Greater Finance

Greater Finance are the home, business, car and equipment lending specialists throughout Greater Springfield and surrounding areas. Locally owned and operated in Springfield Lakes.

Providing more than just home loans. Our focus is building long term relationships with families, couples and singles looking for someone to educate and help them make lending and money decisions in all stages of life.

For us it is not just a loan transaction. It is a journey of learning, making financial decisions and achieving life’s goals. We also happen to make some great friends along the way.

Mark and his wife Aimee have been a part of the Greater Springfield community since 2001 and have raised and schooled their two children in the area.

Why Greater Finance?

Your local home loan mortgage broker and spending planner in Greater Springfield, Western Suburbs and Ripley.

Partnered With communities Locally & Globally

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Owning your property is a feeling unlike owning anything else.

For many Australians, the decision to purchase a property or continue to rent a property may not be an easy decision to make. If you’re considering purchasing a property we’ve outlined some of the things you might what to think about.

The advantages of buying over renting:

  • You can build equity through paying down the principle loan balance plus the property growing in value
  • You are free to make alterations and moderations to your property, with the proper council or strata approval
  • Eventually you will pay off your property and become debt free.
  • Property can make an excellent investment if you choose to rent it out in the future
  • Owning your property means you do not have to move out when your lease is up or your landlord sells the property.

The advantages of renting over buying:

  • Rental rates can be lower than your mortgage repayments
  • Renters are not required to pay for upgrades and maintenance required for the property
  • Renters have the flexibility to move to other properties easily with low transactional costs

Things to consider if you’re thinking about purchasing property

  • Do you have the deposit required to purchase a property or have a family member that could go guarantor for you?
  • Do you qualify for any grants or concessions
  • How much can you afford to spend?
  • What type of property would you like to buy?
  • Do you think you would ever use the property as an investment?

There’s four basic decisions to make when you’re picking the type of property to buy – will it be a house or unit and will it be an exisiting or new property. Here are some of the advantages and disadvantages of buying each.

Buying a House:

Advantages:

  • Houses have greater potential to grow in value
  • Can accommodate any type of buyer such as families or singles
  • Often located in suburban areas
  • Larger internal and external living spaces
  • Can have lots of scope to improve the value and appeal of the property through renovations, additions and landscaping

Disadvantages:

  • Houses are more expensive than units
  • Maintance and repair costs are your responsibility and may be more costly
  • Council rates can be higher for houses
  • Houses may have higher insurance premiums due to size and security requirements

Buying a unit:

Advantages:

  • Most units are more affordable than houses
  • Smaller in size means less space to maintain and furnish
  • Commonly found in metroplital areas with convenient public transport and nerby shops
  • Repairs to the building are shared between all owners
  • Can have shared facilities such as gym, pool and elevators

Disadvantages:

  • Older units or buildings can incur high maintance costs
  • Body corporates my limit the renovations and additions you can make
  • Units may not have all the amenities prospective buyers want – multiple bathrooms, internal laundry, parking
  • You may share walls with multiple other dwellings
  • You will need to pay for strata insurance to insure common areas

Buying a new property

Advantages

  • The property is going to be new and free of any defects or areas that need to be repaired
  • Depending on your state and if you’re willing to live in the property for a short period after you purchase it, there are generous government concessions available for new-home buyers
  • Newer buildings may be in areas around that are newly constructed and feature brand new parks and facilities

Disadvantages

  • If you purchase the property before it’s completed you may not know exactly what it will look like
  • New properties can be more expensive than established or older ones
  • New properties can be located in suburbs or locations that are also newly established and have further travel times

Buying an existing property

Advantages

  • Existing properties will be in established suburbs and likely close to services, transportation and central business areas.
  • Older properties may be cheaper than newer properties
  • Existing properties can be renovated into your dream property.

Disadvantages

  • Established properties may require repairs or upgrades, depending on the age of the property.
  • There are no stamp duty exemptions for buying existing properties.

Where to buy

The location you buy your property can be more important than choosing the type of property you want. When researching suburbs to purchase in you may want to note the properties proximity to some of the following:

  • public transport
  • shops
  • parks
  • entertainment complexes
  • proximity to areas such as CBD’s or employment areas.
  • schools
  • hospitals

