up to 95% of the value of the property (for an owner occupier loan) – sometimes even if you have just started a new job.

Are there lenders who can help?

Many lenders now understand younger generations are in high demand, are highly skilled and are career opportunists who actively change jobs to seek a higher salary or better working conditions. Not all lenders require you to be in your job for more than a year and some are tailoring products and qualifying criteria to meet these new norms.

What if I’ve only been in my job for 1 month?

Some banks recognise that despite a short employment history, many individuals are in a strong financial position and have industry experience. Your length of time in a job will be less of an issue if you have other sources of income, e.g. investments, royalties, second jobs etc. The lender may need proof this income has been steady for a couple of years and that you expect it to continue.

What if I am changing my career?

If you are considering a career change or have recently changed jobs, it does not necessarily mean you need to put your borrowing plans on hold. Increase your lending options by talking to us when you first start thinking about any life changes and definitely before making any decisions.

Do you move house often?

The stability of your home address is also considered, along with many other factors in lenders’ sophisticated credit scoring analyses to assess whether you are a good long term risk. If you are currently renting and planning to seek finance soon, speak to us before your next move to allow us to prepare your application in the most positive light. We can generally find a lender who will help, however if you are changing to a completely new industry or role then this will certainly reduce your chances of securing an approval. That’s WHY you need us to help!

What do the banks think?

Most lenders won’t approve a loan during the process of switching to a new employer but there are some that may consider approving your home loan before you have commenced your new role. If you can show stability with your prior employers they may take the view you are moving to a new employer to take advantage of a better salary or working conditions.

What should I do now?

TALK TO US! Our role as your finance specialist is to keep up to date with the constantly changing borrowing criteria of most lending institutions so we can suggest a solution for your individual situation. When you apply for a loan, the lender may ask a number of questions to fully assess your borrowing capacity. Ask us to send you our ‘Loan Documentation Checklist’ to ensure you are fully prepared.

1. seek.com.au
2. mccrindle.com.au

With so many lenders and loan features on the market, we show you how to make sure you choose the mortgage (and lender) that delivers the rates, service and flexibility you need.

The home loan market has entered a new level of complexity in recent years, as lenders have recognised that consumers are better informed, and have a wide range of different needs. And, lenders have matched these needs with gusto!

But before you even consider which loan is right for you, you need to think carefully about what your needs are, advises Brian Rusten from Energise Home Loans.

“Different loan features are right for different circumstances, so being clear on what your needs are from the beginning will help prevent you from being bamboozled,” Rusten says.

“Consider options like a fixed or variable rate, split loan terms, principle and interest repayments or an interest only loan, or the future need for a repayment holiday.”

While it’s great to be spoilt for choice, many borrowers find themselves overwhelmed by too many options. Rusten offers the following advice when trying to find the right home loan to suit your specific needs.

1. It’s what’s inside that counts.

“It’s easy to be won over by a great looking interest rate, but there is far more to the story than meets the eye,” he says. “Advertised low interest rates are like the sales rack strategically placed at the front of your favourite store – they are designed to entice the borrower to come window shopping. But not all loans are created equal – the real story is in the fees and charges attached to the loan.” Reviewing the mortgage comparison rate allows you to compare apples with apples, as this is an overall percentage figure, calculating the interest rate as well as the fees and charges.

2. Consider your service requirements.

Some customers have straightforward requirements from their lender – basic updates on the progress of their loan, little need for face-to-face service, emailed statements. “In this case, a no-frills lender may easily fit the bill, where you get fewer bells and whistles in exchange for a cheaper loan,” Rusten says. “Other customers’ needs may be more complex, and they would be better to go with a lender that can meet these demands, sometimes at a slightly higher price.”

3. Do you need funds in a hurry?

The real estate market can move quickly, and sometimes buyers can be caught out having found the perfect property before their finance is in place. “You need to be very clear with your lender about what your timeframe is, as there is a dramatic range of timeframes in which different lenders can approve and finalise your loan. We’ve seen many customers whose choice has been dramatically narrowed because they’ve needed funds quickly, and their preferred lender could not finalise the loan in time.” To prevent this from happening to you, securing pre-approved finance is a clever strategy to ensure you are in control and have access to your full choice of lenders.

4. Don’t be afraid to ask for help.

“If you don’t know exactly which loan features are right for your circumstances, be as clear as possible when discussing what you’re trying to achieve, to allow your lender or mortgage broker to help match you to the best loan to meet your needs,” Rusten says. Keep in mind that mortgage brokers deal with lending every day, so they know the tricks of the trade that can mean the difference between your loan being approved or not. They also assist in preparing and submitting all of the paperwork for you, allowing you more time to focus on the fun parts of property buying.

A home loan is generally a long-term proposition, but in some situations it can make sense to refinance your mortgage. Read this guide to the refinancing process, and speak to us before deciding whether it’s right for you.

Refinancing involves taking out a new mortgage and using those funds to pay off your existing mortgage. Doing so can save money and result in significant financial gains over time.

