Author: Darin Hindmarsh

Australian home buyers who may need a leg up when purchasing their first home could maximise specific government schemes. One of these is the First Home Super Saver Scheme (FHSSS). Introduced in the 2017-2018 fiscal year, the initiative aims to assist first-time home savers in saving for a deposit by making voluntary contributions to the super fund. This can later be withdrawn to put up a home loan deposit. Let’s look at how the First Home Super Saver Scheme works, its benefits, eligibility criteria, and how it can help aspiring homeowners in Australia. How does the First Home Super Saver Scheme work? The First Home Super Saver Scheme (FHSSS) aims to let first home buyers make voluntary concessional (before-tax) and non-concessional (after-tax) contributions into their superannuation account and later use this as a deposit on the property. FHSSS can be used to buy a brand-new or an already-constructed home. It is meant for first-home buyers who want to tap their savings and enter the property ladder. The FHSSS lets you save up to a maximum of $15,000 in any one financial year and up to a maximum $50,000 for several years. The allowable amount may not be as significant for many home buyers who want to put up a larger deposit, but this scheme has tax incentives. You can request the withdrawal of your scheme contributions, then have 12 months to sign a property contract or construct a residential dwelling. If you cannot buy a home within this period, the deadline can be extended up to 24 months. FHSSS clients must also occupy the house within the first six months of purchase. What type of super contributions can I make? The First Super Saver Scheme allows any of these contributions or a combination of two: Clients who are planning to use the FHSSS should talk to employer about how often they can make contributions. Bear in mind that the superannuation system in Australia allows up to a maximum of $25,000 per year at the concessional rate of 15%, and includes the minimum 10.5% super guarantee from the employer. How much can I withdraw from the FHSSS? Your FHSSS determination will determine the maximum releasable amount. The maximum releasable amount counted towards the FHSSS for each financial year is $15,000. Across all years, the amount is $50,000. You can withdraw: The ATO will withhold tax from the amount you receive to help meet end of year tax liabilities. Once you withdraw the funds it is subject to a ‘withdrawal tax’ rate equal to the marginal rate (including Medicare levy), minus a 30% offset. For example, your marginal tax rate was 34% and the Medicare levy 2%, the amount would be subject to a withdrawal tax of 6% (34% marginal rate, plus 2% Medicare levy, minus 30% tax offset). Benefits of the First Home Super Saver Scheme Tax advantages: Individuals can take advantage of the favorable tax treatment by contributing to superannuation. Voluntary contributions made under the FHSSS are taxed at the concessional rate of 15%, which can be lower than an individual’s marginal tax rate. Savings: The scheme enables potential homebuyers to save a larger deposit by utilizing the higher concessional contribution caps applicable to superannuation. This can accelerate savings growth and help reach the deposit goal more quickly. Earnings on contributions: Contributions made under the FHSSS, along with associated earnings, are also subject to the concessional tax rate within the superannuation account. This can result in additional growth of savings over time. Who can use the First Home Super Saver Scheme? Eligible individuals are: 18 years old and above can request a FHSSS determination (you can start to save before turning 18); Must have no prior property owned in Australia before including land, investment, or commercial property (unless you’ve lost a previous home due to divorce, bankruptcy, a natural disaster, etc. which counts as financial hardship application); No requirement for you to be an Australian citizen or an Australian resident; No existing applications to withdraw money under the FHSSS. Clients who want to use the FHSSS do not have to inform the employer or super fund that you intend to use the FHSSS. Let our loan professionals assist you throughout the process. Is the First Home Super Saver Scheme right for you? Using the FHSSS saves you up to $30,000 in just two years, but you might still fall short of saving this amount if you’re an average earner. Despite the 30% tax offset on concessional contributions, you are still taxed for trying to put up a deposit on a property. For instance, say that you earn $70,000 per year at a marginal tax rate of 34%. He salary sacrifices $10,000 on the super account for one financial year and another $10,000 over the next year. The tax on these contributions would be about $3,000 to leave with just $17,000 on the super account. Even with a 30% rebate, you would still pay $1,200 in tax. Plus, you may need more than the maximum amount for a 5% deposit on your chosen home. With house prices rising, withdrawing from the First Home Super Saver Scheme might just be a drop in the ocean. There are other home loan options, such as a no-deposit home loan, to consider if you have a limited time and want to secure a mortgage now. Talk to our mortgage specialists today to discuss your goals and super fund options.

Australians with a good chunk of cash have several avenues of earning a return on their money. However, only some people are comfortable investing in stocks or bonds. For individuals who prefer low-risk products, there are two options: a savings account or a term deposit. Both share some similarities but also have glaring differences. Let’s look at how savings accounts and term deposit work, the pros and cons, and which one is appropriate for your specific needs. What is a savings account? A savings account is a bank account that allows you to deposit and withdraw money from the account while earning a variable rate of interest on the deposited money. Depending on your lender, a savings account could offer a bonus interest rate each month when you meet certain conditions, e.g., depositing a certain amount of money and making no withdrawals. The interest on a savings account is compounded, meaning the interest from bonus offers you meet could earn interest on top of your rate. But although you can withdraw funds, a savings account won’t typically come with a debit card like a transaction account. Hence, your funds will be less accessible. What is a term deposit? On the other hand, a term deposit is a product that lets you invest money for a locked period – could be 6, 12, or 24 months. During this time, your money earns at a fixed interest rate, and once the account matures, you earn the interest paid for the duration of the term. The interest is paid monthly, yearly, or when the deposit matures and is not compounded as in a savings account. And unlike a savings account, a term deposit locks in the money and you can’t access the funds until the term ends. But there are no ongoing monthly conditions to earn the interest rate like in a savings account. Concerning the rates, term deposits have lower rates than savings accounts. Whereas the rates were higher three years ago, it’s just around 0.49% p.a. for a one-year term. Savings accounts have higher rates sitting at about 1% p.a. How to decide between a savings account or a term deposit Choosing between a savings account, and a term deposit depends on your financial goals, liquidity needs, and risk tolerance. Consider the following factors: Immediate access to funds: If you need to access the money in the near future, a savings account is the better choice as you have frequent access to your balance when needed. Higher interest earnings: If you have funds that you can afford to lock away for a fixed period, a term deposit can provide a higher interest rate at a fixed and guaranteed return. It’s essentially a set-and-forget account. Monthly conditions: If you can meet monthly deposit requirements or spending conditions then a savings account suits you. But if you prefer capital preservation and a low-risk option, a term deposit is the safer choice. Financial goals: Evaluate your short-term and long-term financial goals. Savings accounts are suitable for emergency funds or short-term savings with higher rates, while term deposits can be ideal for longer-term savings or investment plans. Can I have a savings account and a term deposit? Yes, you don’t have to choose one over the other; you can open both a savings account and a term deposit simultaneously. With a term deposit, you can invest a portion of the money away without thinking about it, and then leave some of the money to be placed in a savings account so that the funds will be accessible any time. Banks are required to withhold earnings for both these products. But the tax would depend on your overall income in that financial year.   When deciding between the two (or opening both accounts), you need to consider your budget, the type of investment you want, your goals, and what purpose you aim for with the money. Compare interest rates, fees, and terms – we can help you make an informed decision, especially with so much competition from lenders.

Every investment property will experience wear and tear through the years – and it comes at a significant cost for the owner. Fortunately, claiming investment property depreciation as a legal tax deduction could offset property upkeep expenses. Here’s a guideline on how to claim investment property depreciation, what types of depreciation are eligible, and how property owners can maximise tax deductions. What is property depreciation? The Australian Taxation Office (ATO) defines depreciation as the fall in the value of an asset over time because of the structure’s general wear and tear. Depreciation in the context of investment properties allows owners to claim tax deductions based on the declining value of certain assets within the investment property. For example, you can claim taxable income on certain elements, such as built-in appliances, fixed assets like kitchen fittings, and the structure of the building. The key to depreciation is that you can only claim it if you earn income from a property. In short, you cannot claim depreciation on your owner-occupier home as you aren’t earning income from that property. What can you claim on depreciation? There are two categories of depreciation. Let’s discuss each one.  Capital Works Depreciation Also known as building depreciation, capital works pertain to the property’s structural elements, including the walls, roofs, floors, and fixed assets such as kitchen and bathroom fittings. Capital works depreciation is claimed over a period of 25 to a maximum of 40 years, depending on the property’s construction commencement date. The rate is usually 2.5% from the time the property is built, with a focus on the construction costs. It sounds like such a small incentive for a hassle, but it adds up in the long run. For instance, if you bought a house today at $600,000, and the house was valued at $300,000, you may claim around $6,000 against the property’s rental income, or based on the quantity surveyor’s figures.   Plant and Equipment Depreciation This category covers the removable assets and fixtures within the property, such as carpets, blinds, air conditioning units, appliances, and furniture. Plant and equipment depreciation can be claimed over their respective lifespan, ranging from a few years to a decade. These are depreciating assets that have a limited lifespan. Examples include: To know about plant and equipment depreciation claims, say you purchase a $700,000 home. The rental income is about $2,500 per month. You may claim around $35,000 in the first year of owning the property. But, you’ve had to install a new heating system during the year. Based on the surveyor’s estimate, you can claim a further $1,000 yearly for its effective life. You could then claim an additional tax deduction (to add if you’re negatively geared in terms of income). What cannot be claimed as depreciation? Depreciation claims only include capital works and plant and equipment assets. Investors cannot claim tax deductions on these expenses: How to calculate investment property depreciation? Engaging a qualified quantity surveyor or a registered tax agent means they can prepare something called a depreciation schedule. A depreciation schedule outlines a detailed breakdown of depreciable assets, their effective lifespan, and the allowable deductions available on your investment property. The schedule can be furnished as soon as possible after your settlement date, as this document is valid for the property’s lifetime, or if you own it. A depreciation schedule can only be documented by a surveyor with the ATO’s qualifications, not an accountant, real estate agent, or solicitor. Depending on the company you use, paying for a depreciation schedule will cost around $400 to $700. Check with your developer if you buy a new property – they may include it for free or negotiate a lower fee. Conclusion Investment property depreciation is a valuable tool that can enhance the financial returns of property investors in Australia. By understanding and leveraging the benefits of depreciation, you can optimize tax deductions and improve cash flow. Let us assist you in seeking expert advice to ensure compliance and take full advantage of the depreciation claims available to them.

