If you are looking at expanding your property portfolio, we share some useful information on the best cities for property investors.

The Best Cities for Property Investors

The pandemic-induced residential property boom is slowing down.  Interest rates are on the rise. And it’s a difficult time to predict where and how housing prices will move in the months ahead.

So, what does all this mean for property investing in 2022? As investors should we tuck our dollars back into our savings accounts and wait for a better day?

Well the answer is – no. If you have a strategic property plan to achieve your financial goals, then any time is the right time to invest.

But once you decide that investing is right for you and your financial strategy, the next, very important step, is to decide where.

Let’s explore the best cities for property investors.

The Best Cities For Property Investors

The answer to this question is both totally unique to you and universal. After all, what makes an excellent investment property for you, could be different from your neighbour or friends or person on the street. Factors such as your budget, age, timeframe and investment objectives are directly relevant. But of course, there are objective considerations to factor in as well.

So before you start to look at potential locations, consider first the things that are unique to you:

  1. What are your goals and needs?
  2. What are potential renters and occupiers looking for?
  3. What does the market say?

What Are Your Goals and Needs?

First consider your goals from property investing. Are you looking for cash flow from the property? Capital growth? Or just a second home or somewhere to house family members while earning rental income?

The answer to these questions will give you some information about the best cities for you to purchase an investment property. After all, it doesn’t make much sense for you to buy a home in the Gold Coast for your mother-in-law to occupy, if your family lives in Sydney.

Talking to a financial advisor or investment loan specialist about the right move for you is also a great idea. This will help you to be fully informed and ready to go.

What Are Potential Renters Looking For?

According to SQM Research, national residential property rental vacancies fell to 1% in May, a 16-year low. In the smaller capitals of Brisbane, Perth, Adelaide, Canberra and Darwin, the vacancy is less than 1%.

For all of these potential renters, there has been an increased emphasis on liveability and lifestyle. Particularly after lockdowns triggered an assessment of work/life balance for so many.

So the next step, when you’re considering where to purchase an investment property,  understand whether it will appeal to your potential renters. To understand that you’ll have to take into account:

  • Security – is the property private, secure and safe for potential occupiers?
  • Lifestyle – what does the area offer in terms of good schools, shops, healthcare, outdoor recreation, and other amenities?
  • Transport – what are the commute and local roads like and is there access to reliable public transport?
  • Jobs – are there solid employment opportunities, or reliable high-speed internet for those able to work from home?

What Does the Market Say?

Now you’ve considered your own situation and what your potential tenants and occupiers are looking for. You should be in a better position to understand what you’re looking for in a city for investment purposes. Now it’s time to look at what the market says.

Canstar’s Rising Stars: Australia Property Market Report 2022 is a great place to start. It ranks 14 jurisdictions nationally – eight capital cities and six regional areas. It also lists 110 ‘Rising Star’ suburbs across Australia as the best cities for property investors for future growth potential.

Demographics of any location play a big role in it being an investment ‘hot spot’, so research is always important. Look for areas that have a proven history of strong capital growth – with many owner-occupiers – and where wages (and disposable income) continue to increase above average.

Cities to Watch in 2022

While the market is currently in flux, there are still a great many opportunities for property investing. Here are a few cities and regions to keep your eye on. And if the area you’re interested in isn’t mentioned, get in touch with us to talk through your property investing plans.

Queensland – Brisbane, Sunshine Coast and Gold Coast

By late 2021, Brisbane was recording a rapid rate of house price growth, due mostly to interstate pandemic migration, increased infrastructure spending and its success in navigating through the pandemic. The 2032 Olympics announcement has also seen increased investment interest across Brisbane, particularly the suburbs of Woolloongabba, Annerley and East Brisbane.

Despite the recent downturns Brisbane will likely remain one of the best performing property markets in Australia over the next few years. In fact, Westpac Bank recently updated its property forecasts, with Brisbane prices tipped to surge 20% between 2022 and 2023.

The lifestyle coasts to the north and south of Brisbane have also seen strong investment growth. They’re within an hour or two of Brisbane and are ideal for those seeking a sea-change while working from home or commuting.

Queensland – Toowoomba

Regionally, the Darling Downs city of Toowoomba has seen strong investment growth, thanks to increased spending on transport infrastructure. It’s only an hour from Brisbane, so is a great affordable lifestyle option while being close to capital city amenities.

New South Wales – Sydney

Residential areas close to the CBD will hold their value, particularly where the local amenities and lifestyle opportunities are high.

Suburbs such as Coogee, Kensington and Maroubra to the east and Neutral Bay on the northern side of the harbour are ones to watch.

When determining the best cities for property investors, it's always important to firstly consider what is best for you.
The best cities for property investors depends on factors such as security, lifestyle, transport and jobs.

Regional New South Wales

Regional areas such as Tamworth, the Hunter Valley, Wagga Wagga, Dubbo, Port Macquarie and Orange offer vibrant, growing economies and an affordable lifestyle. Many people who left regional areas earlier in their lives, are making the move back for the promise of a better life for themselves and their families.

The $15 billion investment in the Inland Rail link connecting Brisbane and Melbourne also means that regional areas along the route may see a surge in property value when the freight line is operational.

Victoria – Brimbank

Brimbank – which includes St Albans, Deer Park and the Sunshine suburbs – is enjoying an investment growth at the moment. It offers the promise of growth that infrastructure projects and urban renewal trends are driving. Houses are still relatively affordable as well.