Things you should consider when selecting a home loan

Choosing an interest rate type – variable or fixed?
A home loan’s interest rate will either be variable rate that moves up or down or a fixed rate that says the same during the loan term. You can also split you loan into fixed or variable portions. Here’s everything you need to know about choosing an interest rate.
Variable interest rates
The most popular loan type in Australia because of it’s financial versatility. Variable interest rates will shift many times during the lifetime of a loan; which will lower and increase your repayments. Manu variable rate products offer flexible options to maximise your savings and minimise how much interest you pay.
Variable interest rates will move up and down as lenders respond to cash rate set by the Reserve Bank of Australia (RBA). As lenders do not adjust their rates in-line with the RBA or each other, it’s important to thoroughly compare both a wide range of lenders and different products.
Variables rate home loans can come in either basic or standard packages and it’s important to know the differences and benefits of both.
Basic vs Standard
Basic home loans are generally used by borrowers with smallers loan amounts or who do not need any additional product features. Basic home loans will have lower interest rates and no annual fees.
A Standard home loan is attractive for borrowers who want:
  • Flexibility with their repayments
  • Simple features that help pay off their loans faster
  • Access to extra repayments
Additional features in variable rate home loans
Here’s an overview of the main features you’ll find in most standard variable rate home loans:
  • Interest only repayments allow borrowers to lower their payments by paying off only the interest portion of their loan. This can help borrowers if they need to free up money for other things such as school fees or home renovations. It’s important to know that when you make only interest payments you won’t reduce the balance of your loan.
Lisa has a $300 000 home loan with 25 year term and 5% interest rate. Her repayments are $1 753 a month. Lisa decided she wanted to switch her repayments to interest only and her repayments dropped to $1 250 a month – $503 less than she was paying before
  • An offset account allows a borrower to hold savings in a separaete account that is credited towards the loan balance. If you ever need the savings you can move the funds out with no penalty or fees. An offset account is a great idea for anyone with a large savings pool but needs flexibility in accessing that cash quickly.
Josh has a home loan worth $400 000. Over the course of the 25 year loan he will pay $319 000 in interest. If he kept $50 000 in an offset account he would have saved $40 000 in interest repayments (25 year loan at 5.25%)
  • Additional repayments / redraw facility. Variable rate products often allow you to make additional loan repayments when you have extra savings you’d like to put towards the balance of you loan. If things change in the future and you need those funds, a redraw facility will allow you to access the extra money you’ve paid.
  • Loan splits. If you’re not 100% comfortable leaving your entire loan balance open to the movements of you lenders interest rate, you can absorb some of the risk of interest rate movements by splitting a portion of your loan between a variable interest rate and fixed one.
Fixed interest rates
Fixed interest rate loans let you lock in an interest rate so you know exactly what your monthly repayments will be. A fixed rate home loan is great for anyone who wants certainty about what their montly repayments will be.
A fixed rate home loan gives you the confidence to budget for your lifestyle and plan yout finances for a set period of time but it’s important to know and understand the benefits and disadvantages of a fixed interest rate.
Benefits of a fixed rate
Certainty of repayments – as the market is difficult to perdict, a fixed rate home loan can offer a solution to an unpredictable future. A fixed home loan gives you certainty that your repayments will not only be the same every month, but safeguards you against future interest rises
  • Makes budgeting easy – a fixed interest rate makes it easy to organise your outgoing expenses for households planning their budgets or an investor managing their cash flow.
  • Safeguard against future rate rises – the movements of the Reserve Bank of Australia’s (RBA) cash rate have an immediate impacr on variable home loan rate but not on fixed interest rates. You can make rates rise knowing your interest rate stays the same. It’s important to keep an eye on rates when your loan term is coming to an end as it’s a guarantee your rate will change
  • You can choose your term – generally speaking, fixed rate home loans are usually locked in for 1-5 years but can sometimes be longer depending on the loan purpose and the borrowers personal circumstances. The amount of time fix your home loan rate can be dependeant on factors such as how long you plan on living in your property or if you’re using it as an investment
  • You can split you loan – alomost all lenders will let you split you home loan between a fixed and a variable interest rate. This lets you adjust your financial strategy and take advantage of market conditions.
Further key influences include how much your repayment amount will be as well as other fees and charges. See also variale rate home loans and split loans
Disadvantages of fixed interest rate

Owning your property is a feeling unlike owning anything else.

For many Australians, the decision to purchase a property or continue to rent a property may not be an easy decision to make. If you’re considering purchasing a property we’ve outlined some of the things you might what to think about.

The advantages of buying over renting:

  • You can build equity through paying down the principle loan balance plus the property growing in value
  • You are free to make alterations and moderations to your property, with the proper council or strata approval
  • Eventually you will pay off your property and become debt free.
  • Property can make an excellent investment if you choose to rent it out in the future
  • Owning your property means you do not have to move out when your lease is up or your landlord sells the property.

The advantages of renting over buying:

  • Rental rates can be lower than your mortgage repayments
  • Renters are not required to pay for upgrades and maintenance required for the property
  • Renters have the flexibility to move to other properties easily with low transactional costs

Things to consider if you’re thinking about purchasing property

  • You can miss out on lower rates – if rates drop below your agreed fixed rate, your won’t. This means you won’t benefit from a lower interest rate
  • Restrictios on repayments – extra reayments are usually capped, meaning there are restrictions on how much extra you can pay
  • Costs to exit the loan – most fixed rate products have costs involved with existing or discharing the loan before the term is up. It’s important to know these costs before you sign up for a fixed loan

You can buy a new home before you sell your existing property with a bridging or relocation home loan.

A bridging home loan bridges the financial gap’ between two home loans. Bridging home loans are commonly used to finance the purchase of a new property while your current property is being sold. They can also provide finance to build a new home while you live in your current home.

The lender takes security over both properties and lends against these properties until the sale and purchase process on both is complete. During a bridging loan period, your home loan will generally be charged as an interest-only loan. Many lenders offer interest rates comparable to the standard variable rate, or slightly above.

How does a bridging loan work?

Some lenders might let you capitalise on the interest of a bridging loan, so you don’t have to make loan repayments during the bridging period. If you choose to capitalise the interest, you’ll most likely have a slightly higher new home loan to cover it.

Some lenders will give you six months to sell your home if you’re buying an established home and up to 12 months if you’re building.

When you sell your first property, the funds from the sale are applied to the bridging loan, and any remainder becomes the end debt or new home loan. At this stage your home loan will usually revert to the lender’s standard variable interest rate or the interest rate you’ve negotiated.

Bridging loans. What you need to know.