Homeownership is a life goal of many Australians. However, traditional pathways to achieve that target could prove too costly. Having the right income and assets to put up a 20% deposit is nearly impossible for most people. In fact, findings suggest that it could take first-home buyers up to 15 years to save for a deposit. Not only will it take too long, but housing market rates will also likely be even more expensive as years go by. Rent-to-buy or rent-to-own arrangements can provide an alternative to eventually owning a property. In this article, we delve into the concept of rent-to-own, how it works, its potential benefits as well as pitfalls for homebuyers. What is rent-to-buy? Rent-to-buy, also known as a lease-option or rent-to-own, is an agreement that combines elements of renting and buying. It allows tenants to rent a property while also paying an equity contribution that later will be added to the home’s purchase. Renting period The tenant moves into the property and pays rent to the landlord, just like in a traditional rental agreement. During this period, the tenant can save for a down payment, improve their credit score, or address other financial requirements necessary to secure a mortgage. For example, the renting period is set at 3 years; currently, you have the option to work on credit score or save the down payment. After the rental period you then have the option to buy the property for an agreed upon sum. The customer pays a higher-than-usual weekly rent that covers all the costs of putting a stake in the property. To give an example, if the market rent for a home is $500, you may expect to pay $700-800 per month. Renters charge higher rent because it’s meant to add to the property’s final purchase. During the rental phase, the property title is not yet transferred to you. But costs on insurance, maintenance, and stamp duty is shouldered by the renter. The money is not refundable in case you change your mind about purchasing the property. Buying period After the set rental period, developers could either obligate the renter to go right ahead and purchase the property OR have a rent-with-the-option-to-buy arrangement that leaves the renter a choice to not go through with buying the home. If you’re set on buying, you are required to take out a home loan from a mainstream lender. Rent-to-buy provides tenants the opportunity to live in the property for a couple of years while working towards homeownership. With it, you can get a feel for residing in the property before committing to purchasing it. And it allows you to commit to a future price that could potentially save you money once the value increases after a few years. It is not a wildly popular strategy in Australia since there are few government safeguards present in a rent-to-own arrangement versus a traditional mortgage product. In most of these schemes, it is the developer that offers a home or unit for sale with a rent to buy contract. But the overall value could change after the rental period. This means that in some rent to own contracts, you have no set sale price until it’s time to finalise the purchase. You’ll then have the legal right to the property title once you secure a standard mortgage. Which states allow rent-to-buy? Rent-to-own is a relatively new concept in Australia, so it may not be readily available in your location. In Victoria there is a significant concern about protecting tenants/home buyers who may fall for predatory rent-to-buy contracts. The concern paved the way for a report by the Consumer Action Law Centre in 2016 – the report called for a ban on the scheme, and establishment of same consumer protections that regulate conventional home loans. As a result, in 2019 the Victorian Government enacted legislation that bans some of the actions associated with how unjust some rent-to-buy terms are for home buyers. In South Australia, meanwhile, only the South Australian Housing Authority (SAHA) has the legal arm to offer these types of contracts and currently, they do not offer rent-to-buy programs. Any other source of the arrangement when you are in South Australia means the contract is not legally binding and could compromise your home ownership goals. What are the advantages of rent-to-buy contracts? Here are potential benefits: Path to homeownership – Rent-to-own arrangements provide a pathway to homeownership for individuals who may face challenges obtaining a mortgage due to credit history, limited savings, or other financial circumstances. Test the property – Renting the property before committing to the purchase allows tenants to assess if the property and location meet their long-term needs and preferences. This minimizes the risk of buying a property that does not suit their lifestyle or requirements. Time to improve finances – Rent-to-own agreements provide tenants with the opportunity to improve their credit score, save for a down payment, or address other financial obligations necessary to secure a mortgage. No 20% deposit – Since rent-to-own schemes pays a higher rental committing to the home purchase, you don’t need a hefty down payment as you would in a traditional home loan. First Home Owners Grant – Home buyers can be eligible for the First Home Owner Grant if they choose to purchase a property through a rent-to-buy arrangement. What are the risks in a rent-to-buy scheme? As you may have noted now, rent-to-own is inherently riskier than other home ownership paths: No legal right to the property – Until the purchase is finalized, you don’t have any legal right to the property title. That means all the payments during the rent period may be for naught if you have a conflict with the landlord. Uncertain future purchase price – The purchase price of the property is typically agreed upon at the beginning of the rent-to-buy agreement. However, if the property’s value significantly changes during the rental period, the agreed-upon price may no longer be favorable. This could result in the tenant overpaying for the property or facing challenges securing financing based on the inflated purchase price. Struggle with refinancing – Because rent-to-buy contracts are quite expensive for the tenant, borrowers who need to obtain mainstream mortgage after a few years usually fail to do so because they have not build enough equity or have not improved their finances enough come time for the buying period. Non-refundable fees – Tenants are usually required to pay an upfront option fee to secure the right to purchase the property within a specified timeframe. If tenants decide not to exercise the option or are unable to secure financing, this fee is typically non-refundable. Therefore, if tenants do not proceed with the purchase, they may lose a significant amount of money. Changes in personal finances – During the rental period, tenants’ personal circumstances may change. Job loss, financial difficulties, or unforeseen events may impact their ability to secure financing or continue with the purchase. Exiting the agreement prematurely could result in financial penalties or loss of the equity you’ve already contributed as part of the higher rental rates.  Is rent-to-own the best choice? Rent-to-own places big financial risk on the home buyer, as the money paid for years may not even result to being able to secure the home during the buying phase. While rent-to-own schemes sound appealing to those who are trying to enter the housing market, its terms and conditions may not be suitable to your specific needs. There are other options that consider non-traditional borrower situations, i.e., low doc home loans, bad credit home loans, and a guarantor home loan. But if you’re curious about rent-to-buy schemes, you can mitigate risks by seeking legal and financial advice – understanding the property’s value, market conditions, and rent-to-buy fine print from the developer is essential before committing to this arrangement. Intellichoice is here to help you get a broader picture or your rent-to-buy options. Our experience in the mortgage and property market can help your decisions be secure and protected from predatory rates and arrangements. Feel free to discuss with us your home ownership plans. Get started today!

Some home buyers are considering buying a brand-new property even when there’s nothing concretely built yet. This is called buying off the plan, and it’s become a popular choice because home buyers often enjoy significant discounts when choosing this purchase while projecting capital gains after a few years. Are you considering putting money down while the property is still under construction? While it offers certain advantages, there are always potential drawbacks.It is a riskier proposition than a move-in ready unit or home – so let’s find out if buying off the plan fits your home-buying needs, current finances, and long-term goals. What does ‘buying off the plan’ mean? Buying off the plan involves entering a contract to buy a property still in the planning or building phase. Off the plan could be vacant land, house and land packages, and strata properties. When you identify a new development, you get to review the location, plans, specs, and available artistic rendering before deciding to buy. Once the home buyer is satisfied with the project, he or she signs a contract with the developer. This contract outlines the terms, purchase price, repayment, expected completion date, and special conditions. Usually, an off-the-plan property requires at least a down payment of 10%, but this will depend on the developer. Buying off the plan is quite popular during a rising market because you can access discounted rates. And if all goes well, you can expect capital gains because once the residence is built, it will have risen in value. However, some experts advise against it, because the valuation could change after a few years and be even lower in a market downturn. Buying off the plan is also riskier, as you are parting with your deposit before a single brick is laid. Anywhere from a shortage of building materials to tradespeople could easily delay construction and completion dates. How much can I borrow? Obtaining financing for an off-the-plan property will differ slightly from a standard home loan. For one, you are presenting lenders with the development plans or contract before they can grant the loan. Lenders tend to view off-the-plan purchases as riskier, as the value may drop when the unit or house is completed. Therefore, they often require a 20% deposit if you decide to buy off the plan.   What’s more, the valuation in an off-the-plan project is done upon completion, which can take 12 months or more for a house-and-land package, and up to 3 years for a tower block apartment. Because of the timeline, banks may use the market value rather than purchase price when calculating your loan-to-value ratio (LVR) and if you need Lenders Mortgage Insurance (LMI). So, an off the plan buyer could face much higher borrowing costs at the time their lender conditionally approved the loan, but then have lower valuations.   What are the advantages of buying off the plan? Potential capital growth – Buying off the plan allows buyers to secure a property at today’s price, potentially benefiting from future capital growth. As the property market evolves, there is a chance that the value of the property will increase by the time it is completed, potentially resulting in a higher return on investment. Customization and modern features – Off-the-plan properties often come with modern features, energy-efficient designs, and the opportunity to customize certain aspects of the property, such as color schemes or finishes. While space in strata properties may be smaller, the features appeal to buyers seeking contemporary living spaces. Stamp duty savings – In some states or territories, buyers may be eligible for stamp duty concessions or savings when purchasing off the plan. This can significantly reduce the upfront costs associated with buying a property. First home buyer benefits – First home buyers may also benefit from government incentives, such as grants or additional savings schemes, specifically targeted at purchasing off-the-plan properties. What about the disadvantages? Uncertainty and delays – Buying off the plan involves a level of uncertainty, as the final product may differ from the initial plans or artist impressions. Construction delays are also possible, which can affect the expected completion date and potentially impact the buyer’s plans. Housing market risks – The property market can fluctuate, and economic conditions can change during the construction period. For instance, lower-density housing options are now preferred over packed units in buildings, and interest rates are higher now. While there is the potential for capital growth, there is also the risk that the value of your property is lower once completed. Limited room for negotiation – When purchasing off the plan, buyers often have limited room for negotiation on the purchase price or contract terms. Developers typically set the prices based on market conditions and their financial objectives. Lenders also consider these loans higher risk. Risk of unsatisfactory build – Buyers rely on plans, artist impressions, and display suites to visualize the property since physical inspections are limited during the construction phase. It can be challenging to assess the quality of construction and finishes until the property is completed. Changes in personal circumstances – Buyers’ personal circumstances may change during the construction period, such as a job relocation or financial circumstances. These changes can make it difficult to proceed with the purchase, and exiting the contract may involve penalties or additional costs. Sunset clause protects home buyers In the context of buying off the plan, a sunset clause refers to a provision or condition included in the purchase contract that sets a deadline for the build completion. Developers are now required to give 28 days’ written notice of a recission of a contract. If the home buyer does not respond to the notice, they would have to obtain a Supreme Court order – proving they acted in good faith, there is a valid reason for the delay, and that the property is indeed priced higher. It serves as a form of protection for buyers by providing a timeframe within which the developer must finish the construction and deliver the property. Is an off the plan home right for me? An off-the-plan unit or home has its incentives, but the fact is, it will only suit certain types of clients. If you are comfortable putting up a 20% deposit and have a consistently high income for repayments, are in no rush to move in or have it rented out, and if you are already eyeing your second property, then an off-the-plan may be ideal. However,  those who are first-home buyers with over 80% loan-to-value ratio (LVR) who may want to move in immediately should opt for an existing home. In addition, foreigners or ex-pats, as well as investment property borrowers that handle self-managed super funds (SMSFs) may want to consider other property types. An off the plan property may have been popular around 18 months ago when prices in a good real estate block go up at every stage. But in today’s climate it might cost you more in the long run. Still want an off the plan property? Talk to us Buying off the plan is an increasingly popular option for property buyers in Australia. It involves purchasing a property, typically an apartment or a house, before it is completed or even constructed. While this approach offers certain advantages, it also carries some drawbacks. When you work with our mortgage specialists, you have the right support and financial insight needed to realise your investment or residential goals. We take a no-nonsense approach to your home loans and investment property loans and support you every step of the way.

