When should you refinance an investment property?

With hundreds of thousands of mortgages rolling off fixed rate terms and property owners facing the mortgage cliff as they jump to higher variable repayments, a lot of investors are wondering whether now is a good time to refinance.

Reserve Bank of Australia (RBA) data shows there will be 450,000 mortgages coming off fixed terms in 2024.

The cash rate has been on hold since November at 4.35%, but many economists now expect the RBA’s next move to be a cash rate cut – likely a 25-basis point easing in the cash rate at the RBA’s September 23-24 board meeting.

So, should you hold and wait to see what the RBA does, or should you shop around for a more competitive loan now? It all depends on your current mortgage rate, your financial goals and whether the benefit of refinancing outweighs the cost involved.

However, at the very least, it always pays to explore your options, especially when it comes to something as costly as your investment property.

Why it pays to consider refinancing

Refinancing your loan can allow you to access the equity in your property. Equity is the proportion of the property you own.

Say the property is worth $800,000 and you owe $200,000 to the bank. You have $600,000 in equity.

Savvy property investors use their equity for a variety of purposes:

  • To renovate and add value to their investment property,
  • As a deposit for their next investment property, or
  • To fund their lifestyle and living expenses.

Another popular reason to refinance is to secure a more competitive interest rate or a loan that better suits your needs.

There may also be loan features that could improve your interest savings or cash flow like offset accounts and redraw facilities.

Key considerations before refinancing

1) How much equity do you have?

Generally, the right time to refinance your investment property is when the equity has grown sufficiently to take the next step in your investment strategy or to fund your renovation plans.

To get an idea of the value of your property and how much equity you have, you can:

  • Ask us for a free property profile report with the latest market insights.
  • Talk to local real estate agents for a market value estimate.
  • Pay for a professional property valuation (a formal valuation will likely be required by the lender before they will allow you to refinance).

2) What is the cost of refinancing?

Switching lenders and refinancing your investment loan can help you achieve your goals, but there are costs involved.

These may include break fees or discharge fees, establishment fees for your new investment loan, and valuation fees.

Speak to us and we’ll run you through the costs and help you decide whether refinancing is worthwhile right now, or if it may be better to wait until your equity has grown further.

3) How is the market performing?

Part of the decision about whether to refinance will depend on how the property market is performing for your investment.

Nationally, property prices have been increasing in many capital cities in recent months and investors have been flooding back into the market.

Data from the Australian Bureau of Statistics shows lending to investors has jumped almost 20 per cent in the past year. Almost 4 in 10 people taking out a mortgage now are landlords.

If property prices were decreasing and you were facing negative equity territory, you probably wouldn’t be thinking about refinancing. But if your property value has increased, it may be the right time to weigh up your finance options.

Talk to us today

If you’re wondering whether refinancing is right for you, we can help you decide.

Whether you’re wanting to access equity to grow your investment portfolio or renovate, or you simply want to check that your investment loan is competitive, we’re here to help.

If the time is right for you to take the next step in your investment journey, we’ll find you the right refinance option to achieve your goals. Call us today!

6 key questions to ask your mortgage broker

In the wake of 13 consecutive cash rate hikes through 2022 and 2023, many aspiring homeowners and current mortgage holders have been left feeling uncertain.

You might be concerned about whether your dream of owning a home has been temporarily derailed. Perhaps you’re questioning how competitive your current interest rate is, or what steps to take towards your property investment goals.

In such times, having a skilled professional by your side is invaluable. Mortgage brokers are equipped to guide you through your property journey, amidst the current market conditions. Here are several questions that we encourage you to ask us.

1)  Why should I use a mortgage broker?

Our role extends beyond connecting you with lenders, offering insights beyond loan processing.

  • Are you a first-time buyer? We can explain the kinds of government assistance, grants or concessions you may be eligible for (like the First home owner grant, the First home super saver scheme, or the Home guarantee scheme).
  • Interested in refinancing? We can compare the market for you, assess if your current mortgage still serves your best interest and explain whether refinancing may be financially worthwhile.
  • Want to use your equity to buy an investment property? We can assist with that too.
  • Need funds for upgrades? We can arrange finance for things like renovations so that you can potentially add value to your property and/or create your dream home.