South Australia – Adelaide & Onkaparinga

The South Australian economy has recovered well from the pandemic. Adelaide has historically shown a steady growth rate, across housing and units. While it’s never been a heavy hitter, with lifestyle choices being front and centre, Adelaide may finally have it’s time to shine, especially for savvy investors. In fact, CoreLogic figures published in December 2021 showed that Adelaide had the second fastest house price growth in the November quarter.

Onkaparinga is one to watch – an Adelaide seaside suburb that offers lifestyle and affordability all within striking distance of the capital city.

Talk to an expert

Investing in property is an experience unique to you and your circumstances, and the ‘perfect location’ varies from person to person. It doesn’t matter where you are on your property investment journey. Whether you’re a first time investor or savvy investor adding to your property portfolio, we can help you identify the best cities for property investors and support you every step of the way.

A free home loan health check could end up saving you tens of thousands of dollars

Why it’s important to do a home loan health check

There are a few things you should do every year – get a wellness check from your GP, get a check-up from your dentist and complete an annual home loan health check.

Of course, most of us don’t think of our home loan in those terms. (Instead, we tend to set and forget!) But a home loan review can help you to ensure that you’re getting the most from your money by helping you work out if the products, features, and interest rate of your current mortgage are meeting your needs and circumstances.

If it’s time to break up with your home loan for health reasons, you’ll be able to make an informed decision about which home loan is better for you.

Why Get a Home Loan Health Check

The short answer is that they can save you money! An annual home loan health check could save you tens of thousands of dollars on the total cost of your mortgage. But they also have a few other advantages too.

Improved Finance Fitness

Another benefit of a home loan health check is that you’re more likely to improve your overall financial fitness by getting on top of other loans and assessing your finances. Your review could lead to a mortgage that better suits your financial situation. This could be one that has more flexible repayment options. Or it could mean splitting your loan between fixed and variable interest, or consolidating other loans into your home loan.

How To Do a Home Loan Health Check

To complete a home loan health check, all you need are a few documents, a bit of time to review of your current mortgage and a little research about alternative home loan options. You can DIY these steps or speak to one of our lending specialists. Either way, you’ll need to consider a similar set of information.

A free home loan health check may help you save by getting a better rate
A free home loan health check can save you thousands by getting a better home loan rate and loan features

1. Know Your Current Mortgage Interest Rate

Knowing your current mortgage interest rate is key, as it will potentially be the biggest deciding factor in whether your home loan is healthy or not. If you’re unhappy with your current rate, or if it’s causing your own health to suffer through stress, it’s time to switch to a loan with a lower interest rate.

If your current home loan repayments are manageable and you feel good about them, you may still benefit from switching to a home loan with a more competitive interest rate.

2. Determine If Your Fixed Term Is Coming to an End

If your home loan has a fixed term interest rate – is the term coming to an end? You would most likely then be automatically rolled over to your loan’s set variable rate – which may be higher than market rate. It’s time to review your home loan health and know what other options you have.

3. Are You Paying ‘Unnecessary’ Fees and Charges?

Home loans come with fees and charges for a range of things. Assess whether you’re paying fees and charges for any services, features or products you’re not using. Or whether you’re just paying more fees than you might with another product. Look for home loans with low or even no fees – you could save hundreds of dollars each year.

Be aware that if you do switch loans, there could be a fee for early discharge of your loan.

4. Know Your Repayment Capacity

Looking at your current income and financial commitments, can you increase your home loan repayments or make additional repayment amounts? Can you link an offset account to your mortgage? Any additional payments you make can pay off your home loan more quickly, potentially saving you thousands in interest.

5. What’s your current equity?

How much equity do you have in your home, and has your home increased in value? You may be able to leverage the equity in your home to finance a renovation – or even purchase an investment property. But if you don’t check, you won’t know!

6. Be Honest With Yourself About Your Circumstances

Any significant change in your personal circumstances can impact your home loan health. Marriage, children, divorce or a change in your employment status can all impact your repayment capacity. They might also drive the need for different features in your home loan.

7. Are You Happy With Your Current Lending Institution?

It’s OK to take a close look at your current lending institution and consider your options. If your home loan health check has made you realise you have no particular relationship with your lender, your loan is missing features that are important to you or you’re unhappy with your interest rate – it could be time to think about refinancing with a different lender.

Speak to an Expert About Your Home Loan Health Check

If you feel like it’s time for a home loan health check, we’re ready to help. Our expert team can talk you through a DIY health check – or do it for you. We’re standing ready to do the legwork needed to review your current mortgage and compare competitive alternatives.

Give us a call today at Lending Loop. We’re happy to help you with your home loan health check!

When is it time to consider should I refinance my loan?

Should I refinance my home loan?

Should I refinance my home loan or not? That is the burning question right now in mortgage holders’ minds.

And it’s hardly surprising when fixed-rate loans have already been on the rise for a year while variable loans are now increasing fast as well, in the wake of the Reserve Bank of Australia’s cash rate hike to 0.85% this month.

Amongst a wealth of top-notch refinancing advice we can offer, here are a few extra points to consider.

1.   Do cashback offers really give you cash back?

Aiming to keep further rate hike fears down, lenders are reaching out to mortgage holders with special offers and deals.

A good example of such deals is cashback offers which essentially give refinancers a quick cash splash, often in the form of a gift card or similar, if they choose to take up a refinanced loan with that lender.

Sounds great, right – but is it?

Tempting as these deals may be, it’s important to look at all the aspects of your potential new lender and loan, particularly what happens if and when their initial deal ends.

And with cashback offers in particular, don’t be surprised if, beyond the initial cash, you find high interest rates and other drawbacks, including agreeing to certain terms and conditions.

On the other hand, if you’re short on cash – and who isn’t, these days, particularly when you’ve just bought a home – cashback offers can be helpful.

