My mum brought a house for around 400k outright but was short 70k so my sister got a loan for the amount and then went onto the house title..we all live together but my sister is now moving out and wants me to take over the loan amd she want to get off the title..
Firstly: what is the cost to just remove her and leave my mum on the title?-is there stamp duty involved?
2nd: if i get on the title what will the costs be?? Will it be calculated only on the 20% my sister put in if i was to do tenant in common or the full market value??..i also work fulltime and have an investment property amd never applied for FHOG and i have a pension card and so does my mother...
Will us both being on a pension card wipe out the stamp duty ?? If i am only being added to the title..
We will have to refinance the 70k borrowed so the loan is in both our names or just mine
A: Hello Amy,
Your question highlights the issue of joint family ownership of property.
I would recommend that yo first speak to a solicitor regarding the stamp duty issue, or if you want a more proactive role, call your state office of revenue (stamp duty office) and ask them.
Next, once you have answers around stamp duty and whatever that may cost, visit your bank and ask if they will help with financing the change.
That will depend on your ability to service the new loan from your income. Depending on your mum's age, if title was to be just in her name she may qualify for a reverse mortgage which could be used to pay out your sister's loan.
Hope this helps.
Q: Hi there,
As I get older I start to think about insurance more. I wonder if it’s better to have a Life and Trauma policy with connected benefits, Trauma Plus, buy backs ETC or is it better to have comprehensive Health Insurance?
I realise I need to decided what’s best for my and all that Jazz, but as professionals in the industry what’s been your experience with things like this and if it was you, what would you opt for ?
A: JT. I am a great believer in life & trauma insurance, and also have health insurance. They are mutually exclusive forms of protection. Everyone hates insurance, or at least, they hate having to pay premiums. We only love it when something bad happens and we have the insurance protection. You need to talk to a Financial Planner and complete a full work up to determine exactly what level of protection you need. A lot depends on your life situation, i.e. family, kids, debt levels, savings etc. My actual advice is - "Don't delay in doing this".
Q: I have only had my home loan for a couple of months so don’t know much about what happens when interest rates move. My loan is with NAB and I read they are reducing rates by 0.25%, does that mean my repayments will be lower and should I keep making the same repayments I do now?
A: Hi Liz,
Just to expand on the answer from Brendan.
Look at the paperwork you received when your loan was approved.
It will tell you if you have a fixed interest rate loan, or a variable interest rate loan.
If it is a fixed rate loan, then this rate reduction will not impact on you, and you have nothing to do.
If however, you have a variable interest rate loan, then you could reasonably expect that the bank will write to you and advise that they are lowering your interest rate by 0.25% from about the middle of June.
If that is the case, my recommendation would be that you maintain your current level of repayments as this means you will be repaying more of the loan principal each month and saving yourself more interest over the life of the loan.
Q: What happens when one party in a joint home loan dies. Is the estate of the deceased liable or does the loan transfer to the living party.
A: There is not a simple answer to your question Frank.
I will suppose that the granting of the loan in the first place is to be based on two incomes.
Upon the death of one party, the lender would need to know that the survivor could afford to continue making the loan repayments. If they are assessed as being able to manage the loan, then the bank would transfer title to the survivor. If they could not afford the loan repayments, it would be prudent to sell the property in order to repay the lender.
For that reason, I always recommend that the borrowers each have adequate life insurance to pay out the debt should one of them die.
If family members jointly purchase property I also recommend that they have a written agreement in place as to what they will do in the event that certain circumstances occur. This eliminates arguments in the future caused by misunderstandings.
Hope this gives you some more clarity.
Appreciate that I have not touched on any potential tax issues, which are dependent on whether the home is owner occupied or used for investment. That is potentially another can of worms.
Q: What happens when one party in a joint home loan dies. Is the estate of the deceased liable or does the loan transfer to the living party.
If you are the surviving joint owner of a property, then go and see your solicitor.
If the two owners were "joint tenants", the title will be transferred to the survivor.
If the owners were "tenants in common", transfer of title to the survivor is not assured, but is determined by the will of the deceased.
I am sorry for your loss.
Q: My wife and I are both PAYG employee in the same job for 5 plus years each. Our home loan is with CBA and the rate is 4.39% - loan is $720,000, could we get a better rate and by how much
A: Hi Peter,
Have you asked CBA for a better deal?
This is always the first thing any borrower should do.
Tell them you are dissatisfied with the rate as you have seen other banks offering rates around the 3.60%.
Let them know that if they don't give you a better deal you will say "adios amigo".
I'm sure any professional finance broker would be delighted to have you and your wife as valued and life-long clients.
Q: When a exclusive agency contract ends and property hasn't sold do you have to pay advertising fees if you part ways with agent?
A: Hi Sarah,
It would depend on the agreement you signed with the agent, but as a general rule I believe it is payable.
Check the wording in the agreement.
You would be within your rights to request copies of all of the advertising.
I heard an ad on the radio today about buying property in Brisbane if you want to help your children. We are thinking of helping our eldest get into the market and we will have to look outside Sydney, is Brisbane the right place, what other places do people suggest. Our budget would be up to $700,000 with our son owning around 25%?
A: Geoff, I also live locally to you and have my office in Baulkham Hills. With a budget of $700k, you can buy property in Sydney. It wont be a Kellyville McMansion, but as a first home for your son, does that matter? Was your first home your current home? I'm guessing it is not. There are new homes at Box Hill within your budget. Smaller homes on smaller lots certainly, however they are very popular with First Home Buyers. Buying interstate can be fraught with danger. My advice is to look locally.
Q: Last year the bank cut the rate on our home loan from 4.72% to 4.25% - at the time we were very happy but can I ask if our rate is too high and is now a good time to be looking at fixing some of the loan?
A: Whether to fix or not is dependent on your situation Cathy.
There are rates available today around the 3.6% - 3.7% range.
Some of these are fixed and some variable.
Naturally your own bank will tell you that they are the best for you.
Every other bank in Rosebery would tell you the same.
What you must do is sit down with a competent finance professional, have that person analyse your current circumstances and then, if appropriate, help you into a new home loan.
Appreciate that finance brokers are now mandated to ensure they put the clients interests ahead of all other considerations.
Bank employees will always put their employers interests ahead of the clients. That is their job.
Q: Hi, we are about to engage a builder for renovations and the quote has come in at $600,000. The builder is buying the materials on our behalf and we assume paying GST on the costs so if we breakdown the quotes should we then be paying further GST based on the builders overall quote?
A: That is a heck of a lot of renovations.
His quote should be inclusive of GST.
The builder is sourcing the materials for the job and would pay GST on those purchases.
The end consumer pays GST on goods and services.
Q: I’m 46 and been in sales and business development for 20 years. I have had an idea in my mind for many years and would love the freedom of running my own business but the fear factor and financial commitments have always held me back. I’d like to ask other people’s opinion on how they took the first step, how hard they found it – the good and bad, thanks?
A: Good on you Peter. Go for it. You do not want to have any regrets in your life.
You overcome fear by being prepared. Work on putting together a sound business plan. Enlist the help of a great accountant (suggest chartered) to review the financial aspects of the plan and business structure. Find a great solicitor to set up the business structure.
Get a "war chest" of funds by way of savings to last you for 12 months. Do a budget and determine how much you need to last 12 months with no income from the business. This eliminates stress and stops you from seeming "desperate" in front of clients.
Last three things.
