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 half of the growth in new loans over the past year. But in an unexpected twist, it isn’t older generations of Australians 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 to 1980) are also snapping up rental properties, accounting for 37% of CommBank’s new investment property loans in 2023.
Rentvesting – get into the market sooner
Rentvesting is buying property where you can afford, possibility 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 is 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
Add in growing expectations that interest rates will start to fall later this year, and CoreLogic says it is likely that property values will continue to rise, giving those today who buy 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!
Zippy Financial is an award-winning mortgage brokerage specialising in home loans, property investment, commercial lending, and vehicle & asset finance. Whether you are looking to buy your first home, refinance or build your property investment portfolio, the team at Zippy Financial can help find and secure the right loan for you and your business.
About the Author:
Louisa Sanghera is an award-winning mortgage broker and Director at Zippy Financial. Louisa founded Zippy Financial with the goal of helping clients grow their wealth through smart property and business financing. Louisa utilises her expert financial knowledge, vision for exceptional customer service and passion for property to help her clients achieve their lifestyle and financial goals. Louisa is an experienced speaker, financial commentator, mortgage broker industry representative and small business advocate.
Louisa Sanghera is a Credit Representative (437236) of Mortgage Specialists Pty Ltd (Australian Credit Licence No. 387025).
Disclaimer:This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information. This article is not to be used in place of professional advice, whether business, health or financial.
Navigating Settlement Value and Valuation in Today’s Market
In the fluctuating tides of today’s real estate market, the savvy investor must navigate with precision and caution. The cornerstone of a secure investment lies in the accuracy of settlement valuations—a critical step that can make or break the financial outcome of a property transaction. Understanding the nuances of settlement value is not just recommended; it’s imperative for safeguarding your investment.
Understanding Settlement Valuations
Settlement valuation is the final appraisal of a property’s worth before the completion of a sale, determining the amount to be paid to the seller. This valuation is pivotal as it influences the final financial commitment of the buyer and the home loan amount sanctioned by lenders. The risks of over-valuation can lead to financial strain, while under-valuation can result in lost opportunities.
The Risks of High-Density Developments
Urban landscapes are increasingly dotted with high-density developments, promising lucrative returns. However, these can be fraught with valuation risks, particularly if market saturation occurs. Investors are thus turning their gaze towards smaller, boutique projects outside central business districts (CBDs) that offer stability and growth potential without the overcrowding premium.
Independent Valuations vs. Developer Valuations
The battle between independent valuations and developer valuations is one of objectivity versus vested interest. Lenders’ approved valuers provide an impartial assessment, crucial for a realistic understanding of a property’s worth. Developer valuations, while useful, may not always reflect the true market value, leading to skewed financial decisions.
Market Hot Spots and Valuation Pitfalls
Chasing the latest market “hot spot” can be a perilous game. These areas, often hyped for their short-term gains, can lead to valuation pitfalls if the market cools or becomes oversupplied. A prudent investor looks for enduring value, seeking areas with consistent demand and growth, rather than speculative spikes.
Expert Advice and Research
The bedrock of any sound investment strategy is research, expert advice, and effective financial planning. Understanding sales data, zoning laws, and long-term community planning is essential. Engaging with property experts, including a mortgage broker, who can dissect this data and provide tailored advice is invaluable for investors aiming to maximize their settlement value.
Comprehensive Research and Data Analysis
Sales Data Analysis: Discuss the importance of thoroughly researching and analyzing sales data, including property price trends, historical sales, and market conditions in the target area.
Zoning Laws and Regulations: Explain the significance of understanding zoning laws and regulations, which can affect property development plans and investment potential.
Community Planning Knowledge: Highlight the value of being well-informed about long-term community planning, as it can influence property values and investment prospects.
Expert Guidance and Advisory Services
Property Experts: Describe the role of property experts, including real estate agents, appraisers, and consultants, who possess in-depth knowledge of local property markets and can provide valuable insights.
Tailored Investment Advice: Emphasize how expert advisors can offer personalized advice tailored to individual investment goals, risk tolerance, and financial capacity.
Risk Mitigation: Explain how engaging with property experts can help investors mitigate risks associated with property investment by making informed and well-calculated decisions.