Just remember that cashback offers may only be available for a certain period, amount, type of property, or loan-to-value ratio (LVR).

2. Short-term benefits or long-term gains?

Again, we recommend that you don’t get caught up in the rush and panic of rising interest rates combined with the frenzied property market that is just only beginning to ease.

Remember that if you are thinking, should I refinance my home loan, refinancing should help you save and not vice versa.

The actual financial cost of both short and long-term benefits with a refinanced loan should far outweigh that of your current mortgage.

So, apart from special deals, does your refinancing opportunity still feature excellent interest rates with reasonable fees, charges and other benefits?

Would you jump at it if didn’t come with a great offer?

Of course, none of this means you shouldn’t talk to lenders offering cashback offers, frequent flyer points and other benefits.

Be honest with them and tell them what you’d like to see in a refinanced loan from them.

Perhaps tell them that while their short-term benefits are great (it always pays to be polite), you’d prefer they take the cost of these benefits out of your mortgage debt or give it back to you in the form of an interest rate discount.

If nothing else, you’ll get a good idea of how easy it is to work with this lender.

Now is the time to ask, should I refinance my home loan? Especially with the RBA cash rate and interest rate rises.
Should I refinance my home loan? If you want to save money with a better interest rate and repay your home loan sooner this could be the option for you.

3. Should I stick with my current lender?

An excellent question!

You may end up staying with the lender you know and pushing for better benefits from them rather than refinancing.

It’s certainly worthwhile talking with your current lender before refinancing, especially if you’ve had a good relationship with them for awhile.

With rates now changing on almost a daily basis, your lender may have much better opportunities on offer for you and never more so than when you tell them you’re thinking of refinancing.

If not, there are spades of other lenders in the sea to choose from.

4. How do I know if I’ve got a good deal?

Yet another good question and much of the answer depends on your personal and financial situation and your mortgage priorities.

Research, explore and make some calls; ask friends, family members and industry experts for recommendations and advice; and spend plenty of time with your calculator and budget before you make your final decision.

NB: don’t forget you may have to pay exit fees to your current lender and application and valuation fees with your new lender.

But if you’ve got a good deal, these fees should soon be wiped out by all the great savings you’re enjoying.

Refinance My Home Loan. We Can Help.

Of course, if you’re wondering should I refinance my home loan, the best people to contact is our Lending Loop team.

We can help you get the hang of the refinancing game including sorting out figures and leading you through the maze of cashback offers and other tempting deals.

We’ve got more than 40 of Australia’s biggest banks and specialist lenders at our fingertips and best of all, we’re free!

Investors and first-home buyers – we’ve got your financial back too so give us a call today at Lending Loop.

 

Not sure how to build your property portfolio? We offer practical tips and information

How to Build Your Property Portfolio

If you’re keen to get more than just a foot in the property market, investment is key. Read on for our best tips on how to build your property portfolio.

Australians have had a long love affair with property. The drive for home ownership seems to be part of our DNA, and many business-minded Australians are keen to develop their financial wealth by building a property portfolio.

But is it really possible?

Yes, it is. And while it’s quite a straightforward process, it’s not necessarily an easy one. However, with the right understanding and approach, it’s very possible to build a robust property portfolio in Australia.

What is a property portfolio?

First things first: what is a property portfolio? Put very simply, it is a collection of properties owned by either an individual or business. These properties can be residential, commercial, mixed-use or a combination of any of these.

In most situations, you will live in one property and own several more which earn rental monies for you. This could be in the form of long-term rentals, holiday homes or even commercial properties.

When it comes to how to build your property portfolio, don’t forget to think outside the box. Car parks, for example, can be an excellent investment – as are vacant lots.

What are the benefits of a property portfolio?

  • Diversification. Owning multiple properties will help to diversify your investments and spread out your financial risk.
  • Passive income. The passive income gained from renting out a property will of course be amplified with several properties in your portfolio.
  • Capital growth. Regardless of whether your properties are generating a positive cash flow (“positive gearing”) or a negative cash flow (“negative gearing”), the ultimate aim is likely to be building capital growth by generating equity in the properties.
  • Financial security. In general, a property portfolio can be a great long-term strategy for offering financial security in your future, particularly after retirement.
We offer helpful information on how to build your property portfolio.
When you know how to build your property portfolio you can benefit from diversification, passive income, capital growth and financial security.

How to build your property portfolio

Building your property portfolio takes commitment and sometimes sacrifice of the short-term for the long-term goals. But the results can lead to exponential financial growth. When it comes to how to build your property portfolio, here are the steps to take:

1. Assess your current situation

You may wish to conduct a Home Loan Health Check to see if there’s a way you can tweak or switch your current home loan/s to free up additional funds for more property purchases. If you’re just starting out on your portfolio-building journey, make sure you check out our tips on how to buy a second home. The equity available in your current property/ies may just be the stepping stone you need to build your portfolio.

2. Get clear on your financial goals and investment strategy

While ultimately most investors will want a balanced portfolio, figuring out your initial plan is crucial to help guide your purchasing decisions. For example, you may choose to focus on a positively-geared property (or one that generates more income than it costs in loan repayments and fees) that will generate a solid rental income as your first investment. Work out what best suits your individual circumstances, and go from there.

3. Know your risks

Of course any purchase or investment comes with inherent risks, and a property portfolio is no exception. Understand the costs involved, as well as any unexpected challenges such as house maintenance costs and time between tenants. Be sure to consult financial professionals and only purchase property you can reasonably afford.

