» mortgage

PropCalc: the secret to avoiding mortgage stress

BMT team — Tue, 17 Mar 2020 22:58:47 +0000

Interest rates are dropping, so it would be fair to presume that mortgage stress rates are too, right? In reality, mortgage stress continues to rise among Australian homeowners. All homeowners, both owner-occupiers and investors, can reduce mortgage stress by understanding the full picture before making the purchase. In this article we will explore: What is mortgage stress? The scale of mortgage stress in Australia PropCalc: The secret to avoiding mortgage stress What is mortgage stress? Mortgage stress doesn’t have a concrete definition, but it’s commonly described as paying more than 30 per cent of a household’s income in mortgage-related costs. Unfortunately, it often causes a ripple effect to other areas of a homeowner’s life such as struggling to pay utilities on time, credit card repayments and other everyday essentials. A mortgage often lasts over 20 years. Interest rates and a homeowner’s personal circumstances will go through many changes over this length of time, which can contribute to increasing mortgage stress. The scale of mortgage stress in Australia A recent study from Digital Finance Analytics (DFA) reported that mortgage stress has pushed even higher in 2020. The results revealed that mortgage stress is a very real issue in Australia with one in three households, or 1.1 million, currently feeling the pressure. While personal circumstances can change suddenly, one of the key reasons for mortgage stress is present at the very beginning. Not having a full picture of the type of costs of owning the property is a common misstep that can creep up on homeowners. There are so many costs involved with buying a property and if they aren’t totally understood, the homeowner can find themselves in a stressful situation. PropCalc: The secret to avoiding mortgage stress Research is key to setting yourself up for a stress-free property purchase. Helping many householders reduce the risk of future mortgage stress, PropCalc shows the real costs of owning the property, before you even make an offer. Forgetting to factor in all the costs involved with owning a property can result in mortgage stress down the track. PropCalc helps you grasp a realistic breakdown of the costs of owning the property and how it will impact your cash flow. PropCalc accounts for a range of expenses beyond the initial purchase including interest, stamp duty, insurances, council rates and maintenance costs. If you’re a property investor, PropCalc can be your go-to tool to ensure you get the best property for your portfolio. The tool includes many features to help you understand what type of cashflow you can expect, from the rental income to any depreciation claims available. PropCalc is your essential property research tool that does so much more than a mortgage calculator. To help you find the perfect property for your budget, PropCalc generates property reports to allow you to save and compare multiple properties online and through the app. Start using PropCalc today PropCalc is a free tool that is available through the BMT website. The platform gives you access to depreciation information, insurance, market analysis and property tools at your fingertips. To join more than 120,000 people enjoying the benefits of PropCalc, visit bmtqs.com.au/propcalc today.

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Are refinance costs tax deductible on a rental property?

BMT team — Tue, 25 Feb 2020 23:08:11 +0000

Interest rates are at historic lows and many property investors are searching for a better deal on their mortgage. When weighing up the costs and benefits of refinancing, investors need to be aware of what refinance costs are tax deductible on rental property to boost their cash flow. In this article, we will answer the following: Are refinance costs tax deductible? How are costs deducted? Why investors choose to refinance Some costs are considered capital and will impact capital gains tax Key points: Refinancing involves replacing an existing mortgage with a new one A key reason why someone refinances is to get a lower interest rate and reduced fees For investors, some of the costs of refinancing their rental property are tax deductible Are refinance costs tax deductible on rental property? Refinancing a mortgage is when a property owner replaces their existing loan with a new one. Unlike owner-occupier homeowners, property investors can benefit from many refinance costs tax deductions. Some of the fees an investor can expect to claim are: loan establishment fees such as the application fee early discharge fees fixed rate loan break fees any title search fees charged by your lender valuation fees charged by your lender mortgage broker fees lenders mortgage insurance billed to the borrower The average cost of refinancing fees can change, so it’s always a good idea to discuss these with your lender to get a full picture. How are the costs deducted? If the total refinancing fees are more than $100, they can be claimed over a five year period or the term of the loan, whichever is earlier. When an investor uses part of their refinanced mortgage for private purposes, all deductions must be apportioned. For example, if 30 per cent of their rental’s refinanced mortgage was used to purchase a new private residence, all deductions for the borrowing costs and ongoing interest expenses need to be apportioned. Why property investors choose to refinance their mortgage A property investor’s new mortgage could be with a different or the same lender. Deciding whether to refinance is a significant decision that should only be based on your own circumstances. There are many reasons why an investor would decide to refinance their mortgage, such as to get a lower interest rate, shorter terms, reduced fees or changing their mortgage rate from a fixed to an adjustable rate. Some costs are considered capital and will impact capital gains tax Any capital costs that an investor incurs from refinancing aren’t tax deductible and instead form a part of the property’s cost base. Capital costs can include conveyancing fees, building and pest inspection fees, valuation fees when a private valuation is done by your solicitor and if applicable, stamp duty on the transfer of property. The capital costs an investor may need to pay when refinancing their home can decrease the amount of payable Capital Gains Tax (CGT) when selling the property. We recommend speaking with your accountant to make sure all capital costs are included. For more information about how BMT Tax Depreciation works closely with your accountant to maximise your return, request a quote or contact our specialist team on 1300 728 726.