1) Don't tell your in-laws (particularly the brother-in-law).
2) Brain wash yourself by reading only motivational books and listening to motivational cds.
3) Believe in yourself and your ability to succeed.
I am a first home buyer and would like to get some advice to buy a home. I have been in the same job for 4 years and earn $90,000 a year plus super. No loans and pay off credit card each month. I have inherited $120,000 and would like to know what price range I could look at, stamp duty costs and what do I have to buy to get the first home buyers grant. What rates and repayments are possible? Thank you
A: Hello Susie,
As someone who also lives in Beaumont Hills, I'll guess you are currently living with family, given rents in the area would be prohibitive for a single person.
If that is the case, do you need to move out of the family home?
Generally, single people are finding it tough to purchase a home in this Sydney market.
An alternate, is to be a rentvestor. This means purchasing a property with the view of renting it, whilst remaining in your current home.
This would allow you to increase your borrowing capacity.
If you prefer to move out of your current home, then I would concur that a borrowing amount of around $400k is sensible, i.e. based on repayments equalling 30% of income.
My office is in Baulkham Hills if you care to call to arrange an obligation free appointment.
Q: I have a small business that has been going for a year and I need to access some capital to take advantage of two new contracts. No luck with the banks so I am wondering if it is possible to use some of my superannuation to invest into the business. We only need about $50,000, are there any limitations and do I need to set up a SMSF to do it?
If you have confirmed orders there are lenders out there who will assist with the funding.
I'm not a Financial Planner, but would doubt you could use your super for this purpose.
Possibly one of the FPs on this chat could advise on this?
Q: Hi, I have a young family and want to go back to work and thinking of starting my own mortgage broker business. Previously I had 8 years in lending with one of the major banks and wondering if I should just go out of my own or join a franchise type model. I’d really like to get the thoughts of others in the industry and to also ask what else I should be considering, thank you
I have an office nearby in Baulkham Hills and would be happy to have a coffee and chat.
Q: Looking for a new home loan and have spoken to Ubank and Loans.com.au. I really don’t want the hassle so can mortgage brokers match their rates…. 3.62%?
A: Hi Sam,
There are some great brokers in the Penrith area.
If you don't know anyone Google Peter Beard and speak with him.
He's a top bloke and he can help you.
We are about to make a decision on which builder to use for our renovations.. we have 3 contracts around $600- 650,000 and they each have different insurances quoted. Is there a way to make sure the builder we choose has the right insurance in place? What do we need to be looking out for? thanks
A: For something like this you need to speak to the HIA (Housing Industry Association)
They will provide you with expert guidance, plus you can check the licence details of each builder.
Q: Question on behalf of my mum, she is 78 and still very active. She is looking at buying a house and land package near Goulburn for $450,000 as an investment. Mum owns her own home valued at $1.2M and an investment property valued at $1.6M and she lives off her super. Apart from the super she has around $200k in savings and would use $150,000 to purchase the property. With a strong net asset position would she be able to get a loan of $300K and what lenders would look at a loan like this?
A: Hi Jack,
I'm actually helping clients at the moment who are in an almost identical position.
There are a number of questions to be answered before a lender would help your mum however the short answer is yes.
What I would really like to know is "who is she doing this for" & "why is she doing this"?
Is it for herself, or is there someone else benefiting from this?
She obviously doesn't need to do it for the money.
I'm guessing that between the super and rental income from the existing investment property, she would be living comfortably.
If she would like to talk to someone, I'm available for a chat.
Q: We have had our home loan with Pepper for 2 years after having a small credit issue. The rate is 5.2% and we would like to know if we have options to refinance. Is 2 years long enough?
A: Hi neighbour.
I'd be happy to look into this for you.
My office is in Railway Street, next door to the library.
Call me to arrange an appointment.
I have a question about my home loan as the interest only period expires in early May. I want to keep it interest only but the bank has said no and it will be principal and interest. There is no problem making the repayments but I would just prefer interest only. Is refinancing my only option?
A: Hi Zac,
Is refinancing my only option?
No it is not, although it is probably the option that would allow you to achieve your wish to have interest only repayments.
Having said that, lenders are charging higher rates on interest only loans, so you may discover that a lower rate Principal & Interest loan would be of greater benefit to you.
You would likely have a lower monthly commitment and be able to reduce the loan balance at the same time.
It does come down to looking at both your current goals and future goals.
I'd be happy to talk to you about that and the loan options.
Q: I am thinking of buying my first investment property. Would you recommend a negative gearing strategy and have the loan interest only or should I go principal and interest and look to create more equity?
All of the responses so far have been extremely insightful, but have all missed one vital point and that is "Why do you think you want to buy an investment property"?
There are so many other investment avenues that may actually suit you better, but how would you know?
The answer to that is, "talk to a licensed Financial Planner". Not just one but I recommend 3.
Just like getting a quote to have repairs done to your car.
Meet these people, listen to what they say, determine if you feel they are a good fit, and select the one you feel most comfortable with. Pay their fee and follow their advice - which might be "buy an investment property".
There is so much more to buying an investment property than just deciding on P & I or I/O.
Best of luck with whatever you decide.
Q: We are finding it difficult to save as we have 4 kids, paying $800pw rent and lived in the same home for 3 years. I earn $120,000 and my wife $55,000 … is there a way to borrow given we pay so much in rent, thanks?
A: Hi Sam,
I live at Beaumont Hills, so am fully aware of housing costs in our area.
If you are serious about breaking the rent cycle, you will need to look at a home slightly outside the immediate area.
I have some first home buyers purchasing a house & land package at Box Hill for around $700k.
Not a massive home, but something similar would be achievable given the level of monthly mortgage repayments, i.e. approximately $3,200 per month.
There are also additional costs that home owners pay that renters don't, i.e. Council & water rates, home insurance and maintenance.
As has been explained, you would achieve this now with a family guarantee, or if you want to sit down with me to look at a structured budget, I'm more than happy to provide some guidance.
Planning future home ownership is something that takes some effort.
Q: Home Loan is 590k and our home is around 900k. I called our lender and they dropped our rate from 4.34% to 4.04% this week. Is that enough, could they do better or should I look to refinance?
A: Hi neighbour.
Suggest calling your lender one more time.
Tell them you've seen lower rates on offer from other banks. You should be down around 3.7%.
If they won't come to the party fo what Mark Bouris does and tell them "you're sacked", then call me to arrange an obligation free appointment at my office in Baulkham Hills. Google me for details.
Speak soon. Stephen Dinte
Q: Can I ask what the best 3-year fixed rate is for the property I live in and can I pay extra into the loan when by bonus comes through?
A: Hi Theo,
I can recommend Sam to you.
In addition to be a first rate broker, he lives close by, so that is an added convenience.
I know he will do the right thing by you.
Q: My parents live overseas and have offered to help with my home loan. If they were to pay something like $1,000pm do I have any obligations or issues in regards to tax?
A: Hi Maxine,
Whilst it is OK for your parents to assist you with loan repayments, appreciate that your borrowing capacity will be assessed only on your income.
To increase that borrowing capacity by including the money from your parents, they would need to become joint owners with you.
This creates a whole lot of other issues, including Foreign Investment Review Board approval, prior to them being allowed to own property here.
Happy to review this with you if you would care to call.
Q: We’d like to ask about the costs associated in transferring the title of our family home from joint names to one? Do we have to tell our lender and does it mean we have to refinance, thank you?