Maximizing Settlement Value
Strategic Decision-Making: Discuss how expert advice and research can lead to strategic decision-making that maximizes settlement value, potentially resulting in a more profitable investment.
Negotiation Skills: Address the importance of having skilled negotiators on your side to secure favorable terms during the settlement process.
Long-Term Investment Gains: Highlight how comprehensive research and expert guidance can contribute to long-term investment gains and financial security.
Case Studies and Success Stories
Real-world examples abound of investors who have adeptly navigated the settlement valuation process. Case studies from reputable firms like the Aviate Group underscore the significance of strategic investment choices and the role of expert valuation in achieving successful outcomes.
Navigating the complexities of settlement value and valuation is a nuanced art that requires knowledge, foresight, and expert guidance. As the market ebbs and flows, the informed investor who prioritizes accurate valuations will stand firm, securing their investment against the unpredictable currents of the real estate market.
Frequently Asked Questions
What is settlement value in real estate?
Settlement value refers to the final agreed-upon price between a buyer and seller for a property transaction, which is confirmed at the closing or settlement.
How is the settlement value determined?
The settlement value is typically based on the property’s appraised value, market conditions, and negotiations between the buyer and seller.
Why is a property valuation important before settlement?
A property valuation ensures that the buyer is paying a fair price and that the lender is not providing a loan for more than the property’s worth.
Can the settlement value differ from the valuation?
Yes, the settlement value can differ from the valuation due to negotiations, market dynamics, or if the buyer agrees to pay more than the appraised value.
How often should a property be valued before settlement?
A property should be valued close to the settlement date to ensure the most current market conditions are considered.
Can market trends impact settlement value and valuation?
Yes, market trends can significantly impact both settlement value and valuation as they influence buyer demand and perceptions of property worth.
Zippy Financial is an award-winning mortgage brokerage specialising in home loans, property investment, commercial lending, and vehicle & asset finance. Whether you are looking to buy your first home, refinance or build your property investment portfolio, the team at Zippy Financial can help find and secure the right loan for you and your business.
About the Author:
Louisa Sanghera is an award-winning mortgage broker and Director at Zippy Financial. Louisa founded Zippy Financial with the goal of helping clients grow their wealth through smart property and business financing. Louisa utilises her expert financial knowledge, vision for exceptional customer service and passion for property to help her clients achieve their lifestyle and financial goals. Louisa is an experienced speaker, financial commentator, mortgage broker industry representative and small business advocate.
Louisa Sanghera is a Credit Representative (437236) of Mortgage Specialists Pty Ltd (Australian Credit Licence No. 387025).
Disclaimer:This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information. This article is not to be used in place of professional advice, whether business, health or financial.
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Property Investment Australia: Dos and Don’ts for Aspiring Investors
The allure of property investment Australia is undeniable. With its potential for significant returns and the stability of a tangible asset, many are drawn to the prospect of building wealth through real estate. However, like any investment venture, property investment comes with its complexities and risks. Strategic planning, informed decision-making, and awareness of common pitfalls are crucial for success.
The Strategic Investor’s Mindset
In the dynamic world of property investment Australia, adopting a strategic approach is paramount. This means focusing on long-term goals, ensuring financial stability, and having a deep understanding of market trends. Continuous learning and staying updated with the latest in property market dynamics, economic factors, and investment property interest rates in Australia can set you apart from the novice investor.
Essential Dos for Property Investment
Do Analyze Market Trends:
Before you invest in property Australia, it’s vital to understand market dynamics. This includes property values, rental demand, demographic shifts, and other factors that can influence your investment’s profitability.
Do Consider the Location Strategically:
The age-old adage, “location, location, location,” holds true. Proximity to amenities, future development plans in the area, and potential for growth can significantly impact your investment’s value.
Do Calculate Potential Returns and Expenses:
Conduct a thorough financial analysis. Consider potential rental income, unforeseen expenses, and the current investment property interest rates in Australia to gauge your expected returns.
Do Consult with Financial Experts:
Financial advisors, mortgage brokers, and tax professionals can offer invaluable insights, helping you make informed investment decisions tailored to your financial goals.