4. Aim for balance

Creating a balanced portfolio can be a clever way to diversify your property investments. By this, we mean selecting properties that offer high rental yields, as well those that are in a good position to generate great capital growth. Choosing properties in a variety of different locations can also help create balance and reduce your risk.

5. Brainstorm ways to generate even more money

Your investment properties might also present extra potential to make even more money. Consider getting creative by adding a granny flat, converting into a duplex or renovating the property to attract higher rental yields and add equity to the property.

6. Stay involved

Building a property portfolio isn’t necessarily a set-and-forget investment. While an excellent property manager can do most of the heavy lifting for you, it’s important to regularly reassess your own financial situation. As part of that, you’ll also want to consider your loan features to understand if they are still serving you well. And you should frequently review your properties to see if your rental rates should be updated or raised.

7. Speak to an Expert

When it comes to how to build your property portfolio, it pays to speak to the experts. At Lending Loop, our team of experienced professionals can share their knowledge and wisdom to help advise you on your best next steps. Give us a call today at Lending Loop, and let’s see how we can help!

Tap into home equity for renovations

Access The Equity In Your Home For Renovating

If you’re like many Australians, you might be considering a home renovation. In the last year, Australians spent $1 billion dollars on renovations to their homes. Even pre-Covid, the average monthly amount spent on home renovations in Queensland alone was $255 million.

Renovating is a fantastic option. It lets your home grow and change as your lifestyle and family does. Maybe you’ve had another child, and want to build another storey to accommodate extra bedrooms and a second living space. Or maybe – like many of us – you’re primarily working from home now, and you need an office to suit your new situation.

Whatever the reason, when you’re ready to renovate, you’ll need the funds to do that.  Access the equity in your home. It’s  a smart way to get those funds.

What is Home Equity

But what is home equity? Home equity is just the difference between your property’s market value and the balance of your mortgage. So, if your home is mortgage-free then it’s the full value of the property. But even if you’ve only owned your home for a few years, you’ll likely have built up a good amount of equity in the home. And this can be accessed for your own needs – such as renovating.

Read more: Equity home loans and how they can help you

Access your home's equity to refinance
Accessing the equity in your home can help you get those renovations done.

How to Calculate the Equity in Your Home

Before you can determine whether you should access the equity in your home, you need to figure out how much you have available for use. And that means first calculating the equity in your home.

Your Home Loan Equity Calculation

  1. First check your records to confirm how much of a mortgage there is on your property.
  2. Next, find the estimated market value of your home. The best way to do this is by getting a real estate agent valuation. The agent will use the particulars of your home and comparable sales in the area to find an appropriate estimated value.
  3. Finally, subtract your mortgage from the estimated value of the home to get the estimated equity in your home.

Example: Your mortgage is $500,000. A real estate valuation shows the value at $900,000. You have $200,000 of estimated equity in your home.

A Note About Accessible Equity

Just because you have $200,000 worth of equity in your home, doesn’t mean that it will all be accessible for renovations. Your ability to service the additional amounts – how much additional repayments you can manage based on your income and expenses – will be taken into consideration as well. Our experts can help you determine how much this will be for you in your specific circumstances.

How to Access the Equity in Your Home

Once you’ve determined how much you have available in terms of home equity, you’ll want to know how to access that equity for your renovation.

Step 1: Work Out a Dollar Amount

Work out the amount of money you need for your renovation project. If you want to use your equity to fund it, ensure that it falls within your accessible equity.

Step 2: Review Your Loan Options

Now is the time to start researching your home loan options. Our Lending Loop experts have access to a vast array of lenders, both bank and non-bank options, with hundreds of different loan products. We can ensure you know what all your options are and help you determine the best one for you.

Step 3: Work Out Costs and Fees

There will be costs and fees associated with each loan product. For example, if you switch from one lender to another, you may need to pay a break fee. And if you access more than 80% of your home loans equity, you may need to pay Lender’s Mortgage Insurance. We can help you find the most cost-effective options for your specific situation.

Step 4: Complete a Loan Application

Once you’ve determined the lender and the loan product you want, as well as the amount of equity you want to access, you will need to complete a loan application. Your Lending Loop broker can help you do that quickly and easily. And it won’t be long until you’re on your way to your ‘new home’.

Speak to an expert

Once you understand how to access the equity in your home, and you’re ready to do so, we’re ready to help. Our expert team can talk to you about how to get refinancing ready, and do the legwork involved in comparing home loans and any relevant fees.

Give us a call today at Lending Loop, and let’s see how we can help!

Have you considered refinancing your home loan?

A Guide To Refinancing A Home Loan

Considering refinancing? Here’s a guide to refinancing a home loan.

Refinancing is likely something you’ve heard about before. But you may not know precisely what it is – or, more importantly, how it could make a difference to your financial situation. But refinancing is an incredibly useful tool, especially when life changes.

There may be interest rate rises, you may be getting married or you may have a new job. Whatever the change, there may be a loan that’s better suited to your life now. Refinancing is a fantastic tool to help.

So, let’s learn what refinancing is and how it can help you.

What is refinancing a home loan

In the simplest terms, refinancing a home loan means moving your loan from one lending institution to another, or from one home loan product to another, after your mortgage is in place.

The process is also very straightforward. Once you’ve found the loan that suits you, you simply need to fill in your application forms, and the lender will take it from there. They will provide you with new loan documents to sign and will take care of organising the exchange of funds with your old lender.

When you refinance, your new lender considers it a whole new loan.

Reasons for refinancing a home loan

There are many reasons why you may consider refinancing a home loan. The terms of a new loan might be more financially attractive than your existing mortgage. Or it may have a better interest rate or more flexible features.