Why you might refinance

You might want a lower interest rate

The lending products market is highly competitive and interest rates can vary significantly between banks. One of the most common reasons people choose to refinance their mortgage is to secure a lower interest rate from another lender. This could assist you to pay off your home loan sooner, potentially saving you thousands of dollars

That makes sense, but before taking any action it’s a good idea to speak with your broker. We can not only look for a better interest rate for you but also help find you the type of lending facility that suits your lifestyle. This may even mean renegotiating a better deal with your existing lender. Either way we will help with the right advice.

Keep in mind that not all mortgage products are the same. A mortgage with a lower interest rate may not have all the benefits of your existing loan.

The interest rates, fees and the features need to be carefully considered and we can help you to navigate the options.

You might want to change your loan type

You may want to switch from a variable loan to a fixed loan with your existing lender, to lock in a low interest rate. Depending on the type of mortgage you have, this may require refinancing into a different product. You might also have to refinance if you want to change to a split loan, which has part variable and part fixed rates.

You want to renovate or purchase an investment property

Another reason refinancing might be an option is because you want to renovate your home or buy an investment property. If you have equity in your home, you may be able to access some of the equity by refinancing your mortgage. (Note that you could also do this by redrawing or increasing the limit on your existing mortgage.) We can help advise on the best option for you. Before going ahead with an increase or refinance, your home may need to be revalued and we will advise how much you can borrow.

Your circumstances have changed

Refinancing could also be suitable if your circumstances have changed – for example, a significant change in your income. By taking out a new mortgage (or increasing your limit on the existing mortgage) through your current broker, you may be able to consolidate other debts, including personal loans and credit cards, into one facility, lowering your monthly payments and saving you interest.

While refinancing can save money, it may not be right for everyone. Consider your financial situation and ask yourself whether refinancing is right for you.

The refinancing process

Getting the refinancing ball rolling is simple once you’ve determined your needs and done your research through your broker.

The application. We will evaluate your circumstances and assist you in submitting your application. You’ll be asked to provide identification documentation and proof of income such as pay slips, and to list your assets and liabilities. If you’re staying with your existing lender, you may not need to provide as much information.

Getting a valuation. Lenders will often require a valuation on your existing home to determine how much you can borrow. This bank valuation happens during the loan approval process and generally requires an inspection of the property by a licensed valuer.

Receiving approval. Once the lender is completely satisfied, full loan approval is granted. You’ll receive an approval letter with a copy of the loan contract to review, sign and return to the lender.

Your funds will be cleared once all the signed documentation is reviewed. Your lender (or your new lender if you’re changing lenders) will arrange settlement of your existing loan and establishment of your new loan.

There are many reasons why you may want to refinance your mortgage. Before taking any action it’s important to talk with us. We can help you to select the best loan product for your needs, based on your individual circumstances.

Realise your property investment goals through capitalising on the equity built up in your home.

Property investment appeals to many Australians but is sadly often overlooked because of the misconception that it’s only within reach of the wealthy. However, with the right finance, planning and strategy, an investment property may be easier to achieve than you think.

Ease The Deposit Burden

A key challenge to property investment is raising a deposit, but there are solutions. Property buyers are typically required to contribute 20% of the property’s value, which can be a hurdle. But existing home owners may be able to unlock equity – or the increased value – that’s built up in their own home to cover some or even all of the deposit on an investment property.

Example:

Dan and Jessica bought their home in Rockhampton in 2003 for $247,000. They are paying a $49,400 deposit and securing a loan for $197,600. They decided they’d like to enter the investment market so contacted their mortgage broker to discuss finance. Their broker suggested they get a valuation of their home, which revealed it was now worth $480,000. Dan and Jessica had paid $48,000 off their original loan leaving $149,600 owing on the property. Today’s valuation of the property, less the outstanding loan, left them with $330,400 worth of equity. Their broker suggested they consider refinancing their own home to the loan ratio of 50% to free up some equity for an investment. Based on the current property value, they could borrow $240,000 – making an additional $90,400 available for investment purposes. They put down a 20% deposit on a $350,000 two bedroom apartment and took out an 80% loan. The deposit came to $70,000 leaving a further $20,400 to cover stamp duty and other expenses while a $280,000 loan covered the rest of the purchase price. Now that Dan and Jessica had a bigger loan on their home their repayments had gone up. But the repayments on their investment property were almost covered by the $385 weekly rental the investment property was generating. By taking out an interest-only loan they also minimised their monthly outgoings and improved their cash flow.

You may also be able to realise your investment goals by putting your current property to work for you.

Help For First-Time Investors Through LMI

First-time buyers can also crack the investment market without having to scrape together a huge deposit. Traditionally lenders would look for a 20% deposit from property buyers but today it’s possible to borrow up to 95% of a property’s value with the help of lenders mortgage insurance (LMI). LMI protects the lender against the risk associated with providing borrowers with a higher percentage loan in the event that they default. The cost of LMI can often be added to the overall loan amount, reducing the initial outlay.