CoreLogic have released their latest reports on the rental and housing market. Click here to download the report.
Chris Magnus
Each quarter, RP data which is now called Core Logic releases their quarterly property update. To read the latest one, please click here
Our key highlights from the report are;
– Whilst property prices are increasing, rental yields differ significantly between the capital cities which will impact your holding cost and your total returns
– Sydney still showing no signs of going backwards
– Brisbane has the highest yields yet property prices have been relatively flat for the past 5 years.
Despite the RBA keeping rates on hold again for another month, lenders are still fighting it out for market share by reducing their home loan rates, with some going as low as 4.54%. Fixed rates are also getting cut, with one major releasing a three year fixed rate of 4.79%.
Whilst this is great for the consumer, when it comes to finding the right loan it is not all about the rate. Finding a competitive rate is important, however there are other factors you need to consider. Some of which include the following;
- Do you have the ability to make extra repayments?
- Are you on a honeymoon rate?
- Do you have access to an offset account or re-draw?
- What are the fees
If you haven’t reviewed your loan recently, then now is the time given the strong competition in the market place.
Consolidating your debts into one manageable loan can be a smart way to not only get your finances in order, potentially at a cheaper rate, but to also reduce the amount of personal finance paperwork you deal with on a monthly basis. You might have personal loans, car loans, credit cards and a mortgage. Usually these debts can be consolidated against your mortgage and of course work harder under your lower mortgage rate. Debt consolidation, however, does take a degree of discipline and finance management.
Advantages of debt consolidation
- Reduced interest rates. If you are consolidating debt against a mortgage, you are using secured debt. Because you have security, your interest rate will typically be lower.
- With all loans secured against one debt, you have only one creditor. Fees should be lower across the board and less paperwork.
Disadvantages
- It can be easy to get into further debt if you don’t manage your situation carefully. If you have consolidated your debts under a mortgage, set yourself a payment level each month and make sure you stick to a budget.
- Because your debt is secured against your home, if you don’t meet your repayments you could lose your home.
Valuations
The property valuation plays a vital role in your finance application, particularly when property values shift.
When a lenders credit team processes your home loan application, their main objective is to assess for risk. First they want to establish your ability to meet the repayments for the term of the loan. Second, they assess the property as a saleable asset. So as a fallback, what is the property value and how much could it be sold for?
The property valuation is provided by an independent valuer, who typically assesses your property in person and provides a report to the lender. The report will place a value on the property, provide commentary about the property and what similar properties are selling for in the area.
Expect your lender valuation to be conservative
In a high percentage of cases, lender valuations come in lower than what you believe the property is worth. If you aren’t expecting this, it can be disappointing and frustrating.
Low valuations can sometimes be your friend
The valuation is effectively an audit on the property sale price, so if you have had a valuation come in below the agreed price, while it is disappointing it could be time to start renegotiating. If the vendor won’t budge, perhaps reconsider if this property is the right one for you. This is particularly helpful if you are buying in an area that is unfamiliar to you.
The amount you can borrow will be driven by the certified valuation.
The property market within NSW, especially areas close to Sydney has been performing very well. This means it might be a good time to re-finance and re-structure your loan.
Why?
- If your Loan to Value ratio is lower (i.e. the size of your loan compared to the value of your property) you might be in a better position to negotiate a better interest rate with your lender
- You may have excess equity in your property that you can withdraw and use for future investments – this could be your business, another property or shares
- Fixed rates at the moment are at an all-time low – it might be a chance to re-do your loans and lock in a low rate to create some cash flow security moving forward
- There may be a better loan for you now – new products are always released and there might be one that is more suitable
If you want a complimentary loan review, just contact us and we are happy to get a valuation on your property and provide you with some loan advice. Best of all, it costs you nothing.
Are you looking to buy property in Super? One of the most neglected parts is typically the finance… contrary to most beliefs, it is not a standard residential loan. It is a non-recourse loan that is typically processed through a different area of the bank. Here are some of the key differences of a super loan compared to an investment loan;
- Different borrowing capacity – it is based on your super balance and contributions as opposed to your income
- Higher interest rate – there is typically no discount on the super loans
- More documentation required – The amount of paperwork is considerably higher with a super loan and generally it all needs to be certified
- Financial Advice Letter – They don’t usually tell you this until the end, but you typically need a letter from a Financial Advisor
- Longer time frame – It just takes longer to complete the full process so give yourself plenty of time to get the loan
These are just the main differences and each bank will have slightly different processes. If you need help with one or you are looking to buy property in super make sure you get in contact with us.
Welcome to Ark Finance… formerly known as Liquidity Finance. We have changed our name to align with our other businesses Ark Total Wealth and Ark Accounting under the Ark Advisory banner.
Whilst we still specialise and focus on providing the right finance solutions for our clients, we also have the ability to help with your other needs such as wealth creation, tax and insurance.
Internally nothing has changed, just our brand and image.
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