The most common reasons are:

  • to reduce your home loan interest rate.
  • to get features that your current home loan may be missing (such as an offset account).
  • because you are unhappy with your current lending institution.
  • to consolidate debt.
  • to fund a big expense such as a renovation, car purchase or travel.

Interest rate or home loan features

A lower interest rate on your home loan could save you thousands in interest repayments over the life of your home loan. The Australian Competition and Consumer Commission (ACCC) found that borrowers could save more than $17,000 in interest over the life of a home loan.

A lower interest rate could also reduce your home loan repayment amount.

Refinancing for a new home loan feature (such as flexible repayment options, redraw facilities or an offset account) is another reason why you may consider refinancing.

Consolidate debt

Refinancing your home loan to consolidate debt (such as a car loan and credit cards) into your mortgage is a great option. Mortgages offer comparatively low interest rates. So consolidating your loans in this way will reduce your monthly repayments and cut down the time and energy spent on managing multiple loans.

Be aware, however, that consolidating your debts through your mortgage can ultimately extend the term of your home loan. And that means you could be paying more interest over a longer period.

Use the equity in your home for lifestyle reasons

Equity is the dollar amount of ownership you have in a property minus the amount owed to the lending institution. For example, if your home is worth $800,000 and the balance of your home loan is $500,000, your equity in your property is $300,000.

You may wish to refinance to access the equity in your home loan. Often people use these equity funds for things like maintaining or renovating your home, as a deposit for another property, investing in shares, buying a new car or travel.

Why it's worthwhile refinancing your home loan
Refinancing could save more than $17,000 in interest over the life of a home loan.

Two Types of Refinancing

There are two main types of home loan refinancing:

  • Internal refinance, where you refinance your home loan with your existing lender.
  • External refinance, where you move your home loan to another lending institution.

You may choose to refinance with your existing lender (internal refinance) for many reasons. Perhaps they’re offering a new, better deal that you’d like to take advantage of. Perhaps your existing loan has a lot of bells and whistles you aren’t accessing or simply don’t need. Whatever the reasons, refinancing with your current lender can save you fees associated with changing lenders.

If you have a home loan that’s a few years old, talk to your current lending institution to see if there’s a better home loan product more suitable for your situation.

If you have found a better loan product from another lender, or are simply unhappy with your current lender for any reason, then you can consider external refinance as well. Take a look around and see what’s on offer in the current market.

Who Should Refinance

This is a question only you can answer, as your own situation is unique. What we can say though is that refinancing a home loan could be beneficial if you believe you are paying too much interest on your existing home loan, or if your personal circumstances have changed.

If your income has changed, your family situation has changed, such as through a new baby or divorce, you have recently retired or been made redundant – all of these are relevant reasons to.

Costs Associated With Refinancing a Home Loan

When comparing home loans for refinancing, it’s important to consider any costs involved. Some of these could include:

  • Exit fee

An exit fee may be charged by your existing home loan lender, if you have an older home loan taken out prior to 1 July 2011 (home loan exit fees on new home loans were banned under the Gillard government over ten years ago).

  • Application or establishment fee

Application or establishment fee may be charged by some lending institutions to cover the costs of setting up your home loan.

  • Valuation fee

Your new lender may require a valuation of your property before proceeding to refinance. The fee for this can depend on the particular lending institution and where your property is located. Fees tend to be higher in rural areas compared to urban areas. Many lending institutions don’t charge a valuation fee at all, so it’s best to find out.

How Long Does the Refinancing Process Take?

From start to finish, refinancing a home loan can take anywhere from a couple of days to a couple of months. In most cases, the process is completed within four to eight weeks. As the length of time can vary depending on the complexity of your home loan and personal circumstances, it’s important to allow more time than you think you will need.

It can help to have all your documentation ready to go, and also to seek pre-approval with the new lending institution.

Refinancing Checklist

There are many reasons to refinance, and a few steps involved and things to be aware of. Our mini checklist is to:

  1. Gather your paperwork. This is similar to what was required for your home loan in the first place, and includes proof of income, your current home loan statement, living expenses, current debts and assets.
  2. Seek pre-approval with the new lending institution.
  3. Work out the refinancing costs vs benefits. Write up a pros and cons list and work through it.
  4. Be clear on your own personal reasons for refinancing.

We’ve shared our top tips to consider when refinancing in an earlier post.

Speak to an Expert

When you’re ready to work through your refinancing checklist, we’re ready to help. Our expert team can talk to you about how to get refinancing ready, and do the legwork involved in comparing home loans and any relevant fees.

Give us a call today at Lending Loop, and let’s see how we can help!

Have you done a home loan health check?

Home loan health checks and why they’re important

So, you’ve bought your first or 10th home and all’s right with the world and your mortgage – or is it?

We don’t want to burst your property bubble but it does (literally) pay to regularly check the health of your home loan.

We know, we know – you’ve spent months researching a property to purchase, you’ve finally done bought it, and now we’re asking you to go back and recheck everything?

Nope, fear not!

Home loan checks come further down the track when yes, you’ve got nice and comfy and would actually prefer to “set and forget” your mortgage deets.

Read on to find out more.

Why should I do home loan health checks?

Easy!

It could save you money.

New and competitive lenders and mortgage deals are constantly occurring, meaning more opportunities for you to enjoy more cash in your pocket.

Then there are rising interest rate changes, which are now hiking upwards after a 10-year fall, while perhaps most importantly right now, a new prime minister and new political party are leading the country.

All of these points, including changes to your familial or other significant details, can have a big effect on your mortgage.

Finally, if you’re on a fixed-rate or guarantor loan  or are considering an equity loan,  you may essentially be forced to reconsider your mortgage choices even if you’re not up for it.