Do Explore Diverse Financing Options:
With various mortgage products and investment loans available, researching and comparing can secure you favorable terms and interest rates.
Critical Don’ts for Property Investment
Don’t Neglect Due Diligence:
Skipping thorough property inspections, legal checks, or neighborhood assessments can lead to costly mistakes.
Don’t Base Decisions on Emotions:
While it’s natural to have personal biases, it’s essential to base your investment decisions on solid data and investment criteria.
Don’t Ignore Tax Implications:
Property investment in Australia comes with specific tax benefits and obligations. Consulting with a tax professional can ensure you’re maximizing benefits while staying compliant.
Don’t Underestimate Ongoing Costs:
Maintenance, property management fees, and potential vacancy periods can impact your returns. Budgeting for these can save you from unexpected financial strains.
Don’t Go It Alone:
Leverage professional networks, join investor groups, and consider partnership opportunities. Diversifying risk and pooling resources can enhance your investment strategy.
Property investment in Australia offers a world of opportunities for those willing to approach it with professionalism, a strategic mindset, and informed decision-making. As you embark on your property investment journey, remember that education, due diligence, and expert consultation are your best allies.
Frequently Asked Questions
What is property investment in Australia?
Property investment in Australia refers to the act of purchasing real estate properties with the intention of generating a return on investment, either through rental income, property appreciation, or both.
Why is property investment popular in Australia?
Australia’s stable economy, growing population, and consistent property market growth make it an attractive destination for both domestic and international investors.
How can I ensure a successful property investment in Australia?
Success in property investment often comes from a combination of thorough research, financial preparedness, understanding the market, and seeking advice from professionals.
Is it essential to consult with a property expert or advisor?
While not mandatory, consulting with a property expert or advisor can provide valuable insights, reduce risks, and help investors make informed decisions.
How does the Australian property market compare to other countries?
The Australian property market is known for its stability, consistent growth, and investor-friendly regulations, making it a preferred choice for many global investors.
What factors should I consider before investing in Australian property?
Factors to consider include property location, type of property, potential rental yield, capital growth prospects, local amenities, and future infrastructure developments.
Zippy Financial is an award-winning mortgage brokerage specialising in home loans, property investment, commercial lending, and vehicle & asset finance. Whether you are looking to buy your first home, refinance or build your property investment portfolio, the team at Zippy Financial can help find and secure the right loan for you and your business.
About the Author:
Louisa Sanghera is an award-winning mortgage broker and Director at Zippy Financial. Louisa founded Zippy Financial with the goal of helping clients grow their wealth through smart property and business financing. Louisa utilises her expert financial knowledge, vision for exceptional customer service and passion for property to help her clients achieve their lifestyle and financial goals. Louisa is an experienced speaker, financial commentator, mortgage broker industry representative and small business advocate.
Louisa Sanghera is a Credit Representative (437236) of Mortgage Specialists Pty Ltd (Australian Credit Licence No. 387025).
Disclaimer:This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information. This article is not to be used in place of professional advice, whether business, health or financial.
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Your First Investment Property: Essential Steps for Market Navigation
The First Home Loan Deposit Scheme (FHLDS) represents a significant step by the government to support first-time buyers in the challenging property market. As a cornerstone initiative, the deposit scheme aims to ease the daunting process of saving for a substantial home loan deposit, offering a beacon of hope for many aspiring homeowners. This article delves into the nuances of the FHLDS, providing insights and practical advice for those considering this pathway to homeownership.
Overview of the Updated FHLDS
The FHLDS has been a game-changer in the property market, allowing first-time buyers to purchase a home with as little as a 5% deposit. The government’s guarantee for the remaining portion of the deposit mitigates the need for Lenders Mortgage Insurance (LMI), potentially saving participants thousands of dollars. However, staying abreast of the latest updates and changes to the scheme is crucial for maximizing its benefits.
Eligibility and Application Process
Navigating the eligibility criteria is the first step in leveraging the FHLDS. Applicants must meet specific income, property price, and citizenship requirements. The application process involves meticulous documentation and adherence to deadlines, underscoring the importance of thorough preparation and understanding of the scheme’s intricacies.