2) How much am I eligible to borrow?

Your borrowing capacity is influenced by various elements including your deposit, savings history, income, expenses, equity, and credit score.

Some banks have previously revised their lending criteria to minimise high-risk lending, impacting how much you can borrow. It’s important to speak to us to get a clear picture of your borrowing capacity.

3) Is now the right time to buy a property?

Whether you should buy now depends on your specific financial situation and goals. While some may benefit from current opportunities, others might find it better to wait. Let’s discuss what’s aligned with your current situation.

4) Should I consider fixing my loan rate given the market conditions?

Choosing between fixed and variable rates is a personal decision, influenced by your financial goals and market outlook.

Locking in a fixed rate might seem appealing for budgeting your repayments. However, this decision should be made with a clear understanding of the terms, including potential limitations and fees for early exit.

5) How do I use my equity to buy an investment property?

If your home’s value has gone up or you’ve paid down what you owe on it, you might be able to refinance and use that equity to fund purchases such as an investment property.

Let’s say your house is worth $850,000 and you’ve got $420,000 left on the mortgage. That gives you $430,000 in equity.

You can use that equity as security to borrow for things such as renovating your home, or even a new car.
Banks typically let you borrow up to 80% of your home’s value, less the debt you’ve still got on it (this is your “useable equity”). You may be able to borrow more if you take out Lenders’ Mortgage Insurance.

6) How does bridging finance work?

Bridging finance might be a suitable option if you’re in the process of buying a new property while awaiting the sale of your existing residence. It can also provide funding to construct a new home while you reside in your current home.

This form of short-term borrowing supplements your main mortgage and is generally structured as interest-only until your property is sold and the principal can be repaid in full.

While bridging finance can provide the flexibility to purchase your next property without the need to align settlement dates precisely, it’s crucial to consider the associated costs. We can discuss whether this option is right for you, or we may suggest alternatives.

Got more questions?

It’s normal to have questions or feel a bit cautious as part of your home loan journey. But you don’t have to sort it all out on your own.

We’re here to support you and clear up any questions you’ve got. Reach out to us today.

What is Lenders Mortgage Insurance?

Purchasing your first home is an exciting milestone, but the challenge of saving 20% for deposit – particularly if you’re also paying rent and navigating cost-of-living pressures – can feel like an impossible mission.

However, it’s important to not lose sight of your dream of home ownership, as there could be alternative options available to you. One such option could be to pay Lenders Mortgage Insurance (LMI).

In this article, we delve into the basic concepts of LMI and address some of the most commonly asked questions.

How does LMI work?

LMI is a type of insurance that a lender takes out to protect itself against the risk of a borrower not being able to repay their loan.

A lender will usually require LMI if you do not have a big enough home loan deposit saved (typically 20% of the property’s purchase price).

How much does LMI cost and how do you pay it?

The cost of LMI is calculated based on the amount of your home loan, the size of your deposit, the value of the property and the type of loan you apply for.

LMI can either be a one-off upfront premium payment or that premium could be included in the overall cost of the loan and included in monthly repayments. LMI is non-refundable and non-transferable.

What are the benefits of LMI?

If you meet all other lending criteria, paying LMI could allow you to apply for a home loan sooner and get you into your new home, without having a 20% deposit.

What happens if I can’t make my home loan repayments?

If you get into financial strife and can’t make your home loan repayments, and no other resolution is found, your property may be sold to cover the loan balance.

If the property sells for less than that amount, the lender will incur a loss and put in a claim to the LMI provider. The insurance provider will pay the lender this amount (in accordance with the LMI policy).

The LMI provider, or their debt collector, may then try to recover this amount from you, or any guarantors on the home loan.

What’s the difference between LMI and Mortgage Protection Insurance?

LMI covers the lender if the borrower defaults.

Mortgage Protection Insurance (MPI), on the other hand, can cover your home loan repayments for a period if you are made involuntarily redundant, or if you suffer from a serious medical trauma or illness that the policy covers. Additionally, it can pay off your home loan in the event of your death.