In Australia, investment properties are allowed tax deductions from losses – called negative gearing. Negative gearing is a financial strategy that involves borrowing money to invest, typically in real estate or shares, intending to generate a return that exceeds the borrowing costs. It’s a concept commonly used by investors to leverage what a property costs each month against how much revenue it generates. Let’s break down negative gearing’s basics, how it differs from positive gearing, and if negative gearing could save you money in the long run. What is negative gearing? First of all, gearing is a financial jargon referring to how an investor borrows money to buy assets. There are two kinds of gearing: positive and negative gearing. Positive gearing occurs when the income generated from an investment exceeds the costs of owning and financing that investment. In the context of real estate, positive gearing refers to rental properties where the rental income surpasses the property-related expenses. Negative gearing, on the other hand, happens when the income generated from an investment, in this case a rental property, is lower than the cost of owning and financing that property. Owners can offset the expenses through tax benefits. Mortgage repayments, property maintenance, and management fees are calculated to determine the reduced taxable income. How positive gearing differs from negative gearing Positive gearing simply refers to a situation when the rental income generated from the home is more than the amount you are spending to keep the property. For instance, if your investment property earns $30,000 a year from rent, and your expenses in total (which includes mortgage repayments, maintenance, corporate fees, etc.) are only $25,000, you have a positive annual cash flow of $5,000. There are obvious perks to positive gearing. Your investment property is paying for itself, so the overall debt is reduced per year. Also, the cash proceeds can be a financial buffer for your situation. And having a positively geared property increases your borrowing capacity to venture into other properties. However, positive gearing won’t receive the same tax incentives as negative gearing. In fact, as you increase income earned from the rental property, you’re also increasing the taxable income. It’s also a slower approach to equity growth, especially when looking at your capital gain appreciation. Let’s now learn what separates negative gearing from positively geared investments. How does negative gearing work? It sounds unusual that an investor would benefit from the property losses. But negative gearing is designed for this purpose. The Australian Taxation Office (ATO) deems that the tax result of your property as a net rental loss, for which you can claim the deduction for said loss. Negative gearing effectively brings down the total taxable income for the year. What expenses can be claimed on negative gearing? Negative gearing allows deductions on the part of the investor. These include: What are the pros and cons of negative gearing? Let’s start with the advantages: Tax benefits – One of the primary advantages of negative gearing is the potential tax benefits it offers. The shortfall between rental income and expenses can be claimed as a tax deduction, reducing the investor’s taxable income. This can result in a lower overall tax liability and potentially increase cash flow. Capital growth potential – Negative gearing is often considered ‘the long game’ employed in the hope of capital appreciation over the long term. You expect that the property’s value will increase over time, generating a profit when it is sold after, say, 7-10 years. This potential capital growth can be a significant advantage for investors looking to compensate for the losses in cash flow and later on build wealth. Long term tenants – Negatively geared properties are usually located in high-demand, metro areas, and so offering lower rental rates could keep your tenants staying on for the long haul. Now let’s discuss the downsides of negative gearing: Cash flow requirement – Experiencing a loss each month means you need to have other income sources to cover property costs while you haven’t claimed tax benefits. You’ll be on a shortfall until tax time. Potential capital losses – Even if you are intent on building equity with the investment property, sometimes the market takes a downturn and interest rate hikes happen. Interest rates often see house prices take a hit, which could affect your capital gains. Vacant property – When you’re planning to negatively gear, you’re accepting the monthly loss. But it’s doubly impactful if your property is vacant and remains so. You’ll more likely shoulder compounded costs from mortgage and maintenance costs. Learn more about negative gearing Australia Negative gearing relies on the expectation of capital growth in the investment property to eventually generate a profit upon its sale. However, this is not always the scenario. It’s a viable strategy if you have multiple income streams and can comfortably sustain yearly shortfalls, and you have the knowledge on property market. However, it also carries the risk for big losses. It’s best to consider your finances, risk appetite, and market insight. Negative gearing may or may not be an appropriate strategy for your investment property. Let our mortgage experts at Intellichoice do the legwork on finding out how negative gearing could impact your monthly and yearly costs, portfolio, and long-term financial goals. Consult with our team today to get started.