Understanding the Financial Implications
While the FHLDS offers a lower entry barrier to the property market, it’s essential to comprehend the long-term financial implications. A smaller deposit means a larger loan amount and potentially more interest paid over the life of the loan. Prospective buyers should consider their future financial stability and the potential market fluctuations that could impact their investment.
Navigating the Property Market with the FHLDS
The property market, especially in high-demand areas, can be fiercely competitive. The FHLDS participants must be strategic in their property search, staying within the price caps and being prepared to act swiftly when opportunities arise. Understanding market trends and aligning expectations with reality is key to making the most of the FHLDS.
Alternatives and Supplementary Options
For those who might not fit the criteria for the FHLDS or seek additional support, exploring alternatives is crucial. Other government initiatives, grants, and financial assistance programs can provide supplementary aid or serve as alternative routes to homeownership.
Exploring Diverse Avenues for Homeownership Support
Government Initiatives Beyond FHLDS: Explore government initiatives beyond FHLDS. Investigate additional programs that may offer financial assistance or support for prospective homebuyers, ensuring a comprehensive understanding of the available options.
Supplementary Grants for Homeownership: Consider supplementary grants for homeownership. Identify grants that complement the FHLDS or cater to specific needs, providing extra financial assistance to make homeownership more accessible.
Financial Assistance Programs for Eligible Candidates: Explore diverse financial assistance programs. Investigate programs designed for individuals who may not meet FHLDS criteria but still require support, ensuring inclusivity in the quest for homeownership.
Tailoring Homeownership Solutions to Individual Needs
Customized Support for Varied Circumstances: Tailor solutions to varied circumstances. Recognize that homeownership journeys are unique, and individuals may require tailored support. Investigate alternative routes that align with specific needs, ensuring a personalized approach to achieving homeownership goals.
Comprehensive Research and Program Comparison: Conduct comprehensive research and program comparison. Thoroughly investigate various alternatives, comparing eligibility criteria, benefits, and application processes. This diligence ensures informed decision-making and the selection of options best suited to individual circumstances.
Collaboration with Housing Experts: Collaborate with housing experts for guidance. Seek advice from professionals well-versed in housing initiatives, grants, and assistance programs. Their expertise can provide valuable insights, helping individuals navigate the diverse landscape of homeownership support.
The Role of Financial Advisors in Maximizing Scheme Benefits
Professional financial advice, provided by financial brokers and mortgage brokers, can be invaluable in navigating the FHLDS. These experts offer personalized guidance, helping applicants understand the scheme’s benefits and risks, and crafting a financial strategy that aligns with their long-term homeownership goals.
The First Home Loan Deposit Scheme is more than just a financial program; it’s a lifeline for many aspiring homeowners. However, it demands careful consideration, strategic planning, and a comprehensive understanding of the property market. By approaching the FHLDS with diligence and informed decision-making, potential buyers can turn their homeownership dreams into reality.
FAQ
A: The First Home Loan Deposit Scheme is a government initiative aimed at supporting eligible first home buyers in purchasing a home sooner. It allows first home buyers to purchase a home with a significantly lower deposit than usually required.
A: Eligibility for the scheme is subject to several criteria including income caps, property price thresholds, and being a first-time home buyer. It’s essential to review the specific eligibility requirements or consult with a financial advisor to determine individual eligibility.
A: The scheme benefits first home buyers by allowing them to purchase a home with a deposit as low as 5%, without needing to pay for Lenders Mortgage Insurance, potentially saving them a substantial amount of money.
A: Yes, the First Home Loan Deposit Scheme can typically be used in conjunction with other government grants and schemes, such as the First Home Owner Grant, allowing buyers to maximize their benefits.
A: Zippy Financial can provide expert advice and guidance on the First Home Loan Deposit Scheme, helping first home buyers understand their options, eligibility, and the application process, ensuring a smooth and informed home-buying experience.
A: Yes, there are restrictions and property price thresholds that vary depending on the location of the property. It’s crucial to be aware of these limitations and consult with a financial advisor or mortgage broker to explore suitable options within the scheme’s parameters.