A: Hi Ingrid,
If I am reading between the lines of your question, I gather that the requirement to change the title from two names to one, might be in regard to a separation?
In that case, if you obtain a family law court order to change the title to one name, you can avoid having to pay stamp duty on the transfer.
If you are changing the title for some other reason, the proportionate (50%) stamp duty will be payable.
A solicitor can guide you through this.
In respect to the loan, as Sam has correctly pointed out, your current lender will have to give consent to the transfer of title into one name. They would do this if the remaining party is able to demonstrate sufficient income to service the loan.
If you are going through this process, it might be beneficial to speak to a professional finance broker to ascertain if you can find a more appropriate loan for your situation (with possibly a lower interest rate).
Best of luck.
Q: Is it possible to transfer the equity I have in an investment property to our home…. our home is worth around $600,000 and we owe $265,000. We have an investment property worth $450,000 and the loan is $250,000.
If we look to refinance can borrow up to 80% on the investment property to repay the home loan?
A: Timo. I'm guessing you are thinking about this on the basis that if you do as you ask, that you could increase the tax deduction for interest in respect to the investment property.
I recommend you speak to your accountant or tax advisor.
My understanding is that you can move the debt to the investment property, but the interest on that portion is not an allowable tax deduction.
Once again, you need to confirm this with your own advisor.
Q: Hi, We are with NAB and reasonably happy with their service but the interest rate on our loan is 4.39%. The loan is $560k and the value of the property is around $800k. Can we get a better rate and how much would it save us?
A: Hi neighbour, I also live in Beaumont Hills, whilst my office is at Baulkham Hills.
I trust you have already approached NAB and asked them to lower your rate?
If not, that is your first course of action.
Home loan rates are available below 3.7% so on your loan, the annual interest saving would be over $3,500.
Happy to meet and discuss if you have no joy with NAB.
Q: there is a estate in play in which I have a equal share with another 5 people i have asked to be paid out as i do not want any responsilities with this house as there is too many costing issues and if there was anything to go wrong i would not be in a finacial state to help pay for things I dont talk to the other share holders only recently due to the house being in probate in which they want me to sign they have offered 100,000 but my share is 175000 is there anything i can do ?
See a solicitor.
Q: We are thinking of purchasing a property with cabins to rent out nightly. We will live in the main property. Will the mortgage interest be tax deductible as we are running a rental business?
A: Hi Wesley,
I agree with Sam that of greater concern is the acceptance of the property as representing suitable security for a lender.
Even then, assuming that a lender is prepared to grant you a loan over the property, they may likely limit the loan ratio such that you will be required to put in a larger deposit or offer some other suitable property as collateral security.
I'm guessing that the cabins are not in Sydney?
Have you received evidence from the vendor as to the income being generated from renting out these cabins?
If you require a lender to take into account that rent to assist you to confirm your ability to service the proposed debt, then you will need historical income confirmation.
I am also mindful of the property usage being approved by the local government authority. Does it comply with the zoning requirements? Are all of the safety aspects in each cabin up to date, i.e. fire safety etc.
Obviously your solicitor will check into these points on your behalf.
It certainly sounds like having the potential of being a reasonable investment.
Just be mindful to complete all of your due diligence before signing on the dotted line and good luck with it.
Q: Is it possible to guarantee one of kids home loan without having to be on the loan or the property?
A: Hello Andrew.
I always like to have a discussion with parents looking to use their home as additional security in regard to this type of lending.
Naturally, there are positives and negatives that need to be fully understood by parents.
Additionally, some lenders are better at this type of lending than others.
Q: I’m looking to buy a property in Western Sydney with 40% deposit. The purchase price is $650,000 but it is a company title property include land and house. Are there any finance restrictions for company title properties?
A: Hi Ash,
Are you certain it is a company title and not Community title?
Can't recall seeing company title in Western Sydney.
If it is a community title, then that is fairly common and does not present a lending impediment
Happy to look at this for you.
Q: We have a loan of $420,000 and want to borrow about $50,000 to pay off credit cards and do some repairs around the house… house worth $800,000. The loan is with Westpac, rate 4.19% and we would like some advice on what the best rates would be if we fixed 50% of the loan for 3 years?
A: Hello Marcus,
Whilst interest rate is an important criteria of borrowing, learning strategies to repay your loan more quickly is what will really save you money.
For example, if you could repay your loan 3 years faster, calculate the amount you would save by multiplying the monthly instalment by 36. If you currently pay $2,500 per month, the savings over 3 years would be $90,000.
This is what I teach my clients.
A number of lenders have rates below 4% for both variable rate loans and fixed rate loans.
Some of these lenders even offer 100% offsets with their fixed rate loans.
Contact me, but only after contacting Westpac and getting their best offer.
Q: Looking to build a new home, and want to know if we pay stamp duty only on the land or the total of the house and land package?
A: Your solicitor will confirm this for you, however if you have split contracts (that means one contract for the purchase of land and a second "building contract"), then you will only pay SD on the land contract value (assuming this is an arms length transaction).
Q: About to start a share portfolio and would like to ask about the fundamentals people use as part of their consideration of whether to invest in a particular business?
A: Hi James,
To answer your actual question I can tell you what I did and now do.
First and foremost - start by studying all that there is regarding share trading and the companies listed on the ASX.
The Financial Review is a great source of information.
Become a sponge for information as the more you know, the better will be the decisions you make.
I look for businesses that are going gangbusters and invest in them, i.e. a particular shop that I walk past everyday is always full of customers spending money. This to me is a good sign.
You then need to do some basic research on the company. Look at the current share price and check historical data. I like companies that pay fully franked dividends so that is another aspect I look into.
There are a number of online brokerages you could join so shop around.
Lastly, appreciate that retail investors (that is people like you and me who don't have multi millions to invest) do not influence the market when we buy or sell shares.
A wise man told me that the surest way to have a company's share price increase tomorrow is to sell my shares in that company today. LOL.
Good luck with this.
Q: I work in the city and it takes about 1 hour and 20 minutes to get to work… painful. My property would be around $1.3m and the mortgage is about $900k and I’m thinking of selling my home and buying in the eastern suburbs or inner west. A couple of friends have suggested renting first for 6 months before buying and selling. The travel is not getting any easier and I’m hoping to get some advice on other options in relation to bridging finance or other things to consider?
A: Hi Judy,
I previously lived in Glenwood and based on your comment regarding time to get to work, I gather you are driving to the city given the time it is taking?
My office is in Baulkham Hills and when I need to go to the City I take the bus. I did that today and the trip was only 40 minutes each way. A single trip bus fare is around $5 compared to the tolls on the M2, Lane Cove tunnel and the Bridge.
Moving is going to put you back around $100,000, when you include agent's commission to sell your home, stamp duty on the next home and legal fees.
Maybe you could be a rentvestor. This is a person who owns a home which is retained as an investment (i.e. Glenwood), and then rents a home in a preferred area (closer to the city).
I have access in my office to a financial planner and an accountant and invite you to come in for a chat.
It pays to look at all the options.
Q: We are thinking of fixing our home loan, probably for 2 or 3 years. Looking at sites like Finder and Mozo the 2 year fixed options are as low as 3.7% but the comparison rate is 4.6 – 4.7%. Why is there such a big difference and is now a good time to be fixing rates?
A: Hi Kate,
The comparison rate reflects what happens at the end of the initial fixed rate period. Appreciate that the comparison rate is not as helpful as it is meant to be, based on the parameters used to determine it.