The right bridging loan for you will depend on a few things:

  1. How long do you need the funds for?

  2. Do you have an unconditional contract on the property you’re selling? Or are you yet to sell?

  3. Is your new property a new build?

  4. Are the properties you’re buying and selling for investment or where you live?

  5. Can you meet the repayments on your current loan and the bridging loan?

Your answers will help your mortgage broker find the right bridging loan for you and how much you can borrow.

Bridging loans – a case study

A couple owned their home outright and wanted to buy and relocate prior to the sale of this property. They believed their property would present better for sale without their old furniture and they didn’t want the hassle of keeping the house in perfect order for prospective buyers. As vendors, the couple were also reluctant to allow a longer than normal settlement time frame.

Their current property is valued at $450,000 and their new home is $568,000. They’re on limited incomes and so could not afford a loan of $500,000. They elected to buy the new property, move in and use a capitalised interest loan. This couple sold their existing home for $612,000 within four weeks, but it’s important to note there was still the risk that the current home might not have sold within the specified six months.

Bridging loan pre-approval

It’s important to understand which option is the right one for you before you sign a contract for the sale or purchase of your property. A Greater Finance mortgage broker will talk you through your options and help you organise a bridging finance pre-approval.

You should consider if the main benefits of property investment align to both your financial goals and personal situation.

The 3 main benefits of property investment are capital growth, rental and investment yield and tax benefits.

Capital growth

Capital growth is the continued growth in the value of your property over time. This strategy generally requires you to hold onto the asset over a longer period of time.

As an example, if you purchased a property in 2010 for $300,000 and it grew in value by 5% each year it would be worth $383,000 in 2015 and you would have made a $83,000 capital gain, minus any expenses and taxes.

Rental and investment yield

Rental yield is the money you earn from rental income minus the expenses you incur owning the property. With the right structure, a property investment can generate a monthly income stream and high investment yield. Investment yield is the yearly amount of rental income you earn divided by the total loan deposit you made.

As an example, if you earned $10,000 in rental income after your expenses and deposited $100,000 on your loan your investment yield would be 10%.

Tax benefits

There are tax advantages for all types of property investors; you can claim expenses you incur owning the property, deductions for depreciation and negative gearing. Negative gearing allows investors to offset losses they incur in their property investment against their taxable income.

Why existing home owners might choose to buy an investment property

Existing property owners who have paid off at least 10 per cent of their property value, can borrow to purchase another property without having to put down a deposit or make a large upfront financial commitment.

When you have more equity in your existing property, banks will lend you higher loan amounts so that you can potentially purchase higher value rental properties. One of the biggest advantages of having equity is that you may not have put down a deposit on the investment loan as your existing property is security for the loan.

An example of using equity to purchase an investment property:

The Smith’s bought a home in a Melbourne suburb in 2005 for $460,000. Over the next 10 years the Smith’s paid their loan balance down to $300,000. In 2015, the Smith’s decided they want to buy an apartment so they had a valuer come and estimate their property was now worth $750,000. This meant the Smith’s had $450,000 of equity in their property.

The Smith’s decided to buy a $500,000 apartment in a popular student area and used a mortgage broker to secure a loan for the entire amount. The mortgage broker negotiated with the lender to allow the Smith’s to use their existing property as security for the new $500,000 loan and they did not have to put a deposit down or pay Lenders Mortgage Insurance (LMI). The loan repayments were $2,500 a month (30 years, 4.75%)

The Smith’s quickly found renters who would pay $2,600 a month in rent. Without having to put down a deposit, the Smith’s were able to purchase an investment that would generate capital gains but also a monthly income stream.

Why first home buyers might choose to buy an investment property (rather than buying a home to live in)

It’s not uncommon for property investors to purchase an investment property the first time they buy a property. For some first time buyers, property investment allows them to use their existing income and savings to purchase a property they expect to grow in value over time. First time buyers can be younger and often in the earlier stages of their career and are taking on an investment with the expectation that as their salary increases, they’ll be able to quickly reduce their loan balance and increase the income stream from the property.

Many first time buyers will also see their borrowing capacity increase when they apply for a loan for investment purposes. This is because lenders will factor in the income you will generate from rent, on top of your regular income .

An example of a first home buyer investing in property.

Julie and Sam, both aged 26 have no children and earn a combined income of $160,000 and wanted to start building some equity in property but were unsure if they should buy to live in or invest. A local bank said their maximum borrowing capacity would be $1.1M and their repayments would be $6,500 per month. Repayments that high would have left Julie and Sam sacrificing more of their lifestyle than they’d like.

Sam and Julie approached a mortgage broker who talked to them about purchasing a property as an investment. They applied to a lender for a loan with the purpose of it being an investment. After they got pre-approval they found a property in a popular student location where the rental rates covered most of the loan repayments.

You should consider if the main benefits of property investment align to both your financial goals and personal situation.

The 3 main benefits of property investment are capital growth, rental and investment yield and tax benefits.

Capital growth

Capital growth is the continued growth in the value of your property over time. This strategy generally requires you to hold onto the asset over a longer period of time.

As an example, if you purchased a property in 2010 for $300,000 and it grew in value by 5% each year it would be worth $383,000 in 2015 and you would have made a $83,000 capital gain, minus any expenses and taxes.

Rental and investment yield

Rental yield is the money you earn from rental income minus the expenses you incur owning the property. With the right structure, a property investment can generate a monthly income stream and high investment yield. Investment yield is the yearly amount of rental income you earn divided by the total loan deposit you made.

As an example, if you earned $10,000 in rental income after your expenses and deposited $100,000 on your loan your investment yield would be 10%.