Want to maximize your existing property? Australians have the option to use home equity to purchase an investment property and to fund small businesses. Stats note that home equity withdrawals amounted to roughly 4.65% of the country’s GDP. This resource can be used for numerous purposes, from injecting capital to investments to spending on general household consumption needs.  Many homeowners are considering using home equity, especially with the rising home prices in recent years. When you have raised enough equity and want to access it, read on to find out how a home equity works, when it is most useful, and how to maximize the value of your existing home. What is home equity? Home equity represents the portion of your property that you truly own, calculated by subtracting the outstanding mortgage balance from the property’s current market value. As you pay off your mortgage or as property values increase, your home equity grows. It serves as collateral for home equity loans, allowing homeowners to tap into this value for financial needs. Home equity is a mortgage holder’s portion of the home. Take note, there are still repayments being made on the home loan. Home equity represents the difference between the current value of your property and how much is owed on the mortgage. For example, your first home is valued at $400,000. To avoid paying lenders mortgage insurance (LMI), you deposit 20% – $80,000. The mortgage is $320,000 to cover the difference. Before any repayments on the mortgage, your home equity is at $80,000. Five years into the monthly repayments, you have already chipped $70,000 from the home loan principal amount. And at this time, the value of your home increased to $450,000. So at this point, your home equity is calculated: $450,000 home value – $250,000 = $200,000. You can use our Home Equity Calculator here (link) to get an estimate of how much your home equity is right now. Does equity help my borrowing power? Yes, because you can access equity to support your next loan. Building enough equity means you may not be required to put up a deposit if you’re purchasing another home. That equity becomes a deposit and therefore, is your leverage to secure a new loan or to refinance your existing loan. Equity basically helps you increase borrowing power without selling the property. What can I use my home equity for? Buying an investment property – Some homeowners leverage their home equity to seize investment opportunities. This can involve purchasing additional properties for rental income or investing in stocks, businesses, or other ventures. Lenders generally allow clients to borrow up to 80% of the property value. Home renovations – Many homeowners use their home equity to fund renovations or upgrades to their property. This can include a kitchen or bathroom remodel, adding an extension, or enhancing the overall aesthetics and functionality of the home. Investing in home improvements can enhance your living experience and potentially increase the property’s value. Investing in other forms of assets – Some people also decide to use the equity in their home to grow their wealth further by investing in the share market or starting a business. Investing in assets like shares or exchange-traded funds (ETFs) enables you to diversify your money and not tie it to one big asset. Consolidate debt – Home equity loans can be used to consolidate high-interest debts, such as credit card balances or personal loans. By combining multiple debts into a single home equity loan, you may benefit from a lower interest rate and have a structured repayment plan, simplifying your financial management and potentially reducing interest costs. Education expenses – Home equity can be tapped into to finance higher education expenses for yourself or your family. Whether it’s funding college tuition, vocational training, or other educational pursuits, using home equity can provide funds to invest in knowledge and career development. Travel and lifestyle – Home equity can be used to finance personal aspirations and experiences, such as travel adventures, a dream vacation, or fulfilling bucket list items. Using home equity for lifestyle purposes should be carefully considered to ensure it aligns with your overall financial goals and priorities. What are the pros and cons of accessing equity? So is it really worth tapping into your home equity? Let’s talk about the pros and cons: Pros to home equity loan Access to funds. Utilizing your home equity gives you access to a substantial amount of funds that can be used for various purposes, such as home improvements, debt consolidation, or investment opportunities. This can provide financial flexibility and the ability to achieve your goals without resorting to higher interest borrowing options. Lower interest rates. Home equity loans often offer lower interest rates compared to other forms of borrowing, such as personal loans or credit cards. By using your home equity, you may benefit from reduced interest costs, potentially saving you money over the loan term. Potential tax incentives. Depending on your location and the purpose of the loan, accessing your home equity may offer potential tax advantages. In some cases, the interest paid on home equity loans used for investment purposes may be tax-deductible. It’s important to consult with a tax professional to understand the specific tax implications in your jurisdiction. Debt simplification. If you have multiple debts with high-interest rates, accessing your home equity can enable you to consolidate those debts into a single loan with a potentially lower interest rate. This simplifies your financial management, as you only need to make one payment each month. Cons to accessing home equity Risk to homeownership. When accessing your home equity, you are using your property as collateral. If you default on the loan, you are risking foreclosure and ultimately losing your home. It’s crucial to carefully consider your repayment ability and financial stability before utilizing your home equity to mitigate this risk. Increased debt burden. By accessing your home equity, you are increasing your overall debt obligations. This means you will have additional loan repayments to manage on top of your existing mortgage. It’s important to ensure that you can comfortably afford the increased debt and consider the impact on your monthly budget. Potential market fluctuations. If property values decline, it can affect the amount of equity available or lead to negative equity. Negative equity occurs when the outstanding loan balance exceeds the property value. This can limit your future borrowing capacity and pose challenges if you need to sell the property in the future. Costs and fees. Accessing your home equity may involve various costs and fees, such as application fees, appraisal fees, legal fees, and potentially mortgage insurance premiums. It’s important to consider these expenses when evaluating the financial viability of accessing your home equity. Long-Term financial impact. Using your home equity for non-essential purposes or short-term gratification may have long-term financial implications. It’s important to consider the impact on your overall financial plan, retirement goals, and future financial security before accessing your home equity. What is negative equity? Depending on the housing market, owning a property doesn’t always mean that you gain equity in the bank. Negative equity, also known as an underwater mortgage or being “upside down” on a loan, occurs when the outstanding balance on a mortgage or loan exceeds the current market value of your property. In simple terms, it means that you owe more on your mortgage than what your property is worth. Negative equity typically arises when property values decline or when a client takes on a high loan-to-value ratio (LVR) loan, meaning they borrowed a significant portion of the property’s value. It can also occur if a property has undergone significant depreciation due to factors like economic downturns, housing market fluctuations, or local market conditions. Here’s an example to illustrate negative equity: Let’s say you purchased a property for $300,000, with a mortgage of $250,000. However, due to unfavorable market conditions or a decline in property values, the current market value of the property has dropped to $200,000. In this scenario, your loan balance of $250,000 exceeds the property’s market value, resulting in negative equity of $50,000. How to access equity from your home If you’ve done proper consultations with mortgage professionals and decided on tapping on the equity, here are different ways to do so: Refinancing Refinancing your existing mortgage involves switching to a new loan, often with better terms, features, or a larger loan amount. Refinancing lets you get a portion of the home loan equity as cash. Banks first revalue the property before refinancing the mortgage. If it has risen in value, the new value will have a higher principal balance, and you’ll receive the difference between the new loan and the old loan balance as cash proceeds. Of course, digging into your home equity means that you’ll end up paying it back with interest later. Line of Credit Like a credit card, a home equity line of credit provides you with a predetermined credit limit. You only pay interest on the amount borrowed, and as you repay the borrowed amount, it becomes available for future use. Line of credit could be useful for ongoing projects with variable costs, but you have to be mindful of repayments and possible interest rate hikes. Cross Collateralization Cross collateralization involves using the equity in one property to secure financing for another property. It allows you to leverage the equity in one or multiple properties to borrow a larger sum or access financing that may not be available based solely on the equity in a single property. This feature can be useful for property investors who want to maximize their borrowing capacity. But it is a high-risk strategy, as defaulting on one property may affect the others that are cross-collateralized – you could end up losing not just one but multiple properties. Reverse Mortgage A reverse mortgage is a financial product specifically designed for homeowners aged 60 or older. It allows them to access their home equity as cash while retaining ownership of the property – basically borrowing back the money paid towards owning the home. With a reverse mortgage, the lender provides regular payments or a lump sum based on the equity in the home, and the amount accessible is capped based on your age. You’re not required to pay back the reverse mortgage while living in the home; it is repaid when the homeowner sells the property, moves out, or passes away. Reverse mortgages can provide financial flexibility for seniors who want to supplement their retirement income or cover specific expenses. However, it’s essential to understand the terms, fees, and potential impact on inheritance or other financial plans before considering this loan. Let us help with your home equity loan Deciding on accessing home equity entails a careful evaluation of your financial needs, repayment ability, and its considerations. Let our experienced mortgage brokers help you navigate the options to minimize your risk. By understanding what you can do with home equity, you can choose to continue building it or go ahead and utilize the most suitable method of accessing it.

Owning a home may be straightforward for most Australians, but for some, moving into a new home could coincide with still paying off the loan in the old home. This is when bridging loans come into play. Bridging loans, also known as bridge financing, serve as a temporary solution that provides quick access to capital while in the process of selling your old home and purchasing a new one. While a bridging loan sounds like a dream strategy, it does come with certain considerations that could potentially increase your debt repayments in the long run. Let’s look at what it means to bridge loans, what instances it could apply, and what are the potential pros and drawbacks associated with bridging loans. What is a bridging loan? A bridging loan in Australia is a short-term solution that literally ‘bridges’ a home buyer’s financing. The best scenario for a bridging loan is when a client wants to buy a home, but the funds from the sale of the old home haven’t yet reached their bank account. Bridging loans provides funds for buyers who need to move quickly to secure a new property. It’s usually a short-term loan that has around 6 to 12 months duration. A bridging loan is akin to a line of credit that you take out to support the cost of transitioning from an old property to a new one. With this financing, you can avoid the stress of matching the settlement date of your old home to your move onto the new property. These loans “bridge” the financial gap by providing borrowers with a temporary infusion of cash until more permanent financing options can be arranged. You get a brand new home and at the same time buy some time to sell your previous property. How does a bridging loan work? A bridging loan is short-term finance where lenders use both properties as security. The bank calculates the size of your loan by combining the remaining mortgage debt on the old home to the value of your new home. These values combined are called the “peak debt”. The lender then subtracts the likely sale price of your old property and its associated costs. What is left is the “end debt” or “ongoing balance,” which is essentially the principal amount of your bridging financing. Crunching the numbers will also include a “fire sale buffer.” This refers to the possibility that the borrower might sell the property for a lower price than initially estimated. The buffer would range from 10% to 15% of the old home’s value.   Lenders often allow borrowers to loan up to 80% of the peak debt. They offer interest-only repayments on the peak debt during the in-between period of selling the existing home and moving into the new property. In short, you only contend with paying off the principal and interest (P&I) on the existing mortgage, rather than getting overwhelmed with holding two home loan P & I repayments. How do I make repayments on the bridging loan? Taking on two mortgage payments would very likely be too much for the average Aussie homebuyer. Fortunately, most bridging loan lenders offer interest-only repayments, which is more affordable than paying two sets of debts simultaneously. There are also options deferring the repayments during the bridging period by capitalizing the interest repayments on top of the loan balance, but keep in mind that later you will be charged additional interest. Bridging loan clients can also make voluntary principal payments if they choose to, which could significantly reduce the total interest on the overall loan. And once you are able to sell the old property, the proceeds are used to pay off the existing debt, after which you can close the bridging loan and then focus on the standard mortgage repayments for the new home. Bridging loan terms Since bridging loans are short-term in nature, it is unlikely that lenders would offer a term longer than 12 months. If, unfortunately, you are unable to sell the property within the set period, the lender may assist in selling the property but at a lower sale price than estimated when taking out the loan. So the proceeds may not be enough to cover the entire bridging loan. Any remaining debt would then carry over to the new home loan. Here are loan terms specific to a bridging loan: When should I use a bridging loan? Bridging loans are commonly used in property-related transactions. Here are key advantages to bridging your home loan: Cover auction purchases – If you found your new home at an auction sale, you would want to pay as quickly as possible to avoid losing out on the property. Auction purchases require quick payment, but this is not always feasible for standard home loans. A bridging loan lets you secure the new home and give time to arrange for the sale of the old property. Avoid paying two home loans – The main draw for bridging finance is that it allows you to purchase a new home without taking out another full home loan. It’s perfect for time-sensitive opportunities without overwhelming you with mortgage repayments. Interest-only payments – During the bridging loan term, you don’t need to make P&I repayments, as the lender could offer interest-only at this time. Move-in to the new home – If you prefer moving into a new home right away, or are building a new property but prefer to have extra funds without renting a new place, a bridging loan enables you to avoid renting between the time it takes to sell the existing home. What are the drawbacks of a bridging loan? Not every home buyer would benefit from a bridging loan. Consider these drawbacks: Higher interest rates – Bridging loans generally have higher interest rates compared to standard home loans, given the short-term nature and quick approval process. Borrowers should carefully consider the cost implications and ensure they have a viable exit strategy for repaying the loan. Financial risk – As with any loan, there is an inherent financial risk involved, but even more so with bridging finance. To be able to pay off the loan, you must sell the existing home within a year. Failure to do so means you will sell for less than the estimated value, and come up short on the proceeds. Break costs – If your current lender does not offer a bridging loan, you will have to switch to another lender. This would entail additional costs for early termination fees and break costs, especially if you are on a fixed rate mortgage. No redraw facility – Bridging loans allow early repayments, but you won’t be able to redraw if you need to do so. Bridging loan example A couple wishes to upgrade to a larger property for their two kids. They already have an eye on a new home but have not sold the current apartment yet, in which they have an existing $300,000 mortgage. The new home is valued at $600,000. They took out a bridging loan at a peak debt of $900,000. After 10 months, the couple sells the apartment for $380,000, and the proceeds used to cover the remaining mortgage of $300,000. The couple are left with $80,000 net proceeds. The couple’s peak debt of $900,000 – now less $300,000 on the property sold – the entirety of the home loan is now at $600,000. The repayment scheme would now switch to a principal and interest mortgage. Now, this is a more ideal scenario because the property was sold right within the time frame of the bridging finance. However, if 12 months later the apartment remains unsold, the lender could step in to facilitate the sale of the apartment. From the estimated value of $380,000 the best offer is now only $270,000. This means the proceeds from the sale are smaller and would not be enough to pay off the couple’s previous mortgage. The shortfall of $30,000 is added to the new home loan, subject to approval. The couple would now have a mortgage balance of $630,000. As can be seen, not all bridging loan borrowers can benefit from the arrangement. It could result in higher interest repayments if the existing property isn’t sold at an ideal price within the bridging period. Do you need a bridging loan? The best way to decide if a bridging loan is right for you is to consult a mortgage broker. Remember, even if you are able to purchase a new home right away, bridging loans may not necessarily be helpful in the long term. Consider the clearance rates in your area. How long is the projected sale of your old property? Will it be within the bridging term, or would it be more likely to lower in resale value? Maybe you are in a capital city where the home would be snapped up in a few months – you don’t need to bridge the loan and accrue higher interest rates then. When it comes to home loans, bridging finance would be more beneficial in suburbs where properties tend to stay on the market for longer. Bridging loans could also be useful for homeowners who are building a new home but prefer not to rent another place. It gives you time to sell the existing property without having to rush and settle on a mediocre rate. Speak to our Intellichoice mortgage specialists about your current plans to weigh your home loan options.