As to whether or not this is a good time to be fixing your home loan rate, there is no definitive answer as it is determined by a whole range of factors that are specific to your situation.
Also appreciate that not all fixed rate loans are the same.
Some offer 100% offset, other allow unlimited extra repayments whilst others only allow limited extra repayments.
Happy to chat if you wish.
My Partner and I (mostly me) have been thinking about starting an SMSF to invest in studio apartments in Kings Cross area.
We have a combined balance of around $120K, we are both late 20's, combined monthly super contributions of around $1,300.00 with the potential to increase that to $1,600.00 PM.
The plan would to live of the rental income in retirement, from what i've said do you think its worth visiting a FP?
A: You should definitely visit a FP. Appreciate the costs of firstly setting up an SMSF and then the ongoing costs including annual audits.
In our office we prefer for people to have in excess of $250k in super balances before transitioning to a SMSF.
There is certainly no "one size fits all" however.
So do investigate this and make a decision from a position of knowing all the facts.
Q: Why is an investment loan on a residential unit block viewed as a commercial loan although the income and expenses are viewed as individual as per the tax office?
A: Craig, with Commercial rates almost as low as residential investment rates, it doesn't make a huge difference.
Depending on the loan ratio (based on the property's value vs. the amount of the loan) you could be looking at rates under 5% in any case.
My office is only down the road at Baulkham Hills if you want my help.
Q: I bought a property a few years ago through my self managed super fund, however at the time I was just short of the funds required to purchase so made up the difference and ended up with a small percentage ownership in the property. The superfund now has enough funds to buy my share out but I was told that I would have to sell the property to get my funds back which I don’t want to do. Why can’t I just sell the percentage of the property to the superfund so I can get back the money I put in?
A: Hi Carol,
Check with your accountant as to how he treated the money you put into the purchase.
If it was treated as a "super contribution" then you effectively put that money into your superfund and it is not able to be returned to you.
However, if is was treated as a "loan" to your super fund, then ask him if the fund can now repay that loan to you.
Q: We are selling our home of 18 years and going through the process of choosing a real estate agent. The fees seem to be around 1.8% but one agent has offered 1.4% but wants to charge a $9,000 marketing fee. Does the marketing costs sound right ….. I know they put a sign out the front and the property goes on realestate.com.au and domain but does it really cost that much?
A: Hi Martin,
Do the maths. Work out the commission @ 1.8% and again @ 1.4% + $9,000.
0.4% (difference between 1.4% & 1.8%) is $4,000 per $1m of your home's value.
So, $9,000 = $2,250,000.
If your home is valued above that figure then the lower commission + marketing fee is less costly.
If you home's value is below $2.25m, go with the higher commission rate.
I choose an agent based on their success in the area. How active are they and what have they recently achieved for other clients.
Commission is the motivation for the agent to succeed. They only win if they achieve a good price for you.
Q: If we have a 15% deposit can we get a loan without having to pay mortgage insurance?
A: Hi Chris,
Appreciate that loans which do not charge mortgage insurance when there is only a 15% deposit usually have a higher than average interest rate, so that you can end up paying more in the long run.
Another option to look at is something called a "family pledge"(generic name) which is where a family member (usually mum & dad) allow the Bank to use some of the equity in their home to lower the lending ratio such that mortgage insurance is not payable. In your case, with a 15% deposit, the equity from a parent's home would need only be 5%, because there is no mortgage insurance once there is a 20% deposit.
The "pledge" portion can be removed once you have 20% equity in your home in your own right (the value of the home has increased and the loan has decreased) after some time.
My office in Baulkham Hills is basically at the top of Seven Hills Road, so feel free to call to arrange an obligation free appointment to chat about the various options.
Q: We have a family business and would like to know if there are any restrictions for 3 or 4 of the family to set up a smsf together?
A: Hello Angela,
Whilst I am not able to directly assist you, I do have a fully licenced Financial Planner in my office who can.
Before that however, I want you to reflect on why you want to set up a SMSF?
Do you appreciate that you, and presumably your husband, take on the responsibility on managing the money in the fund?
Do you have the financial knowledge and time to undertake that responsibility?
Also, as previously explained, there are costs associated with setting up a SMSF and then there are the ongoing costs of running the fund.
Unless there is a reasonably substantial amount in the fund, it may not be a viable option. Some SMSF spruikers will say you only need a small sum in the fund, but the reality is you need a fund total that makes setting up an SMSF economical. In this office we usually suggest that clients need over $250k for the exercise to be worthwhile. More would be even better.
There is then the matter of managing any risk insurance that exists within the current super fund. Any health issues that the members now have may prevent them from continuing that insurance cover.
I've had my own SMSF since 1995, so I am aware of what is involved in managing a fund and can say it is not as simple as some people make out. Even more reason to use a reputable and reliable Financial Planner.
Q: I was looking for email subscription of Property to Prosper, as one of my friends had recommended their service. However, I could find none.
I am looking forward Invest in off-the-plan as well.
Do they offer advice for both?
A: Yes April,
I do assist clients to fully understand the pluses and minuses of property investment.
My office is nearby you at Baulkham Hills.
Feel free to call and arrange an obligation free discussion.
Q: My mother’s fortnightly pension was around $360 p.f but with the recent changes to the government asset tests it is now $260 p.f. She owns her home and is worried about the lost pension and have to live off the funds in the bank. She has about $400k in the account and we would like to ask if there are other options for someone who is quite conservative to get a better return?
A: Your mum has lost $50 per week from her pension, equal to $2,600 per year.
Ignoring any interest she may earn on the $400k she has in the bank, if she merely draws on the capital from the $400,000 at $2,600 p.a., she would have sufficient money to last 153 years before it runs out.
I appreciate that this does not allow for inflation, but then again, she would get pension increases as the $400,000 reduces.
I have this same debate with my in-laws.
I tell them to live life to the full, spend your money as you wish and don't worry about it running out as it won't.
Q: We are thinking of selling our home and contacted Purplebricks as we saw their ad about flat fees. We would hope to get around $1.9 - $2m for our property so it would save us about $25,000 but they said their fee is paid upfront. Do you think this is a risk and is there another we could structure the payment?
A: The recent case of a Sydney home seller stung by a fixed-fee model proves why commissions are a tried and tested way of delivering good consumer outcomes.
Last weekend, the Australian Financial Review ran a story about a Sydney mother who hired a Purplebricks real estate agent to sell her Como home. The property failed to sell, leaving her with a $12,000 bill. According to the AFR, the debt is now being handled by peer-to-peer lender RateSetter, as the vendor chose to defer payment until the end of her campaign.
Purplebricks considers itself a disruptor and is one of the largest real estate agents in the UK. The listed company entered the Australian market late last year and has been marketing its flat-fee model to Aussies across TV and radio.
Vendors typically pay a flat fee of around $5,000, plus more for any extras tacked onto their campaign. This is in contrast to the traditional commission-only model used by real estate agents, who take a 2 per cent to 3 per cent cut of the total sale price.
The bottom line is this: commissions drive results. The agent is incentivised to sell the property for the highest price. If they fail to sell it, they fail to get paid.
Q: I have saved $28,000 and found a unit I would like to make an offer on… around $600,000. My income is $110,000 and the mortgage broker I spoke to suggested a family guarantee loan but when he found out my parents had a loan on their property he said it wasn’t possible. Their loan is only $90,000 and they have plenty of equity. Is what the broker said right and are there any other options available?