Zippy Financial is an award-winning mortgage brokerage specialising in home loans, property investment, commercial lending, and vehicle & asset finance. Whether you are looking to buy your first home, refinance or build your property investment portfolio, the team at Zippy Financial can help find and secure the right loan for you and your business.
About the Author:
Louisa Sanghera is an award-winning mortgage broker and Director at Zippy Financial. Louisa founded Zippy Financial with the goal of helping clients grow their wealth through smart property and business financing. Louisa utilizes her expert financial knowledge, vision for exceptional customer service and passion for property to help her clients achieve their lifestyle and financial goals. Louisa is an experienced speaker, financial commentator, mortgage broker industry representative and small business advocate.
Louisa Sanghera is a Credit Representative (437236) of Mortgage Specialists Pty Ltd (Australian Credit Licence No. 387025).
Disclaimer:This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information. This article is not to be used in place of professional advice, whether business, health or financial.
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Explainer: Open Banking, and What It Means for You
Do you know what Open Banking is, or how it’s set to impact you? Open Banking could be just about the biggest thing that’s happened in the Australian finance industry this century – so it’s probably a good idea that you have an understanding of exactly what it is, and what it means for you.
Regulatory changes, tech-driven innovation and evolving consumer preferences have all led to this new development, which will make the usually quite secretive and hard-to-navigate finance world much more accessible to the average person.
Essentially, Open Banking gives consumers unprecedented access to, and power over, their data.
In a nutshell, you’ll be able to share your selected banking data with accredited third parties (a process known as read access) and benefit from the new products, services and competition this change will generate.
But why is Open Banking important? How did it come about – and what will the end result be for borrowers?
The Open Data Economy
Open Banking forms part of the Consumer Data Right (CDR), which was passed by the Federal parliament in August 2019 and covers the telecommunications, utilities and banking industries.
That’s a real mouthful, but what this legislation represents is a major step towards an open data economy in our increasingly interconnected, online world. The UK and the European Union are already enjoying the benefits of Open Banking systems, so it’s about time we caught up!
The ACCC has given the four major banks from the 1st of February 2020 to the 1st of July 2020 to implement the sharing of consumer data, and will review the rest of the rollout through the year. Other banks and lenders will be ringing in the changes from 2021.
Savings accounts, term deposits and credit cards will be among the first products to join the Open Banking ranks, followed by mortgages and personal loans, and eventually business and investment accounts, retirement savings accounts and trusts.
By 2022, we should have a fully-functioning Open Banking system, and the ACCC will move on to applying the CDR to other sectors such as utilities.
True Transparency
Open Banking is a much more transparent system than we currently have. You will be able to instruct your bank to send your data to other banks, financial institutions and authorised organisations, so that signing up for a new mortgage, personal loan, credit card or bank account will be much simpler.
Instead of chasing up personal indentification documents or printing out page after page of transaction records, you will be able to direct your bank to send your data directly to the new institution on your behalf – a massive time-saver.
You will also find that the process of comparing products and services should become much easier. Working with an experienced and qualified mortgage broker remains the most effective way to get the best possible loan for your situation, as we are in the industry being updated on the latest market changes and credit card movements every day, which means we can direct you towards the loan product (and the lender) that best suits your needs.
However, Open Banking is a massive step in the right direction for a more robust and competitive banking industry overall, and I think we can all agree, that’s good news for borrowers.
The Nitty Gritty: Did You Know?
Relevant privacy legislation applies to Open Banking, and you are always in control of your data – organisations you are involved with can only send or receive your information at your request, and must be authorised under the government’s strict security protocols.
The CDR doesn’t allow for what’s known as write access – that is, you won’t be able to authorise accredited third parties to initiate payments or change account providers on your behalf. While this is part of the legislation in the UK and EU, and may be on the cards here in the future, for now Open Banking is purely a matter of data sharing.
Frequently Asked Questions
What is the impact of consecutive rate hikes on household budgets?
Open Banking refers to a system where banks and other financial institutions provide access to consumer banking, transaction, and other financial data through the use of application programming interfaces (APIs). It allows third-party developers to build applications and services around the financial institution, enhancing consumer choice and competition.
