ACT’s Professional Advantage: Save $70,000+ in Australia’s Most Stable Market
The Australian Capital Territory offers first home buyers a unique combination of Australia's most stable employment market and strategic...
In today’s challenging financial climate, saving enough money for a house deposit can seem out of reach for many. While there are various Government grants available, not everyone is eligible, and some are turning towards their parents for help.
Let’s look at some of the ways parents could assist.
The most common way parents can help is with a Family Guarantee Loan (not to be confused with the Family Home Guarantee government initiative). This is when they offer their own property as security on the home loan. This can fast-track buying if you don’t have enough deposit. A larger deposit could avoid lenders mortgage insurance and could also open up more competitive lender rates. The bottom line is that banks will still want proof that you can afford the loan repayments and know how to manage money.
Fortunately, your guarantor loan doesn’t have to be forever. Once you’ve repaid a certain amount of the mortgage, it can be removed. The risk is that if you fall behind in repayments, the bank could force your parents to sell their home to repay the loan.
If your parents have the cash, giving a lump sum may look like an easy option. However, some lenders ask for a statuary declaration that the money is a non-repayable gift and want it to stay untouched in your bank account for three to six months before it is included as savings. This can slow down your loan approval process.
Another option is a loan. Loan conditions need to be in writing, including the interest rate – even if it’s zero, and the agreed amount to be paid back monthly.
Buying a property with your parents is another option. Your parent’s percentage is an investment, while you could be an owner occupier or another investor while renting elsewhere or living at home.
Even if your parents can’t offer direct financial help, they can still offer practical assistance. A common way is to move in with your parents instead of renting. While this allows you to save for a deposit faster, it does mean higher grocery and utility bills for your parents, so you may have to pay your share. This can also help you understand the costs of running your own home if you’ve never had to pay for groceries or pay bills before.
Saving for a deposit is a great way to understand the importance of living within your means. If you begin this habit early on, not only will it help with a deposit, but it will present as lower loan risk to lenders. Another useful tip is to access your credit scorei so you can fix any problems before applying for a loan.
You can save yourself a lot of stress and heartache by ensuring you have realistic expectations on the location, type and size of property you can expect to afford. It may be very different to where you currently live, especially if you are renting. ‘Rentvesting’ is an alternate option and can be an affordable first step. This is when you buy an investment property in a cheaper area while continuing to rent in another location. Consider how you’re going to afford to furnish the home, as well as budgeting for regular bills, and ongoing maintenance is also important. Most lender websites have calculators to help with this.
If you’re fortunate enough to receive financial assistance from your parents, it’s important to keep the lines of communication open to ensure all parties have a clear understanding of the terms and conditions as well as individual responsibilities.
We’re happy to work out the options open to both you and your parents, including any government schemes to help first home buyers and ensuring everyone’s paperwork is in order. Our wide range of lenders makes it easier to find the right loan structure, so please call us for a chat.
In the space of a year – and 10 official interest rate rises – plenty of positively or neutrally geared investment properties have slipped into negative territory. After a significant 3.5% jump in the cash rate, savvy investors are now rethinking their medium to long term strategies.
While some property investors actively choose a negative gearing path, others have only recently found themselves navigating the oft-talked about mortgage method due to the fast-paced interest rate climate. There are tax-related perks that come with negative gearing, but the strategy doesn’t necessarily make sense for everyone. To work out if negative gearing is right for you, it might be time to give your property investment plan a ‘health check’.
Put simply, negatively gearing your property investment means spending more on your mortgage interest payments and expenses than you’re getting in rental payments. In this case you’re effectively not earning an income from the property, but it does mean you can write off these losses at tax time. Although the investment property is costing you (rather than providing income), the negative gearing pay day hopefully comes in the form of capital growth.
While some investors swear by the strategy, negative gearing does come with downsides. You’ll be making an ongoing loss and won’t generate a passive income to help pay for the property’s holding costs. Another drawback is the potential for a capital loss. Investors get into real estate to make money, but there are no guarantees.
On the flip side of negative gearing, positive gearing takes the opposite approach, whereby the income you earn from your investment property is higher than your expenses. This tactic is ideal for investors looking for consistent returns and a passive income. And if the property increases in value there will be capital gains on top of your rental income when you come to sell. You will pay tax on your rental income and with rising rates, it can be more challenging to find suitable properties which fit the strategy.
If your investment property costs you nothing, but also earns you nothing, then it is neutrally geared. It’s a rare approach because it’s difficult to perfectly align both the expenses and earnings but can work well for anyone investing through a self-managed super as it won’t eat into the fund’s wealth.
It’s important to cover all your bases when working out whether negative gearing is the right strategy for your personal circumstances and the property in question. Prepare yourself by asking;
As the cost of living – and the price of holding a mortgage – continues to increase, negative gearing will eat more and more into your monthly expenses. While it can be a highly effective strategy to reduce your tax bill and unlock capital gains, there are a lot of other things to consider. If your household budget is already tight in the current climate, then perhaps this isn’t a path for you. However, if you have crunched the numbers and are confident you can absorb the extra costs then negative gearing might just be the right fit.
Ultimately, you’ll need to consider your own financial circumstances and speak to us to find a loan that suits your ideal strategy.
Stay up to date with the latest developments in the property market over the past month.
In its tenth rate increase since May last year, the Federal Reserve Bank has announced another rise to the official cash rate, increasing it by 25 basis points from 3.35% to 3.6% in response to continued inflationary pressures.
Our video also 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.
Click the video below to view our March update.