A: Hi Nick,
Ken has outlined the basics for a Family pledge.
I would invite you to my office in Baulkham Hills to look at your overall ability to afford the property and to put in place some sound strategies to assist you in meeting the loan commitment.
Getting into debt is the easy part, repaying the loan and having a life as well is the bit that needs careful managing.
Q: Hi, I would like to get some advice on our business lease. The lessor is giving us hard time and is not willing to extend our lease. We just bought the business a year ago on the basis that we had 5 years x 2 lease options and now the lessor has flipped! He is wanting us to get a lawyer involved to resolve this matter.
We have a potential buyer to purchase our business, but obviously the lessor is not helping us out at all to sign transfer of lease. Any help or guidance available here?
A: Hi Abby. Get yourself a good lawyer who specialises in this area of the law.
Q: The bank just cut our rate from 4.52 to 4.35 and gave us the option of lower payments or keeping the payments the same as we have now. We are comfortable with what we are paying so does it mean paying the loan off earlier?
A: Hi neighbour. I also live in Beaumont Hills. I gather your loan is for your home, and whilst the fact that your bank has lowered your rate to 4.35%, you could do even better. Call them and say that there are a number of banks who are at sub 4% for home loans. Let them know you will refinance your home loan if they don't improve the rate even more. The average loan in our area is between $450k and $500k. An interest rate reduction of 0.50% would save you $500 per $100,000 of loan (say an average of $2,250 - $2,500) per year. By maintaining your current repayment level, you could cut many years off the term of your loan and own your home that much sooner. If your own bank won't help you, visit my office in Baulkham Hills.
Q: Our daughter has just got her P’s and we are looking at getting her a car. If our budget is around $15-16000 does anyone have any recommendations as to the type of car?
A: When our daughter got her P's we put her into a second hand Mazda 2 hatch. Good safe, small & economic vehicle with all of the safety features. More importantly, we had her complete an advanced driving course at Eastern Creek. They taught her about road courtesy, patience when driving and some driving skills, particularly what happens when the ABS breaks kick in. She did some skid pan braking and how to steer under braking. Whilst the vehicle is important, learning how to avoid issues is priceless.
Q: Would like some recommendations for a quantity surveyor.
I've contacted BMT and Washington Brown, BMT will carry out a home inspection for the report while Washington Brown stated that they'll do report without an inspection, Fittings details needed only?
A: I have personally used and now recommend to clients the services of Duotax at Canley Heights. Speak to Tuan on 0455282565
You might find their services a little less costly compared to BMT.
Tuan does a full inspection of my client's premises and prepares a detailed survey report that is fully compliant.
Q: My partner and I are earning good money, 120k and 80k and pay $1,100 a week rent. We have found a property we like and want to ask if it is possible to borrow 100% of the property, about $820,00?
A: Hi Emily. Short answer is no. Longer answer is maybe, if there is a relative prepared to use their home/a property, as the collateral security. You don't mention if you have any savings? A lender would be curious to know why, if you have no savings, that is the case, i.e. what are you spending your money on? Appreciate that there is a cost to home ownership that you don't currently have as tenants. This includes council rates, water rates, home insurance, general maintenance. In addition to the home loan repayments, you need to budget around $100 per week for basic home bills.
The other questions that a lender will ask include "how long have you each been in your current jobs, what other debts or loans have you got and what are your basic living costs"? That is why it is best you speak with a professional broker who has assisted many couples in similar positions to the one you find yourself in.
Q: Wondering what the best option is when it comes to getting money out when you're overseas. I will be visiting Europe soon and would like to know whether it's worthwhile getting a travel card or simply using my own debit card while I'm travelling? Thanks!
A: Blake. As with all things in life it is best to cover all bases to be on the safe side. Therefore, you would be best to use multiple cards. Have a card wallet (both Qantas & Virgin have these as part of their frequent flyer programs as well as Australia Post). Advise your bank that you are travelling O/S and have your debit card (Visa or MasterCard) with you. Lastly, you can put credit funds into your credit card so that it will act like a debit card (you will be spending your own money). Finally, it is never a good idea to tick up holidays on credit. There is no joy in repaying a loan/credit card for months after a holiday. P.S. Store the cards on different parts of you whilst away so that in the event you lose one purse, you won't have lost all your cards.
Q: Just bought family owned business that has been operating for 28 years. Can we get insurance or income protection based on the financials or do we have to have owned the business for a period of time first?
A: Easy answer Diane,
Speak to a licenced financial planner and get expert advice.
Ask amongst family and friends for a referral
Q: I am 60, will retire at 67 and get the single age pension. I rent from the department of housing and pay 20% of my income in rent. What should I do with my $90,000 super that dose not earn 'income' and increase the rent?
A: Amanda. There are special people at Centrelink who are there to help people with these questions.
Q: I am about to sell a development can I give the proceeds of the sale to my wife?
Q: Hi....I'm I able to roll my super into a self managed fund to purchase my first home?
A: This would be OK if the property were purchased for investment and not for you to live in.
The next question is how much you have in super.
As a general rule, I believe that people need over $220k to move into an SMSF due to the costs of setting up the fund and maintaining it (accounting fees, audit fees etc.).
To go down that path (SMSF) you need a very good Financial Planner to assist you. Get a referral from someone you know and trust.
Q: I have a total of $50k saved up and I'm a first home buyer looking to get into the property market. Is now a good time to buy in Sydney? And if not, where can you recommend I consider looking instead? Or should I just wait?
A: Hi Victoria,
If you consider that it is questionable if prices will ever decrease, than it is a case of sooner is better.
I maintain that first home buyers can get into this market if they are sensible about where they buy.
There are loan options available to assist FHBs, so it would be useful for you to investigate what these are.
A professional mortgage planner can show you how you could get into the market without you over committing yourself financially.
Q: Need help understanding ITAA97 S118.10, which implies if a property is leased/rented at sale date then there will be no relief under the main residence exemption should you latter move in then rent out the property again at a later date?
A: Interesting question Jason.
Can't say I have heard this one before, but have always believed that the ATO pro-rata the time a property is held into that period when it was rented out and the period it was someone's primary residence.
Without doubt you would be best advised by a chartered accountant who could provide a professional opinion.
Q: CGT on sale of small business owned for 13 years by person over 55. Is there a 100% exemption in CGT on the sale of a business if sold for under $500,000 in NSW by a 57 year old owner who has owned the business for the past 13 years?
The ATO website provides the answer to your question in full detail.
15-year exemption (from ATO website)
If your business has continuously owned an active asset for 15 years and you're aged 55 years or over and are retiring or are permanently incapacitated, you won’t have an assessable capital gain when you sell the active asset.
The concessions are available when you dispose of an active asset and any of the following apply:
•you're a small business (that is, have an aggregated annual turnover of less than $2 million)
•your asset was used in a closely connected small business
•you have net assets of no more than $6 million (excluding personal use assets including your home to the extent that it has not been used to produce income).
Your accountant will be able to assist you with this.
Q: Parents are in their 70’s and have been given advice about using their home to borrow money. What’s the difference between a reverse mortgage and an equity release loan?
Albert has given an outline of the difference between the two loan types.
With Reverse mortgages, there a number of variants that are available to home owners, based on their specific needs.