How long does it take for a rate rise to affect my mortgage repayments?
Open Banking empowers consumers by giving them control over their financial data. It enables them to share their financial information securely with third-party providers, allowing them to access better financial products, services, and deals tailored to their needs and financial situations.
What can I do to prepare for rate hikes?
Yes, Open Banking uses advanced security measures, including encryption and secure APIs, to protect consumer data. Consumers have control over which data is shared and with whom, ensuring their financial information is safeguarded.
How does the RBA’s cash rate affect my mortgage rate?
Open Banking offers financial service providers the opportunity to access a wealth of consumer data, enabling them to create more personalized and efficient services. It fosters innovation and competition in the financial sector, leading to the development of new products and services.
Are there any strategies to mitigate the impact of rate hikes?
Yes, participation in Open Banking is entirely voluntary. Consumers have the choice to share their financial data and can decide which information they want to share and with which service providers.
How does Zippy Financial view Open Banking?
Zippy Financial sees Open Banking as an opportunity to enhance financial services and products for consumers. It allows for a more tailored approach to financial solutions, enabling consumers to make more informed decisions and access better deals and services based on their individual financial situations.
Look out for consumer education campaign coming this year, which is designed to help you work out how Open Banking will impact you, or chat to your broker or financial planner for more information.
Zippy Financial is an award-winning mortgage brokerage specialising in home loans, property investment, commercial lending, and vehicle & asset finance. Whether you are looking to buy your first home, refinance or build your property investment portfolio, the team at Zippy Financial can help find and secure the right loan for you and your business.
About the Author:
Louisa Sanghera is an award-winning mortgage broker and Director at Zippy Financial. Louisa founded Zippy Financial with the goal of helping clients grow their wealth through smart property and business financing. Louisa utilises her expert financial knowledge, vision for exceptional customer service and passion for property to help her clients achieve their lifestyle and financial goals. Louisa is an experienced speaker, financial commentator, mortgage broker industry representative and small business advocate.
Louisa Sanghera is a Credit Representative (437236) of Mortgage Specialists Pty Ltd (Australian Credit Licence No. 387025).
Disclaimer:This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information. This article is not to be used in place of professional advice, whether business, health or financial.
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The 2024 Launch of the Help to Buy Scheme is Imminent
The highly anticipated Help to Buy Scheme will kick off next year, giving more Australians a chance to score their dream home.
A key election promise of the Albanese government,Help to buy is a shared equity scheme aimed at helping 40,000 low and middle-income earners buy a place of their own (10,000 allocations per year). The scheme involved the government making an equity contribution worth up to 40% of the value of a new home, or 30% of the value of an established home.
Homebuyers need a minimum 2% deposit and must be able to qualify for a home loan with a participating lender to fund the balance of the purchase. No lender’s mortgage insurance is payable. Homebuyers can choose to boost their stake in the property at any time, and the government won’t charge rent on its share of the home.
Who Is Eligible for Help to Buy?
Help to Buy is not limited to first homebuyers. You need to be an Australian citizen and you can’t currently own your home or have a share in a residential home. Income limits apply too. Singles can earn up to $90,000 annually or up to $120,000 for couples.
Help to Buy Property Price Limits
Property price limits apply for Help to Buy across state capitals, regional centres and ‘rest of state’ areas. The price caps are shown below.
NSW capital city and regional centres: $950,000
Rest of state: $600,000
VIC capital city and regional centres: $850,000
Rest of state: $550,000
QLD capital city and regional centres: $650,000
Rest of state: $500,000
WA capital city and regional centres: $550,000
Rest of state: $400,000
SA capital city and regional centres: $550,000
Rest of state: $400,000
TAS capital city and regional centres: $550,000
Rest of state: $400,000
ACT: $600,000
NT: $550,000
Regional centres are Newcastle and Lake Macquarie Illawarra, Central Coast, North Coast of NSW, Geelong, Gold Coast and Sunshine Coast.
How Much Can I Save with Help to Buy?
Under Help to Buy, homebuyers can take out a much smaller home loan. This provides valuable savings in loan repayments and interest costs. The federal government estimates homebuyers can save up to $380,000 on a new home purchased through the scheme or as much as $285,000 on an established home.