Tax benefits

There are tax advantages for all types of property investors; you can claim expenses you incur owning the property, deductions for depreciation and negative gearing. Negative gearing allows investors to offset losses they incur in their property investment against their taxable income.

Why existing home owners might choose to buy an investment property

Existing property owners who have paid off at least 10 per cent of their property value, can borrow to purchase another property without having to put down a deposit or make a large upfront financial commitment.

When you have more equity in your existing property, banks will lend you higher loan amounts so that you can potentially purchase higher value rental properties. One of the biggest advantages of having equity is that you may not have put down a deposit on the investment loan as your existing property is security for the loan.

An example of using equity to purchase an investment property:

The Smith’s bought a home in a Melbourne suburb in 2005 for $460,000. Over the next 10 years the Smith’s paid their loan balance down to $300,000. In 2015, the Smith’s decided they want to buy an apartment so they had a valuer come and estimate their property was now worth $750,000. This meant the Smith’s had $450,000 of equity in their property.

The Smith’s decided to buy a $500,000 apartment in a popular student area and used a mortgage broker to secure a loan for the entire amount. The mortgage broker negotiated with the lender to allow the Smith’s to use their existing property as security for the new $500,000 loan and they did not have to put a deposit down or pay Lenders Mortgage Insurance (LMI). The loan repayments were $2,500 a month (30 years, 4.75%)

The Smith’s quickly found renters who would pay $2,600 a month in rent. Without having to put down a deposit, the Smith’s were able to purchase an investment that would generate capital gains but also a monthly income stream.

Why first home buyers might choose to buy an investment property (rather than buying a home to live in)

It’s not uncommon for property investors to purchase an investment property the first time they buy a property. For some first time buyers, property investment allows them to use their existing income and savings to purchase a property they expect to grow in value over time. First time buyers can be younger and often in the earlier stages of their career and are taking on an investment with the expectation that as their salary increases, they’ll be able to quickly reduce their loan balance and increase the income stream from the property.

Many first time buyers will also see their borrowing capacity increase when they apply for a loan for investment purposes. This is because lenders will factor in the income you will generate from rent, on top of your regular income .

An example of a first home buyer investing in property.

Julie and Sam, both aged 26 have no children and earn a combined income of $160,000 and wanted to start building some equity in property but were unsure if they should buy to live in or invest. A local bank said their maximum borrowing capacity would be $1.1M and their repayments would be $6,500 per month. Repayments that high would have left Julie and Sam sacrificing more of their lifestyle than they’d like.

Sam and Julie approached a mortgage broker who talked to them about purchasing a property as an investment. They applied to a lender for a loan with the purpose of it being an investment. After they got pre-approval they found a property in a popular student location where the rental rates covered most of the loan repayments.

Do you need rent to cover your mortgage payments, or are you looking for tax benefits?

Often, buzz-words like ‘negative-gearing’ and ‘cash flow strategy’ are thrown around without an understanding of what they mean. Now that you’ve made the decision to invest, the next question should be for what reasons?

The investment strategy you choose should depend on several factors, the most common being the length of time you plan on having the investment property, how much capital you are willing to initially put down on the property and your other financial investments and goals.

Capital Growth

All property investors are looking for their property to grow in value over time and generate capital growth. As the value grows over time, investors will increase their equity as their loan balance will be falling while the property value is going up. How much property is anticipated to grow largely depends on the type of property you purchase and where it is located. For this reason it’s important to research the growth of comparable properties in the areas you are looking to buy.

Is a positive or negative cashflow right for me?

There are two types of cash flow strategies and it’s important you understand them both and plan your investment property purchase around one of them. Regardless of the cash flow strategy you choose, there are tax deductions you’re eligible to claim regarding expenses for your property and depreciation.

Positive Cash Flow (Rental Income) – this is where you earn more money from your property than your expenses More simply, when you collect more rental income than your repayments and other expenses. This type of strategy is common when interest rates are lower and rental vacancy rates are low and with buyers who have lower loan-to-value ratios (LVR) and have smaller repayments.

Typical strategies for positive cash flow:

  • buying a property with a high cash deposit
  • buying in an area that is extremely popular with low vacancy rates
  • using loan features such as an offset account or interest only payments
  • Depreciation claims

An example
Jason is a fly-in-fly-out worker and has saved $200,000 for a home loan deposit over the past years. He recently decided he wants to invest in property instead of buying so he bought an inner-city 1 bedroom apartment for $500,000. After paying $25,000 in costs associated with purchasing a property, Jason had a $375,000 loan which he elected to pay off at 4.64% for the next 30 years. Jason’s monthly expenses included $1,639 in loan repayments and $500 in other bills.

Because Jason bought in a popular area he was able to rent out his property straight away for $2,500 per month. Each month Jason’s property generates $361 of positive cash flow ($2,500 – $1,639 – $500). Over 12 months Jason would earn $4,332.

In a single year Jason would have an investment yield of 2.16%

Negative Cash Flow (Negative Gearing) – A property investment with negative cash flow simply means the expenses of the property are greater than the income the property generates. Many investors choose to negatively gear their properties so they can take advantage of tax benefits that allow them to offset their losses against taxes paid from other sources, such as a salary.

Typical strategies for negative cash flow include:

  • Borrowing closer to the property value
  • Loan repayments that include principal and interest
  • Shorter loan terms (25 years or less)
  • A PAYG employee who wants to reduce their taxable income

Negative Gearing Explained

Negative gearing is a common strategy for investors who want to offset the taxes they pay from other sources against the losses they incur owning an investment property.