What questions should I ask about my home loan?

Excellent question!

Both first-home buyers and owner-occupier home owners, as well as investors, should ask themselves the following:

  • What home loan features, fees and charges work for me and my circumstances?
  • What home loan features, fees and charges would I like to change?

Based on your position and perspective, here are a few basic points to consider, some of which are helpful just to ask yourself first before talking to a lender.

I’m a first-home buyer

  • Have I been able to easily repay my mortgage including interest rates and fees?
  • If not, do I need to make changes to my overall budget?
  • In day-to-day reality, does my loan give me the features I need?
  • If not, what features can I do without?
  • Are my current interest rates, fees and charges reasonable, compared to what’s on offer elsewhere?
  • Am I happy with my lender’s service and if not, what needs to change?
  • Has my property’s value increased or decreased and if so, what is its loan-to-value ratio (LVR)?

And finally, these personal questions aren’t crucial, but for property newbies, they can be highly helpful.

  • What have I achieved and learned financially, and actually, since buying my property?
  • What are my real estate goals and ambitions for the next 12-24 months?
Should I do a home loan health check?
As a first home owner it’s important to ask what home loan features, fees and charges work for you and your circumstances.

I’m an owner-occupier home owner

  • Can I afford higher repayments and if so, is this possible with my current loan and lender?
  • Should I (and can I) switch from variable to fixed-rates or vice versa, or could a split loan suit me?
  • Should I (and can I) refinance my loan?
  • Should I (and can I) consolidate my loan with others?
  • What are my plans for my property in the next 12-24 months, especially renovations and changes?
  • Has my property’s value increased or decreased and if so, what is its loan-to-value ratio (LVR)?

I’m an investor

  • What is the current capital growth and rental income of my property, and has it increased or decreased recently?
  • Have the property, its suburb and surrounding areas changed markedly in recent years and if so, how will this affect the above point?
  • Does the property need major renovations or changes in the next 12-24 months?
  • How will all these points affect my home loan?

You may also want to consider the following points:

  • Are my tenants easy to deal or not?
  • Are my tenants leaving the property in the short term?
  • Am I satisfied with my property manager and their fees and charges?

How often should I do home loan health checks?

This is another un-easy question!

But as a general rule of thumb – and especially with so many real estate and overall national changes occurring at the moment – we suggest a short, home health look-see every 12 months.

At the very least, you should do home loan health checks every five years.

As we mentioned earlier, you may have to do this anyway if your fixed-rate or a similar, one-off mortgage deal expires.

In the meantime, definitely keep an eye on the Reserve Bank of Australia’s (RBA)’s monthly cash rate announcements, which occur on the first Tuesday of every month, bar January.

We’re here to help

Of course, if all of the above seems too much and you’d far prefer to relax with a coffee or a cocktail, your friendly Lending Loop team can help.

We’re smart, we’re real estate passionate and we love finances so whether you’re a first-home buyer or savvy property investor, no job is too big or too small for us!

We’ve got more than 40 of Australia’s biggest banks and specialist lenders at our fingertips (so to speak).

So give us a call today at Lending Loop.

Home loan jargon explained

Home Loan Jargon Explained

Whether you’re new to the home loan scene or a seasoned mortgagor, home loan jargon can be a little bit confronting. But understanding the basic jargon isn’t that difficult, and can help you to feel (and be) confident that you know what’s being said and, most importantly, what it means for you!

We’ve created a home loan jargon guide to walk you through the most used home loan terms and their meanings. To keep it simple, we’ve broken them down (alphabetically) into time periods:

1. Pre-Loan Approval

2. Loan Approval

3. Post Loan Approval

Home Loan Jargon Guide

Pre-Loan Approval

Before you’re approved for your loan it’s important to understand what all this jargon means. You might be new to the lending game, and you’ll need to understand exactly what your potential lending institution means when it uses certain terms.

Application fee

This is the one-off fee charged by some lending institutions to cover the costs of setting up your home loan.

Borrowing capacity

Your borrowing capacity is how much a lending institution is prepared to lend to you, based on a range of financial factors, such as your income, living expenses and credit record. These factors support your capacity to repay the home loan.

Cash rate

The cash rate is the interest rate on unsecured overnight loans between banks. It is set by the Reserve Bank of Australia. The cash rate recently increased for the first time in over a decade.

Conditional pre-approval

Conditional pre-approval is when a lending institution agrees to lend you a specified amount of money to purchase a property. There is not yet a formal, legally binding approval for a home loan, but it helps you to refine your property search to be within your price range.

Home loan jargon explained
Conditional pre-approval helps refine your property search to be within your price range.

Establishment free

This is another name for an application fee, which is defined above.

Fixed interest rate

A fixed interest rate home loan is where the interest rate will not change for the period specified in the home loan, usually between one and five years. The fixed rate will generally revert to a variable rate loan (defined below) at the end of the set period of time.

Interest

The interest is the rate that is charged to you daily by your lending institution. Your interest rate can be fixed or variable.

Lending institution

In terms of home loan jargon, a lending institution is a financial institution able to lend you money to purchase a property and receive repayments for the loan. These include banks, building societies and credit unions.

Principal

The principal is the amount you borrow under your home loan excluding any fees, charges or interest payments, for example $500, 000.

Repayment

Your minimum repayment, mortgage repayment or home loan repayment usually mean the same thing. It’s the agreed amount, set by the lending institution, that you are required to pay each week, fortnight or month.

Security

In a mortgage jargon context, security is the asset that secures your home loan. The security is therefore the property that you will purchase with your home loan funds. If you default on your mortgage repayments, the lending institution has a legal right to sell the asset that secures the loan (your home) and recover their money.