Your parents, being aged in their 70s would be able to borrow between 26% - 34% of the value of their home under a reverse mortgage structure.
This could be taken as a lump sum, or by periodic amounts as needed. Interest is charged on the funds as they are taken, and as has been pointed out, gets added to the loan balance.
The interest rate on a reverse mortgage is a bit higher than a traditional loan, as there are no regular repayments (unlike a normal home loan).
Lenders will however allow borrowers to make repayments if they so wish.
Q: Not so much a question but a comment
A good friend has been with the one lender for 10 years and after 4 weeks of hesitation they finally called the bank about the interest rate on their home loan.
One call and 5 minutes later the bank had dropped the rate from 4.75% to 4.09% - the 0.66% rate cut will save them thousands
I’d love to get some feedback if anyone has had or knows of a similar experience - please share
A: Whenever I have a client wishing to refinance to a lower rate loan, I always get them to call their existing bank first and request a rate reduction.
I have them advise me of the proposed new rate, and only then will I check if there is something else on offer that would benefit them.
This has saved me a lot of angst over the years and I never fail to settle any refinance deal that I handle.
Q: We want to borrow about $300,000 for renovations. Do we have to have a contract with a builder or can we manage the process ourselves?
A: Short answer Justin is Yes, you can manage the process yourself.
The longer answer is "depends".
You would realistically need to show that you have the ability to manage the job, be able to produce an accurate costing for the job (gather quotes from all trades involved) and have a reasonable equity in the home.
Then there is the question of being treated as an owner builder (check this out to see if required), and finally insurance.
If you do not have a building/trade background, I suggest that it is not worth the headache to do this sort of thing yourself.
It looks easy on TV, but the reality is vastly different.
You go to a doctor if you are sick, a dentist if you have a toothache etc.
My advice would be to get a professional builder in to do the work.
Q: Hi there, I am wondering where I would go if I was in need of a $3,000 loan I am a single mother of my 3 year old daughter, I have a Job 3-4 days a week & i receive benefits as well. I have bad credit rating from when i was young & stupid. Anyone ?
If the need for the loan is not super urgent, than I recommend you "pretend" to have the loan and commence saving each week/fortnight the amount that you would be required to repay.
Do this for 6 months.
If you find that you would struggle to save this amount regularly, than no harm done. Better to learn that you can't really afford to borrow before you take the plunge.
Let's face it, the last thing you need is another black mark against your name.
If you can manage, than it is likely you won't need to borrow the full amount as you have saved 20% - 25% of the amount.
Thus, the loan required would be smaller, and your repayments would be similarly reduced.
Appreciate that a small loan like this would attract a high interest rate (even if you had a clean credit history), and high up front fees. Understand that it takes the same amount of work to process a loan for $100,000 as it does $3,000.
If at all possible, the likely cheapest option would be a credit card with a low ongoing interest rate.
But do that "pretend" thing first.
Q: I'm thinking of using Purplebricks to sell my house when they start in Sydney next month. They appear to do everything a traditional agent does and I've estimated it would save us about $65,000 in fees. Are there any catches, seems too good to be true?
A: Hello Steve,
I am a professional finance broker and I always recommend that clients look for a real estate agent that commands the highest commission rate to sell their home. I follow my own advice in this regard.
When I am interviewing agents, prior to selecting the one to sell my own property, I always reject the ones that try to get me on price (lowest commission rate). What is going to motivate them to sell my home rather than another home on their books if the commission rates are all the same?
I choose the one who has the self belief to charge a high commission because they know they are worth the money.
I then offer to pay extra (a percentage) if they achieve a sale above their lowest estimate.
You don't think they are then motivated to really work hard to achieve the best possible outcome, knowing it will benefit their hip pocket??
Let's take your home as an example.
If you sell it through Purplebricks for say $3.6m you save the $65k figure you mention.
If you get the best agent in the area sell it for $4m, and he charges you $100k commission, you end up with $3.9m
My parents always taught me not to be penny wise and pound foolish.
Q: I want to get into the property market but can’t seem to save enough to buy in Sydney. I’ve saved $20k and was thinking if I should use the money to buy an investment property in the country?
A: Before going along that path Greg I would want answers to a lot of questions.
What is your current domestic situation?
Are you single?
What is your income and do you have any commitments or debts that you are paying?
Have you a specific country area that you are thinking about?
Do you have family who would be able to assist?
How long has it taken you to save the $20k?
Getting an investment property outside of Sydney may, or may not be a viable option.
Have you considered alternative investments?
Property is not the only investment strategy.
I could continue with questions but will leave it at that and simply wish you good luck.
Q: How come when borrowing money using the equity in my property to invest in shares the interest rate is different to that of my home loan?
A: Hi Wayne. Lenders are required to put more capital away when they write an investment loan compared to a home loan. They get less income on that capital so they charge a higher rate to the investor.
Having said that some lenders do not charge a higher rate.
You have simply to look at the profit figures for our big banks to understand the real reason for the higher rates.
Shop around or get a broker to do it for you.
Q: A lot of talk about interest rates. Big decision by the RBA next week. What is everyone predicting?
A: The RBA will lower rates in May due to the low inflation numbers and the Aussie dollar's current exchange rate. If they wait until June it will seem like a political move which is something that the RBA won't want.
Q: I would like to buy my first property in the next few years. Should I aim for a 10 or 20% deposit?
A: Hi Marc. The amount you save is the perfect indicator as to the amount you can repay on a mortgage.
Let's say you average $2000 per month in savings over the next 24 months.
At the same time you are paying your rent which is $2000 per month.
This would suggest you could afford a mortgage with repayments of $4000 per month.
Now we need to reduce that a little to allow for home ownership costs like rates, insurance and maintenance, so we would comfortably look at loan repayments of about $3500 per month.
This method is the truest way of determining the size of a home loan.
So for now focus on saving what you can rather than worrying about percentages and you will achieve your home ownership goal.
Best of luck.
Q: How can I find a suitable financial planner?
A: Hi Sara. What type of financial advice are you seeking?
Q: I have a property and need to build on it a house in the future, if i needto borrow money from the bank when the repayment has to start, is it after finishing the construction an what normaly happen do they give the money to me or I gove them the invoice?
A: Hi Sam. Normally when building a house the builder will require progressive payments as various stages of construction are completed.
Your lender will make these payments on your behalf upon presentation of the invoice which you are required to sign.
The lender will require you to make payment of interest during this time based on the amount that has been paid out to the builder.
For example, if the first payment to your builder was $50,000 you will pay interest on that amount.
In the following month the bank makes the second payment of say $70,000. Your loan balance is now $120,000, and you will pay interest on that balance.
Your loan balance and the interest you will pay grows as your house is built.
Normal home loan repayments of interest and principal commence in the month following completion of the home.
FYI. You are not compelled to completely repay any loan you may currently have on the land before you start building, subject only on your ability to afford the combined repayments.
Q: Why do lenders who offer debtor finance only fund a certain percentage of invoices from a single customer, even though that customer may be a blue chip company, with very low risk of default? Is there a way to demonstrate that this risk is very low?
A: Hi Nathan. The industry standard is to fund the invoice to 80%, with the remainder paid to you, less fees, once the invoice is paid.
The acceptance of invoices is only made once the lender is satisfied that the debtor is good for the money.
Only a few lenders deal with single invoices with the majority wanting to control your complete debtor ledger.
Invoice funding is a great way to improve your cash flow without the need for you to put up security.