Like to know more?

There are many ways to reach the same destination, so if you’re looking to purchase your first home, speak to us about how to get your foot in the door.

Get in touch today and let’s run through what options could be available to you.

Your guide to save for a house deposit

Getting ready to buy a home starts with saving for the deposit. It might seem challenging, but with a solid strategy, you can make it happen.

Here are several things to consider that may help get you started and on track for home ownership sooner than you think.

Check your current financial situation

Ok, this one seems a little obvious, but let’s start simple. Understanding your financial situation will get you in a good place to start setting your budget. Make sure to take a look at:

  • What you earn: Your paychecks or other income.
  • What you spend: Bills, groceries, fun stuff—where does your money go each month?
  • Your debts: Loans or credit cards you’re paying off.
  • What you own: Savings or things you could sell if needed.

Understanding these parts of your money helps you see how much you can save for your new house every month.

How much can you borrow?

Having an idea of the amount you can borrow – which is determined by your current financial situation – can help you figure out how much you’ll need to save. But remember, there are other costs involved in buying a house, like stamp duty and conveyancing fees.

To figure out the deposit you need to save, consider:

  • The price of the house you want,
  • Plus any extra fees and charges,
  • Minus the amount you can borrow.

If you’re unsure about these numbers, I’m here to help. As your mortgage broker, I can work with you to understand your financial circumstances and how much you can afford to borrow.

Set your savings target

Here’s what you’re aiming for:

  • 20% of the home’s price
  • Extra money for other house-buying costs like lawyer fees, checks on the house, taxes, moving, and insurance.

Even though some places might let you buy with just a 5% deposit, saving more is better. It means borrowing less and showing banks you’re great with money, which might help you get your loan approved.

Government help? Yes, please!

If you’re buying your first home, you may qualify for the following:

These benefits can really help boost your savings by providing financial assistance and reducing costs when you’re buying your first home.

Government programs may offer grants, discounts, and tax breaks, which means you have more cash upfront and pay less over time.

How long will you be saving for?

If you know how much you can save each month and how much you’re able to borrow, you can start to estimate how long it’ll take to save for your deposit.

Check out this handy savings goal calculator to find out:

  • How long it will take to reach your savings goals
  • What steps you need to take to put your plan into action

When you’re getting close to your goals, it’s a good time to seek pre-approval. This means a lender has preliminarily agreed to give you finance for buying a home, giving you a clear idea of what you can afford before you make the final decision.

Start saving!

With your plan ready, it’s time to get saving. Making a budget helps you find extra savings spots. Automatic transfers to your savings make sure you keep saving regularly. If buying a house isn’t happening right away, think about investing to grow your savings.

Saving for a deposit is a big goal, but you can definitely do it with a bit of planning and help. As your mortgage broker, let me guide you on this exciting journey to owning your home. Get in touch today.

What to expect from the car market this year

Are you in the market for a new set of wheels? The good news is that used-car prices are largely continuing to fall, while new car prices have dropped 3.5% since their peak in December 2022.

COVID-induced supply chain issues have well and truly eased, and in some markets, like the US, an oversupply of new vehicles is expected to push prices down.

So is now the time to buy a new or used car, or make the switch to an electric vehicle?

Here’s what to expect from the car market in 2024.

Used car sales will continue to drop

In Australia, used-car sales have been dropping dramatically of late, meaning buyers may have more legroom to negotiate on price. In December 2023, out of 276,268 vehicles for sale, only 169,312 actually sold – a clear decrease compared to November.

With oil prices expected to rise this year, vehicles that are less fuel-efficient are likely to become less desirable. Experts are anticipating that SUVs and used sedans will have significant price drops in 2024.

With supply outweighing demand, light commercial vehicles like dual-cab utes have also seen a drop in both prices and sales.

Certain vehicles are holding their value better than others

In some cases, some used-car models are worth more today than when they were purchased new.

If, for example, you purchased a Suzuki Jimny, Toyota Yaris Cross, Toyota LandCruiser, Toyota RAV4, Nissan Patrol or Honda Jazz in the past two to four years, you’d be pretty happy with today’s resale value. These models have value retention of more than 100 per cent.