Negative gearing is only beneficial if you are paying tax and is not recommended for many property owners such as retirees. For negative gearing to work effectively it is highly advisable to have a mortgage broker property structure your loan.

An example
Lauren owns a one-bedroom investment property in a regional area of Queensland. She collects $1,300 a month in rent and her loan repayments are $1,500 a month and she incurs $300 a month in other costs. Each month she has to cover the $500 shortfall in cash flow from the investment. At the end of the year, Lauren has lost a total of $6,000 from her investment and claims the total on her tax return alongside her $100,000 a year salary. This reduces her taxable income to $94,000.

Mixed strategies for property portfolios

Some investors use a mixture of both negative and positive geared properties in their portfolios so that the shortfalls of one can cover the other.

When you’ve decided on an investment strategy you’ll need to make sure you’ve selected a loan that will maximise your goals for cash-flow and capital growth.

One of the first considerations for your loan is if you should select a fixed or variable interest rate.

Variable interest rates for property investors

A variable interest rate will change over time, as economic conditions cause the Reserve Bank of Australia (RBA) to adjust the cash rate. A variable rate can be good for those investors who aren’t as worried about fluctuations in their repayments and are aware how their cash flow levels can be affected by rate rises or falls.

Often, variable rate packages include extra features that allow investors to make the most of their investments. Here’s an overview of the main features:

  • Interest only repayments – allow investors to lower their repayments, which can aid negative cash flow strategies or help cover costs when the property is unoccupied

Example – Lisa has a home loan repayment of $2,996 and collects $3,000 a month in rent from her tenants. Unfortunately when they moved out Lisa did not have new renters move in so she switched her loan repayment to interest only and paid $2,187 until she found new tenants.

  • Offset account – allow an investor to hold savings in a separate account which will be credited towards your loan balance. If you ever need the savings for repairs or costs involved with your investment property, you can move the funds out with no penalty or fees.

Example – Josh has a home loan worth $400,000. Over the course of the 25 year loan he will pay $319,000 in interest. If he kept $50,000 in an offset account he would have saved $40,000 in interest repayments (25 year loan at 5.25%)

  • Additional repayments / Redraw facility – variable rate products will often let you make additional loan repayments when you have extra savings you’d like to put towards the balance of your loan. If things change in the future and you need those funds, a redraw facility will allow you to access the extra money you’ve paid.
  • Loan splits – if you’re not 100% comfortable leaving your entire loan balance open to the movements of your lenders interest rate, you can absorb some of the risk of interest rate movements by splitting a portion of your loan between a variable interest rate and fixed one.

Fixed interest rates for property investors.

A fixed interest rate is a great product for investors who want certainty about their outgoing costs and want to make their budgeting as easy as possible. A popular reason why investors choose fixed rates is they can match their loan terms and products to the length of time they anticipate owning the property. One of the downfalls of fixed rate products is that they don’t offer the same product features as variable rates and making extra repayments is not possible with most products.

How should I select a Lender?

Property investors are unique in the eyes of lenders because they will be assessed on both their existing income source(s) and the potential income generated from the property they want to buy.

Although it’s great that lenders will increase an investors borrowing capacity because of potential rental income, the way lenders asses property, existing equity and your financial situation are all different.

If you select the wrong lender you may not be able to afford the investment property that matches your investment goals. It’s important to speak to a mortgage broker early in your search so they can outline and explain the lenders that will have the most competitive products for you.

Capitalising costs

If you have less than 20% deposit, you are likely to incur LMI on your loan. This can cost many thousands of dollars, and on top of stamp duty, it can push your budget over the edge.

Although many lenders are tightening their lending criteria due to the current economic environment, most lenders will still allow you to capitalise many of your upfront costs including your LMI into your loan amount.

Bear in mind that while this can reduce your upfront outlay, capitalising costs will increase your monthly commitment to the loan and place more pressure on your monthly budget.

The right loan with the right features will save you time and money

No matter how much experience you have, the range of investment loans can be daunting. We help you quickly cut through the clutter to find options that work for you.

What works for one investor might not suit another. Our experienced mortgage brokers take the time to understand your investment strategy and financial goals to find the right loan for your financial situation.Whether you’re investing for tax savings, rental income or to build equity, our brokers know the loans that will help you maximise your investment.

Best of all, you don’t pay a cent for our service – the lender pays us.

There’s a lot to know about investments, like how to choose the right investment loan to meets your needs and goals. A good investment loan can make property investment a much smoother process.

Investment loans vary depending on what you’re looking to achieve, and can be either very simple (like your standard home loan), or something more complex to help you make effective use of tax, gearing and repayments. Loan features like redraw, offset and additional repayments can also help you manage your investment loan.

Investor borrowers are the most sought after customer by banks and lenders because of their equity position and borrowing history. It’s important you use this position to secure the most competitive loan for your financial position

Once the sale is finalised and you’ve taken over possession of the property you will need to find tenants and a manager for the property.

The case for hiring a property manager

One thing that anyone managing a rental property will tell you is that it can be a lot of work.

While you probably have many other duties and responsibilities, property management professionals look after rental properties full time. It’s their job and has their undivided attention.

They can save you time and effort by taking the helm and relieving you of the many different duties that a landlord or property owner would normally need to attend to.

This includes advertising for tenants, screening applicants, running viewings and preparing the lease when you have selected your preferred candidates.