Wishing you well with your business..
Q: If the RBA doesn't move rates how can the banks. Would now be a good time to go for a fixed rate?
A: Hello Jacob. A large number of people ask the same question. In years past the banks towed the line in regard to rates, however they now thumb their collective noses at the RBA and move rates based on other issues such as raising capital to meet legislative changes. If you were cynical you might say that they only increase rates to improve profitability.
As for fixing rates now there is no perfect answer due to so many factors that may or may not come into play in the year ahead.
If the Aussie dollar continues to climb the RBA may cut rates in the months ahead. This might not impact on fixed rates.
A cautious approach is your best option. Possibly look at having an each way bet by fixing part of your loan and leaving some variable.
Certainly repaying debt as quickly as possible will stand you in good stead regardless of fluctuations in the economy.
Q: Are smsf a good investment?
A: Hi Craig. A SMSF is not an investment but rather a vehicle that allows people to manage their own superannuation.
Whether it is right for you depends on your financial literacy.
People setting up their own SMSF usually require help from professionals. Specifically a licensed financial planner.
Ask around in your circle of friends if any of them can recommend anyone for you to speak to.
Good advice costs. Poor advice is usually free. You decide.
Q: I am selling a business, is there an effective way to minimise capital gains tax?
A: Hi Peter. As you have a business I would expect that you have an accountant to look after the financial aspects of your business and handle your taxation requirements. I strongly recommend you speak to him / her to learn how to treat the CGT issue.
Q: I am 67.. Can I still change from my current lender to another lender and still have 20 years to payback the loan Thanks ?
A: Hi Christopher. You need only have to demonstrate how you will be able to maintain the repayments past the standard retirement age. If you will have the income then you can have a 20 year loan.
Q: I took out an investment loan in 2011 and soon after moved in 2012, I recently realized that my loan type did not change to home owner loan, so therefore I have been paying a higher interest rate, am I entitled to a rebate or refund for the past 4 years ?
A: Hello Theo. I think that is a great question to take up with your bank. Get them to show you the difference between the two rates for the period in question. Good luck.
Q: Should I stick to an interest only loan for an investment property?
A: Hi Adrien. No one size fits all answer to the question. If you are currently repaying a home loan (your owner occupied home) then I would advise you to leave the investment loan as I/O. Concentrate on paying your home loan off.
If you have paid off your own home than an alternative is to make use of an offset account attached to your investment loan. Put your surplus funds into the offset account as this saves you on the interest being charged.
Later, if you wish to purchase another investment property you can use the funds in the offset as a deposit.
A lot depends on what your future ambitions are in regard to building a property portfolio.
Good luck with that.
Q: When you get pre-approval from a lender, how long is this usually valid for?
A: I often get asked that question Bill. The maximum is 6 months, however most responsible lenders and brokers will confirm your situation/income/expenses before proceeding with a loan.
Consistency is the key here. Same job, address, income, expenses, personal situation.
No one wants to put a borrower in a position of financial hardship, and it would be crazy to put yourself in such a position.
We all have enough stresses in our lives without taking on additional and unnecessary financial stress.
I'm sure you understand what I am driving at.
Q: How do I establish a good credit rating?
A: Hi Alistair.
Your credit score is based on information like overdue debts, the number of loan applications you make, the type of credit you are seeking and the type of lenders you are approaching.
So the best way to improve your credit rating is to avoid making numerous loan applications when shopping around (don't let salespeople talk you into signing a loan application unless you are absolutely certain you will proceed with the purchase ), always pay your bills on time and always make loan payments on time.
You can also visit the Veda website for more information.
Q: Just about to sell house due to separation and owe money on a car, should I pay car off 28K and save the 400 a month or keep paying car and buy?
A: Hi Michael.
Not really sufficient information to enable me to answer your question.
Would need to know more about your situation.
Employment, income, dependants, home prices in your area and details of any other debts aside from the car.
Also, how much you will have following sale of matrimonial home.
Would you want to keep the house if possible?
Q: Can I use some of my super towards my deposit?
A: I gather you refer to using your super as a deposit to buy a home for yourself.
Unfortunately super legislation does not allow you to access your funds for such a purpose.
Q: We have two young kids under four years of age, looking to set them up in later on in life. We have about $5k per child with annual inputs from family about $100p year. What's the best set for them shares, gov bonds, or other?
A: Hi Anthony.
I quizzed my financial planner and he quoted $1200 to prepare a Statement of Advice.
I'm certain that whatever you decide will be ok.
Most planners will advise you to diversify into different investment strategies so having some money in cash and some in shares is an even bet.
Getting professional advice costs so that is the best path to follow.
Q: When my fixed rate loan period ends - do I just automatically switch back to variable with the same lender without having to bother with paperwork etc?
A: If this is what you want to happen then you can be reasonably certain it will.
Your lender will write to you about 4 weeks before the expiry date and provide you with details of the variable loan you will roll into.
When you get the letter call them and say you want a cheaper variable rate.
Check their website before making that call and see what they are offering NEW clients.
That is the rate you want and refuse to accept anything less.
If they don't value your business shop around yourself or go talk to a professional mortgage broker.
Q: I'm 52 years of age and have just over $200k in super with colonial on which I'm paying over $1000 pa advisor fees - anyone have a better suggestion?
A: Hi John.
Are these advisor fees or the fund's fees?
If fund fees they are not excessive at under 0.50%.
Are you self employed or working for salary/wages.
A lot of people are setting up Self managed super funds which may or may not be an option for you.
The cost of setting up a SMSF has to be considered plus annual compliance costs. The annual costs would likely be over the $1000 mark.
Are you happy with the returns on your super with Colonial. If so stay put.
Q: Do all lenders for a home loan require that your deposit be made up of savings or can it be part or full cash?
A: Hi Bill. Cash is fine however appreciate that lenders are obligated to report large cash transactions to Austrac.
Q: Why is it more difficult to attain a personal loan over a credit card?
A: They are different types of credit Archer.
Appreciate that a personal loan has a set term whereas a credit card is a form of continuous credit with lower monthly payments.
Q: We are investigating franchising our business and want to get some advice on which banks are more proactive in lending to franchises?
A: Hi Lisa. You will likely deal with one of the majors for this, but not at the local branch level. The majors have specialist Franchise divisions which you will need to approach. From experience, ANZ is one bank that has an appetite for this type of lending.
You will need a solid and professional business plan, including full cash flow projections before calling them. As you are proposing a new business venture don't be surprised if they want some solid security before lending you any money.
If you really believe in what you want to do then you will have to be strong.
Appreciate that they get a lot of people approaching them with similar requests so be prepared for a fight to get what you want.
Best of luck.
Q: Should I go for a fixed or variable interest rate on my homeloan?
A: Pru. Refer to my previous answer. The choice is never a simple black or white.
Q: How do I pick the best homeloan for me? What do I need to be looking out for?
A: Pru, the answer to this question comes down to your knowledge of home loans.
If you know what you want then make a list of your requirements and check that the loan you get ticks all of the boxes.
If you are new to this you could talk to your bank about getting a loan but appreciate that your bank can only provide you with their loans.
Alternatively, speak to an experienced finance professional who will help guide you to a lender which offers the things you are seeking in your loan.
These might include the interest rate and fees, interest type, i.e. fixed or variable or a combination, the ability to pay extra or provide an offset savings account plus a myriad of other features.