If you’re considering a SMSF home loan, you may have noted how complex the borrowing process can be. Indeed, it is an alternative method to financing home purchase because it gatekeeps your retirement savings that isn’t necessarily meant to be invested in property. From the stringent rules and regulations to the nature of the loan, let’s have a comprehensive review of SMSF property loan to make sure you know how they work. What is SMSF? A Self-Managed Super Fund (SMSF) home loan is a financial investment arrangement that enables members of a self-managed superannuation fund to purchase residential property using their retirement savings.   Unlike traditional super funds, SMSFs allow individuals greater autonomy over their investments as to how they plan to diversify. SMSF property loan leverages your retirement savings for a potentially higher ROI in the long term. The returns, either capital gains or rental income, are funneled back into the super fund. The thing is, only a number of lenders offer SMSF property loans, and the regulations are notoriously complex, as borrowers do not have direct access with lenders. Mortgage specialists like Intellichoice work with a network of lenders that can provide  investment opportunities for SMSF home loans. How does SMSF home loan work? Investing in property using a Self-Managed Super Fund (SMSF) involves several steps and compliance requirements. Here’s a general outline of how you can invest in property through an SMSF: Establish an SMSF Firstly, you need to set up an SMSF or become a member of an existing SMSF. This requires creating a trust deed, appointing trustees, and registering the fund with the Australian Taxation Office (ATO). Agree on a property investment strategy As trustees, you are the ones responsible for formulating an investment strategy that aligns with the SMSF’s objectives. This strategy should consider factors such as risk tolerance, diversification, member retirement goals, and returns. Ensure compliance SMSFs must comply with various ATO regulations, including annual audits, reporting obligations, and restrictions on where and what to invest in. Contribute funds SMSF members can contribute funds through personal contributions, employer contributions, or rollovers from existing superannuation accounts. These contributions, along with any existing funds within the SMSF, can be used to finance the SMSF home loan. Set up a LRBA SMSFs can take out a loan through LRBA (limited recourse borrowing arrangements) where the property is held in a separate trust, known as bare trust, and the SMSF acts as beneficial owner. LRBA allows the SMSF trustees to borrow from a third party lender to buy a single asset or multiple properties of the same market value – to be held in a separate trust. Any investment returns go back to the trustees. Should the loan be defaulted, the bank is limited to that singular asset. Repayments and home loan management Loan repayments, both principal and interest, are generally made from the SMSF cash flow. Hence, member contributions and rental income are sufficient to keep the loan repayments and property-related expenses met. It’s crucial to review the ongoing compliance, including insurance, taxes, and capital gains. Review your SMSF property loan against what your goals are and stay updated with the latest ATO regulations to ensure that you remain compliant. Bare trust for SMSF property loan A bare trust, also known as a custodian or a holding trust, is a legal structure used in conjunction with SMSF loans. It is a separate trust established solely for the purpose of holding the property on behalf of the SMSF. Bare trust is established because the property cannot be directly owned by the SMSF until the loan is paid off fully. To comply with the ATO regulations on SMSF investment, the property is held in a separate or bare trust. The bare trust structure keeps the lender’s right to the property held within that trust. In the event of a mortgage default, the lender’s rights are restricted to the property and does not extend to the other assets within the SMSF portfolio. Although legal ownership is held by the bare trust, the SMSF trustees have full control over the property. They can decide to rent, sell, renovate, and make other changes as outlined in the investment strategy. There should be an agreement between the SMSF trustee and the bare trust trustee (should be a company or company director) to meet SIS Act compliance requirements. The process is more complex than a standard investment loan or home loan, so it’s ideal to have a SMSF property loan expert to navigate the process and weigh the benefits of SMSF loans. When to use SMSF for property loan Investing the super funds can potentially bring a healthy ROI, so it’s a worthwhile discussion if you are ready for the complex hoops and regulations. You can only apply for a loan in these instances: Why don’t banks lend to SMSF? Generally, there is a smaller market for super funds borrowing for investment properties. Aside from that, there are convoluted regulations around SMSF and trust loans, and so from a lender’s perspective, it entails more work for lower profits. Big Four banks and AMP, Macquarie Bank, and St. George all previously offered SMSF loans, but are no longer have this loan product. Although, there are still a few specialist lenders offering SMSF property loans.  Borrowing through an SMSF is riskier than going for a traditional home loan or investment financing. Lenders recognize that the SMSF will need constant, substantial cash flow to avoid any issues with repayments. These reasons make SMSF property loan a more niche product that not all lenders will offer. Intellichoice can help you access competitive SMSF home loan packages that will have the terms most suitable for your super fund. You can set up an appointment today with our mortgage brokers. Are there advantages to an SMSF property loan? While there is a lot of regulations to consider, there are certain benefits to using SMSF: SMSF loan considerations and risks As mentioned, SMSF loans are subject to strict regulations. Here are potential drawbacks to planning to borrow using SMSF: SMSF loans certainly aren’t as straightforward as other home loans. If you have professionals with specialized knowledge, it’s more likely that the money is managed and invested effectively. But without the experience and complete knowledge of SMSF strategies and risks, managing the super funds may not bring the maximum returns. We have mortgage brokers well-versed in Self Managed Super Funds. Our mission is to provide a thorough consideration of compliance obligations, investment decisions, loan terms, and legal risks. We’re here to be your helping hand in customizing SMSF loans. Trust Intellichoice to access the best advice for how to go about your SMSF property loan.

Eager to know about your current home loan borrowing power? Find out the latest here. Applying for a mortgage is mostly necessary for Australians who plan to own a home. So how much is needed these days to be able to call yourself a homeowner? It can be difficult to tack on an exact amount – there are a lot of factors in play when trying to figure out home loan borrowing power. Let’s dive into how you can figure out your mortgage borrowing power. What’s Included in Home Loan Expenses? To get an idea of your borrowing amount, let’s first look at the costs to be considered when applying for a home loan.  Your specific home mortgage is affected by several key factors. If you’re a first-time borrower, you’d want to learn what basic costs and fees are included.  First is the Principal or the amount you borrowed on the mortgage. This refers to the actual loan amount you are asking for. Aside from the principal, there’s also Interest. This is the added charge or percentage your lender puts on the principal loan. The RBA has raised interest rates consistently since the beginning of 2022, so it’s been a huge factor in borrowing capacity for many. Second would be Upfront Fees relating to mortgage applications include application fees, conveyancing fees, mortgage registration, and others. There are also Associated Fees in a home loan. For example, package fees per lender product could add different features, like an offset account or a redraw. But these will incur extra charges. Fourth is Stamp Duty. This is an imposed levy that each Australian state imposes for any given property. The rule of thumb is it will be around 3-4% of the total cost of the property, whether you have a residential home, holiday home, investment property, vacant land, or a farm. Last basic cost is the Lenders Mortgage Insurance. LMI  is another fee you may incur if your deposit is less than 20%. This cost protects your lender in case there is a default on the mortgage. If you can, try to avoid this fee because it can easily pile tens of thousands into the total cost of your home loan. What Affects Borrowing Power Home Loan? Borrowing Power is affected by a myriad of factors. Several factors come from you the borrower, and the real estate market itself. Factors you control include: Income – Since the mortgage will be a significant part of monthly expenses, lenders will look at your income to determine your ability to make repayments on the loan. The higher your income, the more you may be able to borrow, but income isn’t the only factor. For instance, if your income is high but you have substantial debts, your borrowing power could be lower. Debts and Expenses – Lenders will want to look at monthly expenses to determine borrowing capacity. If you have a lot of debt or high expenses, this could affect the amount you can borrow.  Dependents – Lenders understand that the financial responsibility of parents to their children will last decades, and they take that into account when determining your borrowing power. Loan Term – the length of term will calibrate your borrowing power, because generally, the longer the loan term, the more you can borrow but with more interest over time. Employment History – Lenders would want a stable source of income, so it’s better if you’ve been in the same job for a while and have a steady source of income. Credit History – Your credit history can also affect how much you can borrow for home loan. A good credit score and timely payments reflect how reliable you are with loans.   Rental Income – If you have existing properties, the income from rentals will also impact how much you can borrow. But, lenders will deduct 20% of the total to factor in the cost of repairs and council rates. Factors the housing market control include: Interest Rates – Lenders set their own interest rates, which can vary depending on the RBA’s announced cash rate, market conditions, and the borrower’s financial profile (e.g. retiree? self-employed?) The interest rate on the loan can impact your borrowing power, as higher rates mean higher repayments, which can reduce the amount you can borrow. Loan-to-value ratio (LVR) –  LVR is the ratio of loan amount to the value of the property being purchased. Lenders are more confident to approve loan applications from borrowers with a lower LVR, as this signifies lower risk of problems with repayments. Credit Policies – Lenders have internal policies regarding credit scores, income requirements, employment stability, and other factors that influence a borrower’s eligibility and borrowing capacity. These policies can vary between lenders,affecting how much they are willing to lend. Serviceability Assessment – Lenders use serviceability calculators to assess a borrower’s ability to repay the loan based on their income, expenses, and the loan’s interest rate. The lender’s assessment model can influence the loan amount they are willing to approve. Property Valuation – Lenders rely on property valuations to determine the loan amount. A lower valuation can reduce the maximum loan amount offered. How Much Can I Borrow for Home Loan? Typically, the house deposit you should provide is at 20% the total price of the property, but there are some mortgage products that set the deposit lower at 10% or 5%. Of course, the higher the deposit, the better because you eliminate the LMI expense, and you will incur less interest rate charges in the long term. But if you do not have the upfront money for a 20% deposit, you can plan for a more achievable but longer-term mortgage. In general, the maximum amount an Australian can borrow for a home loan is about 5-6 times the gross annual income. It is essential to note though, that income is just ONE part of the whole list of factors. Expenses, dependents, credit history, and other information help lenders fully assess your borrowing power. Since we all have different incomes, expenses, and type of home to mortgage, it’s important to calculate what’s the most practical rate for you. Figure out how much you’d be comfortable enough to pay monthly aside from all your expenses like utility, debt repayments, and lifestyle fees. Remember, borrowing the maximum amount can lead to mortgage stress. Conclusion Borrowing power is calculated using lender criteria and a client’s financials. Lenders can control the amount a client can borrow for a home loan, while borrowers can compare different lenders and loan products to find the best fit for their current needs.  Ensure that your credit standing, income, savings, and other financially relevant factors are in check to get the best home loan rates from lenders.  Whether you are buying or refinancing, it always pays to seek professional mortgage advice before committing to a specific home loan. Intellichoice has a team of dedicated finance professionals who can help you weigh different rates and options in the market.