Once your property is tenanted, the duties of your property manager are far from over.

They’ll handle all liaisons with your tenants, including all money transactions (deposit, rent, late fees), respond to any issues with the property and arrange repairs if necessary.

Property managers bring experience and know-how to the table that can prove real assets in the management of your rental property, including comprehensive knowledge of tenancy rules and perhaps even established relationships with local repairers and contractors that get you good rates, reliable service, or both.

While as a new landlord you could be in for some surprises, and even shocks, their experience will mean there isn’t much they haven’t seen – and handled – before.

Additionally, by employing someone else to manage your property, you needn’t be on hand or in the area at all times. This can liberate you to travel or live in another area while retaining peace of mind that if an issue were to arise with a tenant or your property, it can be seen to in your absence.

Managing an investment property means more than simply collecting the rent. Yet even if that were the case, property managers would still be a great resource for owners.

Your relationship with your property manager will be an important one, and one which could last for many years. For this reason you need to make sure you choose the right one.

Consider writing up a checklist of things that you need from a property manager and use this as a guide when interviewing agencies. Here are some things to look for in your future property manager.

Tips for choosing a property manager

  • Does the agency have a specific department for managing rental properties?
  • How many years experience does the agency have?
  • Can the manager give evidence to suggest rental rates?
  • What is their process for choosing ‘assess rental applications’?
  • How many other properties are they managing?
  • What are their fees?
  • Do they have references?

Stability

In every aspect of owning a rental property, the goal should be to form stable and lasting relationships.

This goes for the people renting your property, just as surely as it does for those you are paying to manage it.

You may want to find out whether your property will be managed by the same person at all times, or whether it will be shared among several agents.

If it is one person, consider asking how long they have been with the agency. If they’ve been around for a few years, this isn’t just a good measure of their experience, but can also provide extra certainty that they are going to stick around. Changing property managers often could be a stressful and tiring experience for you as well as your tenants.

Local knowledge

Ideally, your property manager will have knowledge of the suburb and general area that your property is located in.

This will be an advantage when they are advertising the property as they’ll know how best to sell it to renters, as well as which price will give you the right balance between being competitive and generating good returns.

Check to see whether they manage other properties close to yours, and whether they have done so in the past.

Reliability

A reliable property manager is a true asset. They can be depended upon to respond quickly to all matters requiring their assistance or intervention.

Whether repairs are needed at your property or your tenants have questions or concerns about monetary issues, sorting these out quickly could be critical.

This is because even if you have a top-notch property, if your tenants get fed up with the service provided by their property manager, they may well start looking elsewhere.When checking out property managers, find out how many properties they are responsible for.

How quickly do they aim to respond to tenant concerns? Where are they located in relation to your property?

This is an important factor and could be the difference between holding on to good tenants instead of seeing them move on when they tire of an inactive or unhelpful property manager.

Flexibility

As the property owner it is natural that you should take an interest in how your investment will be managed.

Some owners will want to manage their own properties; others will be happy to entrust this completely to professionals.

It needn’t be this cut and dried, however. You may choose to handle some aspects of the role yourself and pay an agency to look after others.

It all depends on how involved you wish to be and how many of the responsibilities of a landlord you wish to delegate.

DIY Property management?

Many landlords have asked themselves at one time or another if they would be better off self-managing their investment property. It’s a question that’s especially likely to have come up for consideration if a landlord has had a negative experience with a supposedly professional property manager who failed to deliver the good service they initially promised.

But recent data from The Australian Landlords Panel 2012 shows that landlords who manage their properties themselves are also significantly less likely to have adequate insurances, compounding the very real risks of self-management.

According to the study, around 77% of all Australian investors currently use a professional managing service with an agent, or have used one in the past. Yet while 88% of those investors have Landlord’s Insurance, just 54% of private landlords had the same insurance.

Interestingly, the Landlords Panel study also revealed that landlords received higher rental yields and profits when a property manager was used and generally had better experiences.
Of course, it is possible to self-manage and some landlords do it quite successfully.

Critically, if you do make the decision to self-manage, you must be prepared to dedicate the proper time and attention to finding a good tenant and regularly attending to inspections and maintenance issues. A legally binding lease agreement must be in place with the tenant and the landlord must also have good awareness of all relevant legislation, much of which is different in each state and is regularly updated.

Failure to take these steps significantly increases the likelihood of problems, including tenants falling behind in rent, malicious or accidental damage to the property, or disputes resulting in a legal liability for the landlord.

The case for doing it yourself

Being professionals, property managers charge for what they do, and their fees will come out of your rental income.

As a property owner, you will therefore need to assess the short and long-term benefits of paying for property management.

You may decide that you don’t mind taking the reins yourself simply because it means you don’t have to give up a percentage of your rental profits.

The other main argument against hiring a property manager is that you may not want to relinquish control.

Some investors like to be involved in the day-to-day management of their properties, and enjoy dealing with people and helping to resolve issues that arise.

Tips for first time investors

Just as you would compare investment loans, it is a good idea to seek out several property management companies for comparison if you are thinking about hiring one to look after your rental dwelling.

By going to see them in person, you can do a bit of homework to find out what is included in their services, what you can expect as an owner when dealing with them, and most importantly, how much they charge.

The potential costs of property management are something more to take into account when planning for your rental investment.

Just like other costs such as insurance and renovations, be sure to discuss these with your mortgage broker so that they can help you find an investment loan structure that is the right fit for what you hope to achieve.