Note that today's lowest rate is a poor indicator to use when comparing loans.
Hope this helps.
Q: What are the best options for entering the home market with a low deposit without being locked into high interest fixed loans?
A: Hi Graham.
Difficult to answer your question without knowing how much deposit you actually have.
Depending on your income and your wife's income there are a number of potential options available.
At the moment fixed rates are quite good when compared to variable rates.
The advertised variable rates are mostly only given where a person has a 20% deposit, whereas the fixed rates apply for people with smaller deposits.
Possibly you need help putting a plan together that moves you towards your home ownership goal.
Q: My wife had a property in her name back in 1998 before the first home buyers grant. Sold out 10 mths later. I have never owned a property. Is there any way for us to enter the home market (even just on my own wage) to receive the first home buyers grant?
A: Hi Graham. There is a question on the application for the first home buyers grant that asks if you or your spouse or partner have ever received a grant.
You are required to answer this honestly.
Based on what you wrote you would not be entitled to the grant.
Q: What percentage do I need upfront for my first homeloan?
A: Hi Pru
Most lenders require borrowers to put in a 5% deposit.
In addition the other costs associated with a home purchase include stamp duty (there are some exemptions if you purchase a new property), legal costs, possible lender fees depending on the loan you choose plus you should budget for other miscellaneous costs ( pest and building reports, adjustments at settlement for council rstes and water rates etc.).
There are other options if you have a family member who is prepared act as guarantor.
Lastly it could be said that your deposit needs to be the difference between the cost of the home you wish to purchase and the loan that you can afford to repay. Always factor in an allowance that lets you make additional payments.
The bigger the deposit you can save the better off you will be in the future.
Q: How are the proposed negative gearing legislation changes likely to impact on existing and new investment properties?
A: Hi Stewart. From what little I've heard, I understand that the existing arrangements are to be grandfathered.
The possible new arrangement will mean that negative gearing will later apply to only brand new properties.
I guess it will all depend on who is in government.
Q: We have recently had some bad luck and have ended up falling behind in our mortgage. I've tried talking to our bank, but they don't seem very interested in coming to the party on some type of plan. Will I be able to re finance and consolidate other debts?
A: Hello Michelle.
Whilst not a consolation your story is a common one and fortunately there are lenders who can assist in situations where home owners have experienced some ill fortune.
The idea is that these specialist lenders assist you by consolidating your currnet home loan and other debts and you use the next 12 - 24 months getting back on your feet so that your loan can then be switched back again to a main stream lender.
I'd be happy to chat with you if you want further information.
Q: I was going to buy an investment apartment off the plan but my bank will only let me borrow 80%. Is there a way in which I could borrow 90%?
A: Hi Alison.
I could write a War and Peace length answer to your question but would like to better understand your situation first.
If you like, give me a call to discuss how to best progress this situation.
Q: What are the advantages of a self managed superannuation fund and is it easy to do?
A: Good morning Emma.
Having had my own SMSF now for 20 years I can tell you that doing so is not for everyone.
Without being negative I want to point out that there is a lot of responsibility imposed by the law on trustees of a SMSF.
Breaches cause fines and other penalties.
Managing your own SMSF can be very labour intensive.
Having said that there are people who can help you with that management..
Whilst there is no lower $ limit, it is not really practical to have a SMSF with assets below a minimum of $150k
It truly is a case of more is better.
I suggest you speak to people with hands on experience before taking the plunge.
Q: I am a small business owner. I need a cash injection of about 20k to expand my business? What is the best way of doing this, redraw on my home loan? Take out a new business loan? What are the various costs and implications? Thxs
A: Good morning Stephanie.
In addition to the answer already provided there is another finance alternative called debtor financing.
Whether you qualify for this depends on the type of business you have and if you run a debtors ledger.
With this type of funding you hand the invoices you have raised to the finance company who generally pay you 80% of the face value.
Debtors then pay the invoice value in the usual 30 days, not to you but to the finance company.
In turn, the finance company pays you the balance of the 20% less there cost (interest).
The main benefit from this form of funding is your ability to turn it on or off as required.
You are only paying for the money you are using.
It is always advantageous to investigate all of your options.
Q: I've been told I can use a deposit bond instead of cashing in some investments to buy a property, is that possible?
A: Hi Alison.
A deposit bond is a form of guarantee issued by an insurance company and takes the place of cash at the time of exchanging contracts.
At settlement the purchaser is required to pay over the full purchase price and the bond ceases to have any value.
Any purchaser who uses a bond to exchange a contract and who then subsequently fails to complete the purchase will still forfeit an amount of 10% of the purchase price.
The only difference is that the purchaser would pay that forfeited amount to the insurance company as the vendor would receive the value of the bond from the insurance company.
You need to determine if the income from your investment exceeds the cost of the bond.
Hope this provides a brief overview of a deposit bond.
Q: Do home loan lenders look more favourably at applicants with permanent roles over casual roles despite the income?
A: Hi Bill.
The short answer is yes.
The longer answer is dependent upon the length of time an applicant has had the casual job and what the job is.
If the applicant is in some form of professional role in an vital industry, i.e. a nurse, teacher etc then the casual nature of the position is less important.
Appreciate that a lender does not want to put a borrower in a situation of financial difficulty which they would be in if there was a reduction in their casual hours for example.
Hope this helps you to understand how the lenders view casual employment.
Q: If I'm buying my first property do I still have to pay mortgage insurance if I have less than 20% deposit?
A: Hi Jacob.
In addition to the answers already provided an alternate idea is to consider a family pledge loan.
This allows for borrowers to avoid the expense of mortgage insurance.
Quite simply the lender uses some of the equity in a relatives property (usually a parent) to get the lending ratio below 80%.
Hope this helps.
Q: How do interest only periods work, if I've been putting money into an offset account, when the interest only period is over do they just charge you principle and interest on the difference between what's in your offset account and the loan amount?
A: Hello Zoe.
It is taken that this question is about Interest Only periods of your investment loan.
At the end of the interest only period (typically between 5 - 15 years depending on the lender) your monthly repayments of principal and interest will be calculated based on the loan balance and the remaining loan term.
The money in the offset will not impact on that calculation.
Where you do benefit from having money in the offset is the actual monthly interest amount will be reduced meaning more of each month's payment goes to reducing the principal of the loan.
Hope this is a clear explanation for you.
Q: I'm thinking of buying a holiday house. Is there a way to make it a negatively geared investment property?
A: Hello Bethany.
A lot of my clients seek to have negatively geared investment property. I like to point out that depending on your income and therefore your marginal tax rate, such a strategy is not always beneficial.
For every $ of loss (income - expenses) you claim as a deduction on your tax return, you get back only a percentage equal to your marginal tax rate, i.e. 30 cents. Therefore you have really lost $0.70
With holiday homes the amount of deduction claimable is a percentage based on the number of weeks in the year that the property was available to be rented.
If you spend say 6 weeks holidaying in the property during a tax year then the maximum claim for expenses is 46/52.
Feel free to message me to assist clarifying any of this.
Q: Novated lease versus personal/car loans...what are the pros and cons and does one make more financial sense than the other?
A: Hi Daniela. This is not something with a black/white answer. Various issues that need addressing include your income and therefore your marginal tax rate, the mileage you will travel for business vs private use, the size (cylinders) of the vehicle. Your tax accountant is probably the best person to help you with such a question. If you need direction I can point you to someone who is qualified to answer your question.