For prospective home buyers, securing a home loan right away usually means that you check all the boxes from the lender’s perspective. However, not all have the privilege of having a clean credit report, and securing a home loan can be challenging if you have a bad credit history.  Challenging, yes – but not impossible. There are options for borrowers who have less-than-perfect credit ratings.  Bad credit home loans, or non-conforming or subprime home loans, are specifically designed for borrowers with a poor credit history. These loans cater to individuals who have experienced financial difficulties, such as defaults, bankruptcy, late repayments on credit debt, and more. Let’s talk about how bad credit home loans work, the eligibility criteria, and the biggest considerations before applying for one. How do bad credit home loans work? Lenders across Australia must thoroughly assess loan applications and ensure all requirements are met before granting mortgage approval. The National Consumer Credit law mandates this, compelling major banks and specialist lenders to scrutinize each loan application. But lenders also recognize that various factors in a person’s life can impact their ability to meet mortgage repayments. Unexpected life events such as divorce, spouse passing, unemployment, depression, and economic fluctuations can significantly impact one’s finances.  These events, in combination, can disrupt a person’s financial credit rating. Anyone experiencing these challenges must understand that while bad credit poses obstacles, it does not eliminate the possibility of obtaining a home loan. The mortgage terms will change in interest rates and other features, but it would still allow individuals with less attractive credit scores. What could cause bad credit? Your credit history may be damaged if you: It’s unfair to assume that bad credit means irresponsible lifestyle. Most Australians may have simply been involved in an unfortunate situation. Understanding these causes can help you identify areas that need improvement and take necessary steps to rebuild your credit.  Bad credit home loan types Home loan with defaults: A default is an unpaid debt on your phone bill, credit card, utility bill and other that is paid over 60 days late. Having a defaulted loan signifies to mortgage lenders one’s inability to pay debts. Defaulting on a loan is an automatic black mark on your financial record, but it is still possible to secure a home loan especially after defaulting when it is paid off.  Debt consolidation: Bad credit home loans can also be designed for borrowers who have several unsecured debt. Debt consolidation enables borrowers to roll multiple debts into a single, more manageable loan. For individuals with bad credit, these loans can be used to pay off high-interest debts, such as credit cards or personal loans, and streamline their repayments into one manageable loan.  Discharged bankruptcy: This type of bad credit home loan enables those who are ‘discharged’ from bankruptcy to apply for a home loan and rebuild their credit again. Aside from being eligible for bad credit home loan, being discharged also means being free from overseas travel restrictions and asset ownership. Which lender offers bad credit home loans? Specialist lenders are generally more flexible in their offers than the major banks. It’s understandable that big banks assess home loan applications differently, and so it’s better to have a lender that assesses loan application on a case-by-case basis rather than applying a rigid mortgage criteria that could dismiss the needs of many potential borrowers. Furthermore, bad credit or non-conforming home loans also benefits those who have just moved to Australia and are yet to build a credit history but want to apply for a home loan. Remember, not all non-conforming loans are about bankruptcy or financial issues. Bad credit sometimes means not fitting into the cookie-cutter standards that major banks require.  What should I expect with bad credit home loans? Bad credit home loans offer an avenue for borrowers to enter the property market or refinance an existing loan. However, it is crucial to consider these truths: The primary purpose of a bad credit home loan is to give a short to medium-term solution to buy a home. After a few years of working towards improving creditworthiness, you can then refinance to a better loan product with more favorable terms and features. Talk to Intellichoice brokers if you have questions about bad credit home loans. We can help you transition to explore available options, understand loan implications, and make informed decisions tailored to your individual needs. Securing a home loan is possible even with credit issues – our team can assist you anytime.

Families and individuals working towards saving up for a deposit need all the help they can get, as costs in homeownership continue to rise. One of several government initiatives is the First Home Guarantee Scheme, which aims to help prospective home buyers enter the housing market with just 5% of deposit. Let’s look at what key advantages the First Home Guarantee Scheme offers new home buyers, and if it’s a helpful initiative for Aussies who may have difficulty saving a substantial deposit. How does First Home Guarantee Scheme work? Under this provision, first home buyers can pay just 5% of the property value when buying a home.  While that is allowed in standard home loans, paying only 5% also means having to shoulder Lenders’ Mortgage Insurance (LMI). LMI is a one-off premium that protects the lender in case you default on mortgage repayments and adds thousands of dollars to your loan. The First Home Guarantee Scheme allows you to avoid the expense – meaning you can purchase a property with a minimum deposit of 5%, waiving the LMI. Essentially, a buyer can borrow up to 95% of the property value with government assistance for approximately 15% of that value. The federal scheme offers 35,000 slots for Australians across the country each year up to 30 June 2025. What type of property can I buy? Eligible properties under the First Home Guarantee include an existing house, townhouse, or apartment. You could also buy a house and land package, a land and a separate contract to construct the home, and an off-the-plan apartment. Who is eligible for the First Home Guarantee? To qualify for the First Home Guarantee, take note of these conditions: Property price caps  The First Home Guarantee Scheme applies price caps on the value of properties that can be purchased under the scheme. These caps vary depending on the location of the property to ensure that the scheme is accessible for buyers in different areas. The price caps aim to assist first home buyers in both metropolitan areas and regional centers. Major cities and their surrounding regions have higher property caps at around $600,000 to $900,000. Meanwhile, regional areas that include towns, smaller cities, and rural locations tend to have lower price caps.  Property Price Caps FY 2022-2023 State/Territory Cities / Regional Centres The Rest of the State / Territory New South Wales (NSW) Sydney + Regional Centres = $900,000 $750,000 Victoria (VIC) Melbourne + Regional Centres = $800,000 $650,000 Queensland (QLD) Brisbane, Gold Coast, The Sunshine Coast = $700,000 $550,000 Western Australia (WA) Perth = $600,000 $450,000 South Australia (SA) Adelaide = $600,000 $450,000 Tasmania (TAS) Hobart = $600,000 $450,000 Australian Capital Territory (ACT) $750,000 N/A Northern Territory (NT) $600,000 N/A Jervis Bay Territory and Norfolk Island $550,000 N/A Christmas Island and Cocos Islands $400,000 N/A What should I expect when applying for First Home Guarantee? Though the scheme is a big help in cutting down on upfront mortgage costs, there are a lot of caveats to being eligible for the scheme. For instance, there is a chance that saving up for a 20% deposit would prove to be more financially sound than getting the First Home Guarantee. Considering that the interest rate is high right now, even without shouldering the LMI, the total repayments for having a small deposit would amount to hundreds of thousands of dollars.  The First Home Guarantee Scheme is super helpful, but it won’t automatically mean that mortgage repayments will become easy over the life of your loan. If possible, try ramping up the deposit up to 10% to pay less interest in the long term.  First Home Guarantee Lenders in Australia A panel of 32 participating lenders offers the First Home Guarantee to prospective home buyers. If you are considering this option, remember that applications can only be made through a participating lender or their authorized representative, like our brokers here at Intellichoice.  We are your trusted financial advisors who can assess whether a specific home loan or property aligns with the scheme and checks your financial and personal objectives. Our decades’ worth of experience, along with an extensive network of lenders, result in a more careful, thorough home loan consideration.  Contact your Intellichoice broker today – we’ll find out if you are eligible and facilitate your First Home Guarantee Scheme application immediately.