New car sales will likely continue to be red hot

In 2023, Australia broke an all-time record for new vehicle sales. In total,1,216,780 vehicles were delivered throughout the year, beating the previous highest sales record of 1,189,116 in 2017.

And if the first few months of 2024 are anything to go by, sales of new cars may continue to go gangbusters.

In February, there was a record month for deliveries of new vehicles in Australia, with 105,023 new vehicles sold. It was also the 10th consecutive month of growth. If you compare those figures to the same month last year, there was a 20.9% increase.

EVs and hybrid cars will continue to gain popularity

Demand will continue for Electric Vehicles (EVs) and hybrids in 2024, and we may see prices stay the same or potentially even increase.

Federal Chamber of Automotive Industries (FCAI) data shows that a record 10,011 full-battery electric cars were sold in Australia in February – representing a market share of 9.6%. This was a significant increase from the 4,893 sales in January. Tesla’s refreshed Model 3 was Australia’s best-selling passenger car in the month.

Check out the current federal and state/territory incentives for EV’s here.

Tips for buying in 2024

  • Do your research before you step into a dealership. Use car comparison tools, check out customer reviews and read advice about the vehicle you’re interested in.
  • When budgeting for your purchase, make sure you consider all the costs of ownership – fuel, insurance, maintenance costs, the lot.
  • Don’t fall into the trap of dealership finance, which may not take into account your financial situation and goals. Instead, talk to us about the different asset finance options available to you.

Need finance for your vehicle purchase?

Whether you’re looking to buy a new truck for your business or you want to join the EV tribe, we can help. Get in touch to talk about your asset finance options.

Looking to join the EV tribe or add to your company’s fleet this year? Get in touch with us to talk about your asset finance options.

5 tips for getting on top of your mortgage repayments

If you’re struggling to cover your mortgage repayments and other living expenses, you’re not alone.

Data by Roy Morgan revealed that more Australian homeowners were “at risk” of mortgage stress over the three months to January than ever before. If you’re wondering how you’ll afford your next mortgage repayment, here are some tips for getting on top of your finances.

1) Reassess your budget

Many households are already stretched thin at the moment but there’s no better time to see where you can cut even more expenses.

Can you do without the gym membership? Maybe you don’t need five subscriptions to different streaming platforms?

Start cutting costs and saving a buffer for your mortgage repayments.

2) Shop around

Ten minutes of your time spent making a few phone calls to your utility and service, or health insurance providers to see if you can get a better deal could save you money in the long run.

Go through your expenses and try to negotiate a more competitive rate. Be sure to see what competitors are offering too.

3) Boost your income

Realistically, there is only so much you can save. Another way to boost your savings is to establish an additional income stream. Think about starting a side job, renting out assets, or selling some of the unused items sitting around the house.

If you’re feeling game and you think you deserve it, perhaps you could ask your boss for a pay rise. You never know your luck!

4) Get us to review your interest rate

Don’t assume your current loan is the be all and end all. There are loads of different lenders with different home loans out there. Speak to us to explore all of your options.

We may be able to negotiate a more competitive interest rate with your current lender or point you in the direction of another bank with a loan that’s more suitable for your needs.

5) Reach out if you’re struggling

If you are having difficulty making your repayments or are at risk of defaulting, get in touch with your lender’s hardship team. It’s best to do this early, before the situation gets worse.

What happens if you default?

If you’ve already fallen behind in mortgage repayments, your bank may give you a grace period of a couple of weeks to catch up. However, if you don’t make the repayment, you will have defaulted on your mortgage.

At that point, you may be stung with fees and your mortgage default may be recorded on your credit rating. This could impact your ability to borrow money in the future.

You may be issued with a default notice to pay the lender within a certain timeframe. If this doesn’t happen, the lender may repossess the property and sell it to recoup the debt.

The bottom line is, try to stay on top of your mortgage repayments and avoid defaulting if possible.

We’re here to help

We hope you’ve found these tips helpful. If you’re feeling stressed with making your mortgage repayments, get in touch today to chat through your home loan options.