How Soon You Could Tap Your Equity to Borrow and Buy New Property

How Soon You Could Tap Your Equity to Borrow and Buy New Property

If you’re renovating, usually most of the lenders won’t let you do a refinance within six months of purchasing a property.

Some can get you to three months especially if your broker has that conversation around the fact there’s been a significant renovation or change.

But usually they’ll accept that they need three to six months. So it’s not a buy, renovate and then 10 days later, let’s get a refinance that could be difficult.

It could be that you’ve got a current property within your portfolio, you renovate it, and then you refinance whenever you want to. So there’s that opportunity.

Buying between properties is essentially its really up to you when you can afford it. And as long as you’ve got a buffer in place, so that you make sure if something goes wrong, you know, you’ve got some cash to cover vacancies, etc.

You have to think ahead of what your strategies and have the right finance setup.

If your plan is to buy a property and access equity, make sure that you’re with the lender that’s going to allow you to access that equity and has the policies to allow you to do it.

If you’d like a complementary call to talk with one of our experts then book a call https://investorschoice.com.au/bookacall

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Property Review May 2021

Stay up to date with the latest developments in the property market over the past month.

Our video takes you through an overview of the state of the property market, including a breakdown across all capital cities of the changes in dwelling values over the past month, as well as over a period of 12 months.

Please click here to get in touch if you’d like assistance finding the right loan for your situation.

Keeping your cool in a hot market

 

After reeling from the impact of COVID-19 lockdowns in 2020, property values throughout Australia have strongly rebounded, rising at their fastest pace in 32 years. These exceptionally strong conditions are now being seen across all major capital cities, following the trend set by regional areas during the latter half of 2020.ⁱ

If you are in the market to buy property in the near future, no matter where you are looking in Australia, you are likely facing a market that favours the seller over the buyer, under quite competitive conditions. So, let’s look at the measures you can take to buy well and keep your cool under the current conditions.

Do your homework

It’s a good idea to be very familiar with the areas you are looking at buying in and physically inspect as many properties as possible, both so that you get a sense of your ‘must haves’ and ‘nice to haves’ and so that you can keep your finger on the pulse and know what represents good value in your preferred suburbs.

Be prepared to act fast!

If you have found a property that meets your criteria, try to view it as soon as possible by making an appointment with the agent, rather than waiting for open for inspections.

It’s also important to be prepared for a purchase and make sure you can respond quickly if a property ticks all (or even most of!) the boxes. Ensure you are familiar with the process of buying property and your rights and obligations as a buyer. Line up the necessary assistance you need including selecting a solicitor, as well as touching base with the relevant contacts for building or pest inspections so that you can call on them as required.

Buy with your head – not your heart

It’s important to keep your emotions in check and not make rash decisions just because the market is strong. Due diligence remains vital during the home buying process, speeding things up and acting rashly can end up costing you much more down the track.

The fact that you’ve missed out on properties you are keen on, does not need to be the reason you lower your standards drastically and make significant sacrifices in order to get a foothold in the market. Although it is important to be realistic about what you can and can’t afford and maintain a longer-term view in terms of your property purchase.

Strategies for success

In a seller’s market you should assume you are competing against other offers. One way of getting an edge on the competition is to be flexible when it comes to settlement. It’s worth asking the seller if they need a shorter or longer settlement and if you are able to meet their needs in this area, it may give you an advantage over other bidders.

Pre-auction offers need careful consideration. Making an offer prior to an auction can work in your favour by enticing the seller and you may pick up the property for less than it would sell at auction. Equally, a prior offer may work against you by reinforcing to the seller that the property is highly sought after, encouraging them to ‘hold out’ for the auction.

Finance pre-approval

And last but certainly not least, having your finance pre-approved will help you to jump in when you need to and also to know your budget and what you can afford. Being pre-approved by a mortgage lender is a great way to show sellers that you’re not only serious about buying, but that you have the funds for the purchase ready to go.

We can help you review your finances, budget and repayments and get you sorted with the best loan for your circumstances so you are set for success in a competitive market. Click here to book a call with us today.

i https://www.corelogic.com.au/sites/default/files/2021-03/210401_CoreLogic_HVI.pdf

Financially planning parenthood

 

Parents often refer to their children as their ‘pride and joy’ and there is no doubt that becoming a parent can be a profound, life changing experience, which is just as well because the cost of raising a child is often greater than expected – at every step of the way.

A recent survey by CUA found that three quarters of parents underestimated the cost of raising their first child which it estimates as $10,000 in the first 12 months alone.ⁱ

But the costs don’t stop there.

Budgeting for the bundle of joy

Just having a baby can be expensive. Even with private health cover, it is estimated that out of pocket expenses can be up to up to $7300 for a private delivery, while the public health system, is free.ⁱⁱ

The CUA survey found the costs that surprised parents the most were baby essentials, childcare, loss of income, food and formula, increased household bills, health care, clothing, a bigger car, increased health insurance costs and the need for a larger house.

As always, planning ahead to manage your expenses will put your family in good stead. A good general rule is to have at least six months budgeted expenses for the entire family and ideally 12 months to assist during a time when the household income will most likely be reduced.

Giving them the best start in life

Many parents are keen to support their children in developing new skills, while introducing them to new experiences and hobbies, in order to give them the best start in life. As your child grows, so do the costs. Feeding, clothing and entertaining a socially active teenager is much more expensive than a baby. In fact, the average cost of raising a child between the ages of 5-9 is estimated at $212 per week, rising to $244 per week for a 10-14 year old and $440 per week for a 15-17 year old.ⁱⁱⁱ

Education costs

One of the biggest costs associated with raising kids is education. While childcare can be a major outlay in the early years, the cost of education soars once children reach high school.

It’s generally acknowledged that private school fees require a financial sacrifice for many families, however even government schools do have their costs.

A study by Futurity (formerly Australian Scholarship Group) found that 13 years at a government school in a major city will cost $81,823 for each child. This figure jumps to $140,433 for a Catholic school and a hefty $340,882 for an independent school.^iv

Whatever your choice of schooling, it’s a major financial commitment so a savings plan makes sense. There are various ways to put money aside for education.

You could start saving with a bank account in your child’s name. However, you need to be mindful that once the interest on the account hits $417 a year, the tax rate becomes prohibitive at a whopping 66% to 45%, depending on interest earned.^v

Opening a savings account in your own name could be a more attractive alternative, but with interest rates currently below 1 per cent your savings would not keep pace with inflation.^vi

Investment bonds are another option popular with parents and grandparents saving for a child’s education. This is because any earnings are taxed at the company tax rate within the investment. As long as you hold on to the investment for 10 years, you are not liable for personal income tax.

Alternatively, you might look at paying each year’s tuition in full in advance and benefitting from any discounts the school may offer. To assist with cashflow with the lump sum payment, there are various avenues you can explore such as advance loans.

Be prepared for the unexpected

Interestingly, the shift to home education during COVID-19 led to greater financial pressure on families with on average an extra $808 per child being spent on educational expenses. This included electronic devices, outside tuition and coaching, additional stationery and additional textbooks.

While raising children is likely to be one of the most joyful and satisfying things you can do, it’s also expensive. It’s never too late (or too early!) to look at your financial situation and put a plan in place to not only give your children the best possible start in life but also provide ongoing support as they grow.

We can help you. Click here to book a call with us today.

Property prices are rising, will interest rates be next?