Acquiring a home is a significant milestone and for most Australians, the best way to finance this purchase is through a home loan. Once you’ve secured a home loan, the work of paying it off begins. Mortgage can easily overwhelm you if you don’t have a clear repayment plan; every tactic that could work should be explored! It’s better to fully understand how to stay on track and minimize financial stress, especially regarding your regular mortgage repayments.  This guide provides essential knowledge and tips on making your home loan repayments more efficient and worthwhile. What’s your home loan repayment priority? Not every borrower is the same; some want to pay off their loans faster and gain full ownership of the home, while others prioritize having a more practical repayment amount that won’t hurt the budget too much. The good news is that both these goals are possible as long as you weigh your options carefully.  You can always use our handy home loan repayment calculator (link) to estimate what’s a realistic mortgage repayment amount based on your current budget.  Understand your loan structure Before diving into repayment strategies, you have first to determine the structure of your home loan. The two most common types are: Because of recent interest rate hikes by the RBA, monthly repayments are hugely impacted for hundreds of thousands of Aussies. It’s a serious issue that could potentially land many in a “mortgage prison” because of continuously increasing home loan repayment costs. In today’s climate, you may be encouraged to opt for interest-only structure as it keeps your repayments lower than if you were to shoulder principal and interest. However, be mindful about the consequences of paying only the interest. You won’t be chipping through the principal loan amount even with years of repayments.  Make sure you revert to a principal and interest arrangement when you’re no longer financially burdened so that you could complete your home loan payments sooner. If possible, pay more often  Who knew that making mortgage repayments more frequent would help you making extra strides towards your goals? Yes, for many, switching to fortnightly or weekly repayments can result in an extra month’s repayment per year.  Given that the first 5 to 8 years of a 25-year mortgage repayment will go to paying off the interest, anything extra means cutting down on the amount of interest to be paid in the long run. And because there are 26 fortnights, you’re actually making the equivalent of 13 monthly repayments if you opt for this payment schedule. You end up shortening the loan term and reducing interest paid – without feeling a huge difference in paying off the mortgage.   Make extra repayments a habit Not all home loans allow making extra repayments, but if allowed, paying more than the minimum repayment amount can help reduce your loan balance faster and save on interest charges.  The big ask here is to find the source of these extra repayments. Since wages growth hasn’t picked up materially to match the inflation rate, every bit of extra fund source counts. For instance, windfalls like a year-end bonus and other large earnings could directly slash off mortgage costs. The little things matter, too. Shopping less frequently, making meals at home instead of eating out, etc. and then putting your savings towards the repayment could easily make a huge impact without thinking about it. Check if your lender allows additional repayments without penalties. Negotiate with your current lender It’s going to involve more steps if you’ll switch lenders. As much as possible, discuss first with your current lender about lowering your interest rate or changing your loan terms. They may be willing to negotiate to retain your business.  If, after a couple of years you feel dissatisfied with the current lender in terms of customer service, responsiveness, and if other lenders have additional features you are looking for, then maybe it’s time to consider switching to another bank. Consider some changes in your home loan Another option to lowering your interest rate is to make important alterations to the loan type. Since many Australian borrowers who locked in at fixed rate loan a few years ago with record low rates are now subject to much higher variable rates, there’s a significant need to revisit their mortgage structure to address the higher costs.  Here are three ways to do so: A split rate home loan enables you to combine both fixed and variable loans. Borrowers can ‘split’ the loan into separate accounts, with some loan term subject to a fixed interest rate and some on a variable rate. You could do a 50/50 split or put the majority into one loan type you prefer. With a split rate home loan you can take advantage of having certainty during the fixed rate years, and the flexibility during the variable rate loan term. Do keep in mind that fixed rate break costs as well as additional account-keeping fees may apply. Consider opening an offset account linked to your mortgage. An offset is a transaction account that offsets the balance against your loan with the deposit placed into the account. The bigger the deposit, the more you will reduce the interest charged on your repayments. Any money deposited into the offset account reduces your loan balance. The key here is to keep a substantial amount of deposit in the offset account so that your monthly mortgage repayments will be lower in rate. Most Aussies pay off their mortgage in 25-30 years. This is an ample time to switch to multiple lenders or refinance their loan structure, which can potentially make home loan payments easier. For one, you could access better loan terms if you negotiate with the existing lender or if you switch to a new bank with a better rate. Aside from lower interest rate and improved loan terms, refinancing also lets you access equity you’ve built in the property. But refinancing involves a lot of weighing pros and cons, so before refinancing, make sure it’s worth the time and effort – and that it will be the financially sound decision for you. Think twice about bridging loans Sometimes, you may decide to move to another home whilst mortgage is still being paid on your current property. Bridging loans are a short-term financing option that can be used when transitioning between selling your current home and purchasing a new one.  Even though bridging finance is useful when covering the period between buying the new property and settling your for-sale house, bridging loans could increase the overall loan amount you’re paying off.  These often have higher interest rates and fees compared to regular home loans. Moreover, the costs associated with the bridging loan can add up, potentially increasing your entire mortgage expenses. Bridging loans can also be riskier if the property market experiences a downturn or if you are unable to sell your current home at a desirable price. You may end up with a higher debt burden than anticipated. If you are set on selling your home, instead of getting a bridging finance, sell the property first before purchasing a new one. And if you have built equity, you could use that to cover the downpayment or deposit for the new home.  Loan Repayment Issues? Talk to Us At Intellichoice, we’re here to keep you informed. If you feel overwhelmed or unsure about managing your home loan repayments, our mortgage specialists are a call away to provide personalized advice. Let’s talk about your home ownership journey – if you want to refinance, look for lower interest rates, or start on an aggressive savings plan – we’re here! Get in touch today to get started.

Home loans for doctors, medicos, specialists, and other health professionals do not vary greatly from what’s available for other professions. However, health care specialists have the edge due to the fact that they have higher income levels which they can leverage for better home loan rates. Doctors, specialists, dentists, and other healthcare professionals are considered essential services by the government – they enjoy benefits in terms of certain fees and mortgage charges, and are considered low-risk by most Australian lenders.  Let’s look at how home loans for doctors are tailored to accommodate the unique financial circumstances of healthcare professionals. Why apply for a doctor home loan? Lenders look at health professionals as low-risk borrowers, and in many cases, they provide discounts and privileges to prospective doctor home buyers. Here are potential benefits of home loans for doctors: Waived Lenders Mortgage Insurance (LMI) – One of the key advantages of doctors and other medicos is the ability to secure a higher Loan-to-Value Ratio (LVR) without incurring Lenders Mortgage Insurance (LMI). LMI is required for borrowers with an LVR above 80%, or home buyers who have a lower deposit. With a doctor’s home loan, medicos can often access higher LVRs of up to 90% or even 100% without the need to pay thousands more for LMI. Flexible income arrangements – Medical professionals, particularly doctors, have complex employment arrangements, i.e. working in multiple hospitals, having overtime income, or being self-employed. Home loans for doctors take into account these employment structures and accommodate them as long as you can present an accurate income stream and prove trustworthiness to lenders. Discounted interest rate – Some lenders offer lower interest rates on home loans for doctors as an incentive to attract medical professionals. These rates effectively save on costs over the life of the loan and make homeownership more affordable. Tailored loan features – Banks may include specific features that cater to health professionals. These include but would not be limited to: additional repayment flexibility, loan portability, and the ability to finance associated expenses such as medical equipment, business construction loans, and professional development financing. Is now the right time for this type of home loan? Building or construction can be a perfect avenue for doctors, both for building equity and investing in the housing market. Now is the perfect time to consider the options around getting a home loan.  Moreover, the ability to leverage higher income to secure reduced interest rates is another factor that comes into play when acquiring these types of loans. And it cannot be overstated that when LMI cost is waived, that means you could be saving thousands of dollars in upfront costs. Lenders look at health professionals as relatively low-risk borrowers, so if you’re considering buying a property or investing in real estate, here at Intellichoice, you can source the best finance for doctors.  Who is eligible? Lenders are comfortable with having an array of special offers for doctors, dentists, and health professionals like anesthetists, psychiatrists, vets, dentists, and other specialists. And while some medical research doctors and naturopaths may be more riskier than traditional medical doctors, our network of lenders can still look after these health professionals.   How to compare home loans for doctors? Our recommendation here at Intellichoice is that you first start with your current lender to see if there are any benefits that they provide for your particular field as a professional. If you feel that you’re not getting the service you require, then our home loan brokers are more than happy to compare all the current offers in the market and come back with a solution that suits your preferred loan type, loan term, features, and repayment scheme. Start your journey by contacting our home loan specialists for more information.   How to apply for a doctor home loan? Different lenders have different terms and conditions, but here are the general requirements to prepare: Considering construction loans for doctors? There are several specialist lenders that offer health professional discounts in relation to construction loans. Some of these perks may include waived LMI, higher discounted interest rates, cost plus construction, equipment financing, and a range of other loan types that may be useful. If on the other hand you’re a health professional considering building a medical centre or renovating a building to operate your practice, speak to us about the range of products available for specialists in this space.  our brokers and specialist knowledge on how best to acquire the sort of deals needed to get your practice up and running.  Working with a verified mortgage broker like Intellichoice means you access expert advice and guidance from start to finish, making your home loan decisions much smoother and more successful in the long run. How to compare home loans for doctors? How to apply for a doctor home loan? Considering construction loans for doctors? There are several specialist lenders that offer health professional discounts in relation to construction loans and some of these perks May include waive lmi higher discounted interest rates and a range of other servers that may be useful. If on the other hand you’re a health professional considering building a medical centre or renovating a building to operate your practice, speak to us about the range of products available for specialists in this space.  our brokers and specialist knowledge on how best to acquire the sort of deals needed to get your practice up and running.