Refinancing is a process where your existing home, personal or car loan is replaced with a new one. However the reason you select a new loan, depends on the specific purpose or purposes you have.

One of the first questions our brokers will ask you in the refinancing process is, are you looking to lower your repayments or are you looking to use your existing equity to free up cash for investments, renovations or debt consolidation?

Generally speaking, if you’re looking to lower your repayments your loan amount will stay the same but may have a different rate or structure. If you are looking to free up equity, you will be taking on a larger loan amount and potentially higher loan repayments. Having established these key differences, it’s important to know the major steps involved in each and the key points to consider.

Why should I refinance?

  • To lower repayments
  • Access equity
  • Consolidate debt
  • Renovate
  • Investment loan

Should I refinance to lower my repayments?

For many borrowers, their existing loan may no longer have a competitive rate or have the features needed to reduce interest charges.

Refinancing to lower your repayments is popular but you’ll need some help to make sure there’s no hidden costs and your new loan is structured properly.

How to lower your repayments by refinancing

The three most basic ways to lower your repayments are by either finding a lower interest rate, adjusting your repayment frequency or by using loan features that you’re old loan didn’t have.

Refinancing can give you a better deal. For many borrowers, their existing loan may no longer have a competitive rate or have the features needed to reduce interest charges.

Refinancing to lower your repayments is popular but you’ll need some help to make sure there’s no hidden costs and your new loan is structured properly.

How to lower repayments by refinancing

The three most basic ways to lower repayments are by finding a lower interest rate, adjusting your repayment frequency or by using loan features that your old loan didn’t have.

Should I refinance my loan to find a lower interest rate?

Finding a lower interest rate may not be too difficult but to make the switch worthwhile you’ll have to factor in the added costs of changing your loan product.

A lender may have a much lower interest rate than your existing rate but a high fee to establish the loan, making it more costly to refinance with that lender.

Here are two examples:

Lisa’s current home loan balance is $300,000 and her variable interest rate is 5.25% and her monthly repayments are $1,797. Lisa found a different lender whose interest rate is 5.10%, and her loan repayments would drop to $1,771 a month. However her new lender charges a loan establishment fee of $1,000 and a monthly fee of $10. Using our loan comparison calculator, it would take her six years to save just $184.39. (25 year loan)

Phil has a home loan balance of $500,000 and a variable interest rate of 5.2% with a major bank. His monthly loan repayments are $2,952. Phil found a regional bank that is offering a variable interest rate of 4.80% but the loan has a $700 establishment fee. Phil’s repayments with the regional bank would be $2,864. Using our home loan comparison calculator, you can see Phil would save $698 in just one year with the new loan and would save $34,256 over the next 25 years.

Switching between fixed and variable interest rates?

Often, borrowers refinance between fixed and variable interest rates and it’s important to understand some key points.

Switching from a fixed to variable interest rate

  • You should begin comparing and searching for a new home loan about six months before your fixed rate expires.
  • It may not be worthwhile exiting a fixed interest rate before it’s term finishes as you may incur heavy fees.
  • Borrowers commonly switch to variable rates because they anticipate the average variable rate to be lower than the fixed rates presently offered.
  • Be prepared to see your monthly repayments fluctuate
  • You can split your loan between fixed and variable portions if you wish to lock in a portion of your repayments at a set amount.

Switching from a variable to fixed interest rate

  • Borrowers commonly switch to fixed interest rates because they believe interest rates are at the lower end of the rate cycle and variable rates will rise over the next few years.
  • You can split your loan between variable and fixed portions if you wish for a portion of your loan to have the additional product features that most variable rate products have.

Should I refinance my home loan to use additional product features?

If you have a basic loan without repayment options or additional features you may be able to find another loan that can save you thousands of dollars in interest.

Here are some of the main loan features that borrowers switch for:

Offset account

An offset account allows you to keep a sum of money in an account that counts against your loan balance but that you have instant access for. Offset accounts are great for those who have large savings they need to keep handy.

An example:

Ted has an existing home loan balance of $450,000 and he makes repayments of $2,630 a month (5%, 25 years). He has $50,000 in savings he wants to use to eventually use to start a business and his current loan won’t let him apply those savings to his loan balance. Ted finds a new lender with the same interest rate but that offers an offset account. Ted switches lenders and puts his $50,000 savings in an offset account. While the money is in his offset account, his repayments drop to $2,338.

Additional repayments

The ability to make additional repayments can help borrowers take advantage of periods where interest rates are low and to save thousands of dollars in interest.

Redraw facility ­

A redraw facility allows a borrower to claim back additional repayments they have made if they find themselves in a situation where they need quick cash.

Interest only repayments

Interest only repayments allow a borrower to reduce their monthly repayments to pay off only the interest portion of their loan. This strategy can be effective to manage cash flow but should only be considered with the guidance of a mortgage broker.

Should I refinance my home loan and change my repayment frequency?

A common strategy for saving money on interest is to adjust the number of times you make loan repayments per month.

Many loans do not offer options for paying a loan more than once per month so if you find a lender that allows you to make fortnightly or weekly loan payments, you could save thousands of dollars in interest charges.