The Fine Print to Be Aware of
For low and middle-income earners struggling to buy a home, Help to Buy could be a game-changer. But before you rush in, bear in mind that the scheme will see you share a stake in your home with the government.
So, if or when you decide to sell the property, the federal government will put its hand out for a slice of the sale proceeds.
In this way, you won’t get the full benefit of the property’s long-term price growth, but rather a share of the profits in line with the proportion of ownership you hold.
Now Is the Time to Start Planning
With Help to Buy due to launch in 2024, now is the time to start planning. If it is something you might be interested in, don’t delay reaching out to us to find out more – it is bound to be popular, and places are limited, so you will want to start preparing now.
Frequently Asked Questions
What is the Help to Buy Scheme?
The Help to Buy Scheme is a shared equity scheme aimed at assisting 40,000 low and middle-income earners in Australia to buy a home, with the government making an equity contribution of up to 40% for new homes and 30% for established homes.
Who is Eligible for the Help to Buy Scheme?
The scheme is open to Australian citizens who do not currently own a home or have a share in a residential property. Income limits are set at up to $90,000 for singles and $120,000 for couples.
What are the Property Price Limits for the Scheme?
Property price limits vary by location, with caps set for capital cities, regional centres, and rest-of-state areas. For example, in NSW capital city and regional centres, the limit is $950,000, and in the rest of the state, it’s $600,000.
Can Homebuyers Increase Their Stake in the Property?
Yes, homebuyers can choose to increase their stake in the property at any time, and the government won’t charge rent on its share of the home.
What Savings Can Homebuyers Expect with the Scheme?
The federal government estimates that homebuyers can save up to $380,000 on a new home purchased through the scheme or as much as $285,000 on an established home.
What Should Potential Buyers Consider Before Joining the Scheme?
Potential buyers should consider the shared ownership aspect with the government and how it affects long-term property value growth and the proceeds from a future sale.
Zippy Financial is an award-winning mortgage brokerage specialising in home loans, property investment, commercial lending, and vehicle & asset finance. Whether you are looking to buy your first home, refinance or build your property investment portfolio, the team at Zippy Financial can help find and secure the right loan for you and your business.
About the Author:
Louisa Sanghera is an award-winning mortgage broker and Director at Zippy Financial. Louisa founded Zippy Financial with the goal of helping clients grow their wealth through smart property and business financing. Louisa utilises her expert financial knowledge, vision for exceptional customer service and passion for property to help her clients achieve their lifestyle and financial goals. Louisa is an experienced speaker, financial commentator, mortgage broker industry representative and small business advocate.
Louisa Sanghera is a Credit Representative (437236) of Mortgage Specialists Pty Ltd (Australian Credit Licence No. 387025).
Disclaimer:This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information. This article is not to be used in place of professional advice, whether business, health or financial.
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Should You Pay Off the Home Loan or Invest in Property?
We have been told that our home loan is the first one we should get rid of. After all, it is the biggest debt, so it makes sense that most people want to pay it off as quickly as possible.
But is that really the smartest way to manage your finances? Should homeowners pay off their home loan completely before considering other investments such as buying an investment property?
For some people, this may make sense. If you want a low-risk profile, can see your income going down in the future or there are other reasons why you want to get rid of this debt, then it could be the right way to go. But when you avoid investing because you want to pay off your home loan first, you will pay a big cost.
This is known as an opportunity cost. This is simply a way of saying – how much will it cost you to wait 10 or 20 or 30 years before you start investing? How much profit and market growth will you miss out on by waiting?
If you bought a home in Sydney 10 years ago and waited until you paid it off before you invested in property, you would still be waiting to buy another investment. It would be at least 5 or 10 years, if not more, before owning it outright. BUT if you used some of your equity to buy an investment property 3 or 4 years ago, you would have 2 quality property assets that have both gone through a massive growth spurt. Your wealth would be greater with 2 properties than it would be with 1, even though you have more debt.
The extra wealth of profit is the “opportunity cost” you miss out on if you wait for until your home loan is paid off.
How Can You Safely Invest Before You Own Your Home Outright?