Buying a property in Australia can sometimes involve significant costs. One of the larger costs is the initial deposit required by many lenders. Traditionally the deposit is 20% of the home price, but with Lenders Mortgage Insurance, prospective home buyers can put up a deposit of as low as 2 1/2 to 5%. Lenders Mortgage Insurance (LMI) is an important consideration for borrowers seeking a home loan If they don’t have the requisite 20% of the purchase price.  It’s a one-off premium payment that works for mortgage applicants with smaller deposit amounts, but it can have both benefits and drawbacks. This guide is all about understanding Lenders Mortgage Insurance, including what it is, how it works, and how to decide if you need it or not. What is Lenders Mortgage Insurance (LMI)? Lenders Mortgage Insurance is a lump sum, non-refundable insurance payment that is added to your mortgage as a guarantee for the lender. Lenders require LMI when a client is taking out a mortgage with less than 20% deposit – meaning they are borrowing more than 80% of the property value.  LMI protects the bank against any potential loss that could happen in case the borrower is unable to repay or defaults on the home loan. Because many home loan applicants aren’t able to place a huge deposit on the loan, which is when lenders’ mortgage insurance kicks in.  It can be paid upfront or the lender incorporates it into the home loan borrowings. LMI is also non-refundable, which means if you switch loans, the insurance won’t be transferred to another lender unless a new lender uses the same insurer- and only then can be a case by case situation where special circumstances are met.  Lenders Mortgage Insurance vs. Mortgage Protection Insurance  Lenders mortgage insurance is not to be confused with mortgage protection insurance or income protection insurance. The latter insures you, the borrower, so you can still cover repayments in the event of unfortunate situations such as injury, illness, unemployment, or death. It is designed to protect the borrower’s financial well-being and help them continue paying their mortgage obligations. Meanwhile, lenders mortgage insurance is meant to protect the lender if the home loan deposit is over the 80% value. The primary purpose of LMI is to reduce the risk for lenders when approving loans with higher loan-to-value ratios (LVRs). If a borrower defaults on their loan and the property is sold for less than the outstanding loan amount, the lender can make an insurance claim to recover the shortfall. Do I need Lenders Mortgage Insurance? Home loan applicants who are required to pay LMI won’t really have a choice in which insurers a lender can use. That’s because lenders arrange for the policy and are dependent on agreements they have with appropriate insurers.  LMI will cost differently, depending on the insurer’s calculations. Among the factors that will affect the cost is the size of the loan, deposit amount, loan type (fixed or variable?) borrower’s employment status, to name a few.   Despite the steep cost, lenders mortgage insurance is beneficial for those who may not have time to save for the 20% home loan deposit. Especially in today’s market where interest rates are much higher than in years past, property market prices rise faster than buyers’ capacity to save. LMI is an important component of the entire Australian housing market as it reduces lender risk, while still enabling thousands of Australian home buyers to buy the property of their dreams. Can I avoid paying LMI? While lenders mortgage insurance is a frequent add-on of standard mortgages, some borrowers could aim to  under certain circumstances. Here are a few strategies that can help you avoid paying LMI: Save for a larger deposit – The most straightforward way to eliminate having to add LMI to the overall loan is to deposit a larger sum that reaches the 20% threshold of the property purchase price. Having a large deposit  reduces the loan-to-value ratio (LVR) and potentially eliminates the need for LMI altogether. Explore guarantor loans – If your savings aren’t sufficient for a large deposit, consider a guarantor loan. With a guarantor, such as a family member, their asset or property serves as security for lenders, who may then be willing to waive the LMI requirement. However, this option requires careful consideration because having a guarantor means having another person involved in the home loan. So is not for everyone and many lenders will require the guarantor to gain legal advice before committing to providing a guarantee.  Inquire for profession-specific loans – Certain professions are deemed “low-risk” borrowers because of the well paying and in-demand nature of the work. If you are in the medical, legal, mining, entertainment, or sports industry, you could be among home loan applicants exempt from LMI. Seek government assistance programs – Depending on your location, there may be government programs designed to help first-time home buyers or low-income earners enter the property market. Different programs offer concessions, grants, or other forms of support that may waive or minimize the need to pay for LMI. How much will the LMI cost? Costs will differ depending on the lender, the loan amount, and the LMI provider. You may check out online calculators to get a rough estimate of what the LMI cost ballpark would be, or talk to mortgage specialists to find out more given your particulars. The figure can vary greatly depending on lending volumes and previous claims by banks-so not all are equal.  Take note that lenders mortgage insurance costs differ according to these factors: To get an idea of how much LMI premium is for your brand new home loan, or if it’s worth it to switch loans with a new LMI payment, feel free to consult with our mortgage professionals. We’ll do the necessary research for your specific mortgage application.

Granny flats, also known as secondary dwellings or bungalows, have gained popularity in Australia in recent years, as it is a practical housing solution that can be rented out if you wish to do so.  Recent stats show that over half a million homeowners nationwide have the space to build a granny flat, potentially increasing the home’s overall value by 30%. Granny flats can benefit you doubly: aside from adding value to your property, it can bring passive income if rented out. With many homeowners being able to fit a granny flat in their property, it makes sense to learn more about this type of investment.  If you’re considering building a granny flat, you’ll want to understand the financing options to maximize your loan. Let’s explore the concept of granny flats, the rules surrounding granny flat construction, and the pros and cons of this investment. What is a granny flat? A granny flat is a self-contained living space located within a home. It can either be separate from the primary home, or attached to it, e.g., built above the garage. A granny flat can function as a single-family dwelling, complete with amenities that offer the same comfort as a home. Some granny flats are mini versions of a full-sized house with kitchens. Meanwhile, other granny flats just include a small fridge and a microwave and won’t have a full kitchen setup. On average, the granny flat measures just 60 square meters. Why the name? These flats often serve to house an aging parent or other adult members of the family. But they aren’t limited to that purpose – granny flats can be used by in-laws, nannies, friends, and even as rental units-hence why they are sometimes called secondary dwellings or bungalows. Why build a granny flat on your property? There are several selling points for a granny flat. These include: Properties that are in major cities or in densely populated and expensive areas could capitalize on granny flats. Offering short-term accommodation rentals, e.g., AirBnB type stays apart from long-term renters could support financial outcomes while at the same time building equity. What are the drawbacks? However small you plan it to be, a granny flat is still a construction project that involves upfront costs from design to build. With any construction come the risk of hidden issues that could bleed your budget. For instance, any plumbing, electrical, fencing, or pathway build may leave you overcapitalized in the end.  In other words, it can be too costly to build and may even disappoint in terms of the value expected to be had. In addition, some states do not allow granny flats to become rental units. Certain areas could have tricky rules when it comes to building a secondary dwelling right on your property. Navigating the regulatory landscape and obtaining necessary approvals can be time-consuming and may vary depending on your location. And lastly, a granny flat could be subject to capital gains tax, except if there is a written formal agreement with a family member who is older or who has a disability to reside in the flat. Rental income is also taxable, and unless you plan to use negative gearing you could earn less than what you spend for maintaining the flat. Make sure you consult with Intellichoice home loan specialists to understand how a granny flat could affect your taxes. Rules in granny flat loan and construction While regulations vary across states and territories in Australia, some general guidelines apply when building a granny flat: How much does a granny flat cost? The cost of a granny flat in Australia can vary significantly depending on various factors, including location, size, design, materials used, and additional features or customization. On average, the cost of building a granny flat in Australia can range from around $80,000 to $200,000 or more. Granny flat loans are designed to have the same functionality as a single-family home. Even though it’s smaller, the construction could entail huge costs. Granny flat loans Given the enormous expense in building a mini home, most homeowners would need financing to commence the construction. A granny flat loan offers homeowners the chance to fast track this specific project, accessing funds that align with a borrower’s needs. To finance a granny flat, consider these methods: Explore financing options here for granny flat construction. Our advisors have a network of trusted lenders around the country. We help you thoroughly understand how to budget for your granny flat project and keep it aligned with your financial means and goals. Talk to us today to get started.

Buying a home is no small undertaking. You will have to commit years and even decades to pay off the mortgage, and along the way there will be considerations for upsizing, downsizing or renovating.  Most home buyers in Australia are interested in knowing about how long home loan repayments will be because let’s face it, it’s a big financial commitment. And with this commitment comes the ongoing investigation as to how interest rates affect repayments and whether it’s time to consider refinancing if your bank won’t negotiate on rate.  One of the critical decisions you need when applying for a home loan is determining how long you want to take to pay off that loan. Calculate your mortgage repayments here (link calculator) How many years is ideal for a home loan? Paying off the mortgage earlier means taking off that huge financial load much faster However, that could mean higher monthly repayments which won’t be ideal for every one,and how interest rates affect your plans. The most common loan term for mortgages in Australia are for 30 years. The maximum term offered is up to 40 years, but as much as possible, aim for a shorter term to pay less interest and complete the repayments faster. Figuring out how long you want to be tied to your mortgage isn’t just about picking a random number of years. It involves considering factors like interest rates, monthly payments, your own financial situation, and your long-term financial objectives. By finding that sweet spot, you’ll be on track while enjoying some financial flexibility with your mortgage repayments. How do I decide how long to repay home loan? It’s good to pattern your mortgage with your normal income and outgoings, especially if you have a steady source of income. So which one should you choose: a shorter loan term with a higher interest rate, or a longer loan term with a lower rate? It depends on your financial setup and goals. Let’s take a look at each option: Going for a shorter loan term means: But think about: Going for a longer loan term means: But think about: Should I make extra mortgage repayments? Getting ahead of your home loan responsibilities means prioritizing repayments. Many of the wiser folk among us treat their mortgage as if they have higher interest rates so that when you make repayments, each one is already at a higher rate.  Of course, this may not be possible with the interest rates now rising continuously. But when rates go down, repaying at a higher rate will help you make strides in completing your mortgage payments sooner. Talk to us about home loan repayments Ultimately, the decision should be based on your personal choice and financial priorities. You can consult with Intellichoice loan specialists about how to decide. If your main focus is paying off the loan quickly and minimizing total interest paid, there are loan products that will align best with your needs and objectives. Consult with our mortgage professionals today.