If you have existing debts, you can bundle them into your home loan or into a single personal loan

The two biggest advantages of this are:

  1. You can consolidate your repayments into one easy payment
  2. You can pay a lower interest rate on the debt as interest rates on home loans tend to be less than personal loans

Lenders will accept most types of debts and a mortgage broker will know the lenders that are open to refinancing certain types of debts against residential property, against a motor vehicle or even an unsecured personal loan. With any debt you are looking to consolidate, you will need to demonstrate the following:

  1. You’ve had the debt for at least 3 months
  2. The debt can be verified by statements or an account
  3. You are not behind on payments on the debt.
  • Examples of debts you can consolidate
  • Business debts
  • Australian Tax Office Debts
  • Personal loans
  • Credit Card debt
  • HECS debts
  • Court ordered payments
  • Divorce settlements.

It’s important to know that some lenders will not allow you to consolidate more than one type of these debts into your home loan. A mortgage broker can give you guidance after reviewing the types of debts you may want to consolidate.

How debt consolidation works

  1. Get your property or motor vehicle valued to determine your LVR
  2. Shop around and see if you can get a higher valuation from another lender
  3. Determine exactly how much debt you can add
  4. Apply for the new loan
  5. At loan settlement, your lender will pay your debts and the debt totals will be added to your home loan.

A case study:

David and Mary have a current balance on their credit card of $10 000 with an interest rate of 15%pa and a minimum monthly repayment of $300. They also have a personal loan with a current balance of $12 000 at a fix rate of 15% and a monthly repayment of $525. They are able to consolidate the two debts together over a 5 year loan term at a fixed rate of 10% and a monthly repayment of $494.56 including the $8 monthly fee and $900 establishment fee, reducing their repayments by $330.44.

One of the most popular reasons borrowers look to refinance an existing loan is because they’re looking to use the equity they have in their existing property to borrow money for a number of purposes.

The main purposes are;

  1. To renovate an existing property
  2. To access money to make an investment
  3. To consolidate debts.
  4. To access money for other purposes like a holiday or big purchase such as a car

What is equity?

Equity is the difference between the money you owe on your property and the value a lender thinks your property could sell for. As an example, if you had a loan balance of $500,000 and you had your property valued at $800,000 then you would have $300,000 of equity and a loan-to-­value ratio (LVR) of 62.5%.

The value of your property: the most important step in refinancing with equity

If you are looking to refinance in order to access any existing equity in your property, the most important first step you must take is getting a valuation done on your property. Greater Finance can organise a free valuation for you.

The reason a valuation is so important is because lenders will use the current value of your property to determine your LVR which will impact how much equity you have and how much additional money you will be able to borrow.

Getting a up­-to­-date valuation is critical because the valuation you had when you first purchased your property could have significantly changed.

Valuations can differ greatly different between lenders

When you are looking to use equity in your property, you will want your property valuation to be as high as possible ­ this creates more equity for you. It’s very important to note that banks all use different valuers, and they may value your property differently. If you use the wrong valuer, you may not be able to borrow the money you need to consolidate your debts, renovate your property or make an investment.

A case study:

Adam bought a house for $900,000 in 2012 and took out a loan for $800,000. By 2015 his loan balance was $750,000 and he wanted to access some of his equity to renovate his property. His current bank had a valuer assess that his house was worth $1M. Unsure if that was the right value of his house, Adam approached a mortgage broker who had another lender value his property at $1.2M.

Adam ‘s current lender assessed his LVR to be 70% and said he could access up to $50,000 for his renovations, without having to pay LMI. The second lender assessed his LVR to be 58% and said he could access $210,000 for his renovations without having to pay LMI. In this situation

Adam would be able to borrow an additional $170,000 for his renovations by selecting a lender whose valuer thought his property was worth more.

Important information to know about refinancing to access your equity

Most lenders will lend you enough money to bring your LVR up to 80% without many questions, but every lender’s policy for releasing equity is different and if you want to borrow more than 80% of your property’s value, you will have to provide evidence of the ‘purpose of the funds’.

What is ‘purpose of funds’?

Purpose of funds is the process and policy of a specific lender to assess if it should release equity to you. As mentioned, most lenders won’t ask too many questions if you’re only asking for enough money to bring your LVR up to 80% but after any equity to be released above 80% will need to go through a process with a lender. In cases where you are borrowing a considerable sum of additional money, regardless of your LVR, your lender may require you to adhere to their purpose of funds policy.

Be aware of Lenders Mortgage Insurance (LMI)

Even if you get permission from your bank to borrow more than 80% of your property value you may need to pay for Lenders Mortgage Insurance. This added cost should be considered as it applies to any borrower whose LVR is greater than 80%, regardless of if the original loan was charged LMI or not.

Use a lending specialist

Greater Finance know the lenders who have the most flexible equity release policies, offer free valuations and have the most generous LMI thresholds. A lending specialist will make sure you select the right lender and your loan has the right structure. It’s very important to keep in mind that equity is not free money ­ it is money you are borrowing. When you access your equity your loan balance will increase and so will your repayments. It’s always important to make sure the purpose of your additional money is well served.

Whether it’s a sports car, a family car, or even a first car, not many of us have the cash on hand to buy a vehicle outright.

But just as there are all kinds of cars on the market, there’s also a huge range of loans available. And just like with cars, some will be more ‘you’ than others.
That’s where we can help. Instead of simply accepting the loan your car dealer offers you or if you want to purchase a vehicle privately, we put you in control – helping you choose from a panel of lenders, to find the loan that’s right for you.
Best of all, we do all the legwork (and all the paperwork).
So if you’re ready to get in the driver’s seat with your car loan, contact us today.

CALL MARK BARNES

PO BOX 849, Redbank Plains, QLD 4301

For Any Inquires, Call or Email Us:

0418-593-677 | mark.barnes@greaterfinance.com.au

Alternatively:

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