Settlement

Settlement is when the lending institution formally advances  money owed under the contract of sale to the seller. The seller then provides the certificate of title to the lending institution. This  is updated to include you as the new homeowner (mortgagor) and lending institution (mortgagee).

The average settlement period is four to six weeks.

Home loan jargon explained
Settlement is when the certificate of title is updated to include you as the new homeowner.

Variable interest rate

A variable interest rate is subject to change (variation) over time. Lending institutions may raise or lower their home loan interest rates in response to changes to the cash rate or due to the cost of doing business. With a variable interest rate, if rates go down, you will experience lower home loan repayments. If rates increase, it’s likely your repayments will also.

Loan Approval

Your offer to purchase a property has been accepted, and settlement has occurred. Here are another few mortgage jargon terms you may come across.

Certificate of title

A certificate of title is the formal record of a property, like a birth or marriage certificate. It details the property’s identity, such as its ‘lot’ and ‘plan’ number. It also indicates whether the property is security for a home loan. Your lending institution holds the certificate of title to your home as security for the loan.

Default

In home loan jargon, a default is when a repayment is missed for whatever reason. And you must not ignore a default. The mortgage may have penalty fees for defaults, and these can be recorded on your credit record.

Equity

Equity is the dollar amount of ownership you have in a property minus amounts owed to the lender. For example, if your home is worth $800,000 and the balance of your home loan is $500,000, your equity in your property is $300,000.

Mortgage

Lenders use the legal term mortgage to describe a home (or other property) loan. Under the terms of a mortgage, the property is used as security for the amount borrowed. This is what gives the mortgagee (the lending institution) the right to sell the property.

Mortgagee

The mortgagee is the lending institution providing you with a home loan. They ‘hold the mortgage’ over your home and will have the right to recoup their investment should you default on your home loan repayments.

Mortgagor

The mortgagor is someone who takes out a home loan (you).

Post Loan Approval

Discharge

This is the golden moment all homeowners live to see. Discharging your mortgage means you have made your final home loan repayment and you own your home debt-free. A discharge can also occur if you sell your home or refinance your existing loan.

Redraw facility

A redraw facility is a mortgage feature of some loans. Under it,  if you have made additional home loan repayments, you can access those funds down the track. Redraw facilities are more common in variable interest rate loans, rather than in fixed rate loans.

Refinance

A refinance occurs when your change from one lending institution to another, or from one product to another, after your mortgage is in place. The terms of a new loan might be more financially attractive than your existing mortgage. Or it may have a better interest rate or more flexible features.

Speak to an Expert

We created our home loan jargon guide to give you a head start in understanding your home loan. Whether you’re a first home buyer, refinancing or investing, our expert team can talk you through all these mortgage jargon terms and much more.

Give us a call today at Lending Loop, and let’s see how we can help!

 

are-you-overpaying-on-your-home-loan

Are You Overpaying On Your Home Loan?

In February 2022, the total value of owner-occupier home loans in Australia was $16.91 billion. And the average home loan was nearly $600,000. That’s a lot of dollars. And a lot of financial obligation for most Australian homeowners.

So if you’re one of those homeowners (and you probably are if you’re reading this) it just makes sense to ensure you are making the right choice around home loan payments, to avoid paying excess interest or penalties and move ever-closer to being debt-free.

In this article, we’ll talk through our tips to make sure you are in the home loan repayment sweet spot and are not unnecessarily overpaying your mortgage.

Are you overpaying on your home loan?

Sometimes we get in a loan paying habit, and we forget to really check our numbers. But over time things can change – whether it’s interest rate rises, a fixed rate loan rolling over into a variable, new options for refinancing or something else entirely. So, when it comes to determining whether you might be making mortgage overpayments, here are a few signs to watch out for.

You Have a Fixed Rate Loan

If you have a fixed rate loan, it’s a good idea to revisit your rates at least annually. Fixed rate home loans usually come in terms of one to five years, but often this time can slip by unnoticed. When your fixed rate term expires, you will automatically revert to a variable rate, and this rate can sometimes be higher than what is currently available even with the same lender.

If you don’t follow up on those interest rates you could be paying more than you need to on your home loan.

There’s Been an Interest Rate Rise

When there’s been an interest rate rise, the interest rate on your home loan will rise as well. Most of us are aware when this happens, but occasionally an interest rate rise will slip past. When there has been an interest rate increase it will naturally impact the amount of interest that you’ll pay on your home loan. It’s a good idea to follow these changes closely so that you can investigate any opportunities for rate reductions if you do find your rate has risen.

mortgage-overpayment
It’s a good idea to follow rate rises closely to avoid mortgage overpayment

You Haven’t Investigated Refinancing

If you haven’t refinanced your home loan in a few years, there’s a good chance you’re making mortgage overpayments. This is because home loan interest rates fluctuate, and even a minor reduction can save you thousands over the life of your loan.

It’s a good idea to schedule in an annual review of your mortgage with a view to refinancing regardless of interest rate rises or other factors. We think of this as good loan hygiene and it will ensure you’re not making any unnecessary overpayments.

You Haven’t Explored Competitive Interest Rates

Many lenders offer special (and very competitive) interest rates. Sometimes it’s for certain types of loans, sometimes for new borrowers and sometimes they’re just seasonal. It’s a good idea to periodically check to make sure your current interest rate is on par with what other lenders are offering. And you might not need to do a full refinance to lower your rate. Get in touch with your lender and ask for the same competitive rate that other lenders are offering, or that is on offer to new customers.