With interest rates increasing, contact us today to get a better understanding of how market changes will impact your next property purchase
Having a career means so much more than just having a job and a regular income. Having a successful career can provide you with great satisfaction but it does require work to get to where you want to be and then sustained effort to continue to grow in your chosen field.
It’s worth it though. We spend roughly 13 years of our lives at work, so it makes sense to put effort into establishing and maintaining a career that ticks your boxes.i
It’s important to consider that having a satisfying career is not so much a destination than a journey. Most of us, on average, have 12 distinct jobs through our working life so managing your career is never ‘set and forget’, it’s a continual process of progress and re-evaluation. So, whether you are relatively new to the workforce or well into your working life, here are some tips to help you along your journey.
While it is possible to achieve success by ‘winging it,’ you improve your chances of achieving the career of your dreams by putting a plan in place. Everyone has different goals and dreams for themselves and it’s important to be true to what you want for yourself, so do some soul searching to decide what’s important to you.
Good career planning also takes into consideration where you want to be in the future – both personally and professionally. Think short term, medium and long term. For example, how do you see your life in two years, five years, and ten years?
Then once you’ve decided what you want to achieve and defined what success looks like to you, the next step is to do some goal setting. Put in place some achievable, incremental steps to aim for to make the journey a little easier. Make sure your goals don’t just exist inside your head – writing down your goals makes them more tangible. Just be sure your goals are specific and measurable.
Growth is integral to career success and that can mean pushing yourself out of your comfort zone.
Say yes to that job interview, even if you don’t feel totally qualified, as the experience of attending the interview itself will help you to hone your skills and you may well even be successful in being offered the role.
Take a course so you can learn a new skill, even if you’re scared you’ll be terrible at it – you may surprise yourself and find that you excel in this new endeavour.
You don’t have to go it alone. One of the most powerful things you can do to enhance your career and make the most of opportunities is to recognise the power of networking and actively expand your career networks. The concept of networking can sound a little intimidating, but it simply means connecting with people and cultivating mutually beneficial relationships. Start with who you know and build from there, be open to meeting new people and attend professional groups and networking events and maintain a presence on social platforms like LinkedIn.
Another way to get help is to develop a relationship with a mentor. A great mentor can provide the benefit of their experience, be a sounding board and support you in your career development. It can take time to find the right person so be patient and invest in building good relationships, perhaps with more than one individual to open up career opportunities.
An integral part of career development is maintaining continual growth. While it can be tempting to stick with what you know and stay in your comfort zone, it’s important to recognise when you’ve outgrown a role or even an organisation and when it’s time to seek out new opportunities and make a move.
And finally, dare to dream – be an active participant in your career development, and you’ll be sure to see your career grow in amazing ways.
With higher interest rates causing price falls across most of the country, buying in a falling market can appear tempting. As always, whether it’s a good time to buy will depend on your circumstances and what type of property you’re after. Here are some tips to help you avoid the pitfalls and capitalise on opportunities presented in the current market.
While the property market is never uniform, in today’s climate, sellers may have to consider lowering their price expectations. This can give buyers more negotiating power and, if you have your finance in place, then you may be able to take advantage of the falling market. Knowing exactly when the market has bottomed out is difficult and shouldn’t be your main concern. It is unpredictable and you need to look long-term to ensure you don’t miss out on the right property.
Believe it or not, people are still missing out on their dream property because they haven’t organised their finance ahead of time. Whatever the market, if you have your pre-approval in place, you know the maximum amount you can borrow and how much your repayments will be.
You’ll also have to decide whether to fix your loan at the current rate or choose a variable rate that might benefit from falls sooner rather than later. Some people may opt for a combination of the two. Again, working out what’s best for you is something that should happen before you start looking to buy a property. We’re happy to help you do this and keep you up to date as rates and loans change.
Local real estate agents can guide you on what’s happening in the areas you are interested in purchasing in, and whether there may be room to negotiate on the price.
Keep track of sales in your area, go to house inspections and auctions so you know what to expect. Some properties may sell for more than anticipated and some for less. Others may be passed in at auction and then sold later. If real estate agents know you have your finance in place, they will take you seriously when you approach them about a property pre- or post-auction. They may also be happy to put you on their off-market sales list.
Off-market campaigns could potentially save sellers money because there is no public website campaign or auction, which could also save the buyer. The estate agent can send you the details of the property directly, allowing you to negotiate faster.
While property prices may be decreasing in different areas across the country, this could be offset by the recent interest rate rises. As the cash rate increases, first home buyers are watching their borrowing capacity decrease with every interest rate hike.
This could impact where they choose to buy and they may decide to either expand their search in terms of where they are willing to move, or to ‘rentvest’ instead. This is when you buy an investment property in an area you can afford and continue renting yourself in an area you prefer to live.
Generally, falls have been stronger for houses rather than apartmentsi. For upgraders, this could be good news, but for downsizers, it may mean adjusting what you can buy. You may need to look at a property that needs work instead of a renovated property or expand your search to neighbouring suburbs which may be a little cheaper. But again, suburbs vary, so always check with local experts about what’s happening.
With all these options and a market that is favouring buyers across many regions and types of housing, 2023 could be a good year to buy property.
We can help you arrange your finances and apply for your loan pre-approval. With this in order, we can help you make the most of the opportunities presented in a falling market and buy your home in 2023!
The Australian Capital Territory offers first home buyers a unique combination of Australia's most stable employment market and strategic...
The Northern Territory offers Australian first home buyers the most generous grant support in the nation, with the HomeGrown Territory...