How can an investor use their home equity safely, so it does not impact their lifestyle and enables them to buy a property at the same time?
Our suggestion is that people pay off their home loans enough to be able to avoid paying Lenders Mortgage Insurance. This means you want to borrow no more than 80% of your property’s total value when you withdraw some equity to buy an investment property.
Let us explain… say your home is worth $800,000 and your loan is $500,000. A loan worth 80% of its total value is $640,000. You owe $500,000 so you can borrow another $140,000 against your home to use as a deposit and stamp duty on an investment property.
Here are a few tips for people who are considering this strategy:
Always take out a principal and interest loan on an owner-occupied property – this means you will repay the principal debt from day 1.
Take out an interest only loan on an investment property – this is a tax-deductible debt and principal payments are not deductible, so this is the smartest way to leverage your money.
Any extra money you would have paid into your interest only debt should be paid into your personal home loan – this way you repay the non-taxable debt even sooner.
What Are the Traps to Know About?
Over the years we have seen a similar pattern play out in that inexperienced people don’t structure their debt correctly and end up with loan products that don’t suit them or that restrict their borrowing capacity.
Other traps we have seen is that borrowers fall into is include using redraw, causing them to lose tax advantages, taking out principal and interest loans on an investment loan that is not tax-effective, or they don’t think about using the equity they have built on their properties to use on purchasing investment properties.
To best leverage your loans for both your home and investment properties, it is ideal to set up the right structures and loan features from the beginning. Working with a mortgage broker and an accountant can be so powerful – it can save you from making mistakes that could cost you thousands, tens of thousands or even hundreds of thousands in lost profits, missed opportunities and unnecessary fees.
Frequently Asked Questions
What is the main dilemma addressed in this article?
The article addresses the common financial dilemma faced by homeowners: whether to prioritize paying off their existing home loan or to invest in additional property to potentially increase wealth.
How can investing in property potentially lead to increased wealth?
Investing in property can lead to increased wealth through capital growth, rental income, and tax benefits, allowing individuals to leverage their assets and diversify their investment portfolio.
What are the benefits of paying off the home loan early?
Paying off the home loan early can lead to reduced interest payments, financial peace of mind, and increased financial security, allowing homeowners to utilize their income for other financial goals or investments.
How does one decide between paying off the home loan and investing in property?
The decision depends on individual financial goals, risk tolerance, market conditions, and personal circumstances. It’s crucial to assess one’s financial situation, consider long-term objectives, and possibly consult with a financial advisor to make an informed decision.
Can someone do both, pay off the home loan and invest in property, simultaneously?
Yes, it is possible to allocate funds to both paying off the home loan and investing in property, depending on one’s financial capacity and strategy. This approach requires careful planning and budgeting to balance financial commitments effectively.
How does Zippy Financial assist individuals in making this decision?
Zippy Financial offers expert advice and tailored solutions to assist individuals in navigating their financial options and making informed decisions based on their unique circumstances and goals. They provide comprehensive financial consultations to explore the most suitable strategies for achieving financial objectives, whether it’s paying off a home loan or investing in property.
If you are interested in property investment but don’t know where to start or whether you should pay off your home loans first, feel free to get in contact with our friendly team today and we can help look.
Zippy Financial is an award-winning mortgage brokerage specialising in home loans, property investment, commercial lending, and vehicle & asset finance. Whether you are looking to buy your first home, refinance or build your property investment portfolio, the team at Zippy Financial can help find and secure the right loan for you and your business.
About the Author:
Louisa Sanghera is an award-winning mortgage broker and Director at Zippy Financial. Louisa founded Zippy Financial with the goal of helping clients grow their wealth through smart property and business financing. Louisa utilises her expert financial knowledge, vision for exceptional customer service and passion for property to help her clients achieve their lifestyle and financial goals. Louisa is an experienced speaker, financial commentator, mortgage broker industry representative and small business advocate.
Louisa Sanghera is a Credit Representative (437236) of Mortgage Specialists Pty Ltd (Australian Credit Licence No. 387025).
Disclaimer:This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information. This article is not to be used in place of professional advice, whether business, health or financial.
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