Are You Paying For Unnecessary Bells and Whistles

Many loans are packed with secondary features, such as split interest rate, no or low fees, a redraw facility, an offset account, flexible repayments and a repayment holiday. But these often come as part and parcel of a higher interest rate. It’s worth your while to make sure you aren’t making mortgage overpayments because your home loan is packed full of features you aren’t using.

Get in touch with your lender to make sure your mortgage features are exactly what you need for your own circumstances. There’s no need to pay for features you don’t need, such as fees for offset or redraw facilities you aren’t using.

Speak to an Expert

If you really aren’t certain whether you are overpaying on your home loan or are confused by what the recent interest rate rise will mean for your home loan, get in touch with us. At Lending Loop, our experts can help you find the best home loan for your situation. We compare loans from more than 40 lenders to help find the best deal for you, to ensure you are on track to achieving your financial goals.

Give us a call today at Lending Loop, and let’s see how we can help!

fixed-rate-home-loans-are-they-right-for-me

Fixed rate home loans: are they right for me?

Deciding whether a fixed rate home loan suits your familial and financial situation can be tricky.

However, last week’s Reserve Bank of Australia (RBA) decision to increase the cash rate for the first time in a decade makes it an ideal time to determine what home loan road you’re going to take – or to reconsider a decision you’ve already made.

The cash rate is now set at 0.35% but you’ve got a few weeks up our sleeve before the central bank’s next monthly cash rate announcement on Tuesday, June 7.

So let’s start with the basics of fixed-rate loans and go from there.

Fixed rate home loans but not flexible

As the name suggests, the interest rate on fixed-rate home loans won’t change until the loan period expires, unlike variable rate home loans.

This is the main reason why homeowners love fixed-rate loans as they enable you to always know in advance how much your mortgage repayments will be (instead of waiting in dread for the RBA’s cash rate announcements and then figuring out what’s happening with your lender’s interest rates).

At the same time, if cash rates drop – as they have done for 10 years and particularly in the last two years – you can’t enjoy the benefits of this downscale.

How long does my fixed rate home loan remain fixed?

It all depends on your lender but fixed-rate home loans are generally set for several years, with popular periods being two, three or five years.

After this period ends, watch out for changes.

What happens when my fixed-rate home loan period ends?

Firstly, prepare well in advance for the expiration of your fixed-rate period.

Consider your budget and how much extra (or less, cross fingers!) you’ll pay in mortgage repayments.

You may want to refinance your loan with the same or another lender.

If you like, you can choose to “refix” your fixed-rate loan too.

Either way, this is a great time to consider your short and long-term mortgage future.

What if I change my mind about my fixed-rate decision?

You can but it ain’t financially simple or beneficial because it’s not just interest rates that are fixed with fixed-rate loans.

These loans are also fixed in that you can’t end your loan early for whatever reason.

If you do, your lender will charge you with high costs, known as “break fees“.

This includes whether you decide to repay higher sums than you and your lender originally agreed to.

What are the benefits and disadvantages of fixed-rate loans?

Make no mistake – as with most decisions in this world, there are good and bad sides to the fixed-rate story.

Benefits:

  • Your interest rate will never change during your loan period, regardless of RBA cash rate verdicts
  • This unchangeability ensures you can enjoy home loan stability
  • You can plan your budget well in advance

Risks:

  • Fewer flexible benefits such as offset accounts and redraw facilities (depending on your lender)
  • Very high “break cost” fees for larger repayments or breaking a loan contract, unlike variable rate loans
    NB: Google “how to calculate break costs” for different ways on how to do this

Should I lock into a fixed-rate loan after the RBA’s cash rate hike?

Boom! This is the question virtually every homeowner has been asking themselves this past week!

Unfortunately, there’s no easy answer but saying that, as a general rule of thumb, fixed-rate loans are designed to protect you from rate hikes.

And with real estate experts predicting an RBA rate increase for months already, further upscales in the coming months are almost inevitable.

After the RBA announcement last week, the bank’s governor Dr Phillip Lowe indicated there would be more rate changes with his inflation forecasts “based on an assumption of further increases in interest rates.”

As well, CoreLogic research director Tim Lawless suggested higher cash rates implied higher rates for variable mortgages with fixed-rate home owners in a better place than their variable cousins.

“The recent rise in fixed-term mortgage lending is … helping to insulate homeowners from higher interest rates,” Mr Lawless said.

At the same time, fixed-rate loans have doubled in the last year, according to AMP Capital chief economist Dr Shane Oliver.

In short, we can’t answer this question easily.

But this is definitely a good time to consider refinancing whichever loan you currently hold, or review what loan you’re leaning towards.

Is a fixed-rate home loan right for me?

Again, there is no easy answer to this question.

Variable rates are just that – highly variable.

So, risk-averse home owners who appreciate stability, or who know their employment or other financial factors may change in the near future, may be happy to run with a fixed-rate loan, regardless of where the RBA takes cash rates.

A good compromise can be a split loan – part fixed-rate and part variable rate.

We encourage you to take the time to consider every loan box, do your research and talk to independent advisers.

It doesn’t hurt to talk with your current lender either to see if they can offer you better interest rates or other options, preferably without too many fees and charges involved.

We’re here to help

If you’re becoming overwhelmed by facts, figures and finances or simply need an extra head to help you decide if a fixed-rate loan is for you, your friendly Lending Loop team can help.

We love loans and we love finances and whether you’re a first-home buyer or property investor, no job is too big or too small for us!

We’ve got more than 40 of Australia’s biggest banks and specialist lenders at our fingertips (so to speak) and our service is free to enjoy.

So give us a call today at Lending Loop.