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Loan to value ratio explained

BMT team — Thu, 30 May 2019 23:18:37 +0000

If you are looking to buy an investment property, the chances are you’ve heard of a Loan to Value Ratio (LVR). The LVR for an investment property underpins your cash flow, the level of risk you can take and whether you have the potential to broaden your property portfolio. In this article we will explore: What is a Loan to Value Ratio? How are Loan to Value Ratios calculated? Lenders’ Mortgage Insurance Equity Recent changes What is a Loan to Value Ratio? A Loan to Value Ratio is how lenders describe the amount you need to borrow to buy a particular property. It informs investors as to how much of a property is being financed and how much equity is available. How are Loan to Value Ratios calculated? To calculate the Loan to Value Ratio for an investment property, divide the loan amount by the value of the property then multiply by 100 to get a percentage. Banks and financial institutions use this as a measure of whether you can secure the loan. When borrowers request a loan for an amount that’s near the appraised value and therefore has a high LVR, lenders consider there to be a greater chance of the loan going into default because there is little to no equity built up within the property. In general, investors with an LVR over 80-90 per cent are considered to be higher risk for lenders. Lenders’ Mortgage Insurance Lenders’ Mortgage Insurance is sometimes mandatory when the amount you are borrowing is more than 80 per cent of the purchase price. It can help you buy a property sooner if you have a smaller deposit and is designed to protect the banks against the risks involved in loaning to a buyer with a low deposit amount. Your Loan to Value Ratio determines whether you need Lenders’ Mortgage Insurance. Equity Equity is the difference between your mortgage and your property’s market value. For example, if your home is worth $400,000 and you owe $150,000, then you have equity of $250,000. Some lenders also include a Loan to Value Ratio when calculating equity. As you pay off your home loan your equity can increase, giving you options for further investment. If you own another property, then you can use the equity in that property as security for your next investment purchase. If you are borrowing more than 90 per cent for an investment, some lenders will want to see equity in other properties. Find out more about Using equity to buy a second property. Recent changes Loan to Value Ratios have recently been in the spotlight, with the government proposing changes to its regulation. The Coalition has promised to help first home buyers into the market by allowing them to purchase property with a 5 per cent deposit, meaning lenders will provide loans on a 95 per cent LVR. Under the proposed plan the government will set aside $500m of equity through the National Housing Finance and Investment Corporation to guarantee the additional amount needed to reach the standard 20 per cent deposit. Set to come into effect from 1st January 2020, the scheme would be available for first-home buyers with an income of up to $125,000, or couples with a joint income of up to $200,000. The plan would allow borrowers to avoid paying thousands of dollars in Lenders’ Mortgage Insurance. First-home buyers purchasing an investment property while renting, also known as rentvestors, are eligible to claim interest to reduce their tax liabilities, as well as other expenses involved in holding a property. Owners of any properties that generate an income may also be eligible for thousands of dollars in depreciation deductions. A BMT Tax Depreciation Schedule can provide you with additional cash flow to help you reduce your home loan faster. Request a Quote today for a free estimate of your likely deductions or contact one of our expert staff on 1300 728 726.

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The seven steps in obtaining a mortgage

BMT team — Tue, 14 Nov 2017 01:00:18 +0000

For most, getting a mortgage goes hand in hand with buying a home. But you just have to look at the number of products and lenders in the market to know that obtaining a mortgage is not always a simple task. While mortgages vary between lenders and based on individual circumstances, there are seven basic steps in obtaining a mortgage. Here we outline these steps and considerations to help you on your way. 1. Determine your budget First things first, you need to sit down and carefully map out your budget. Consider income versus expenditure and account for everything, including any regular fees or payments, additional forms of revenue and any shares or assets you hold in addition to everyday expenses. When you have carefully calculated your monthly or weekly budget, you should know exactly how much you will be able to put towards loan repayments. Don’t just consider how much you can afford now, but over the life of the loan should your circumstances change. For instance, if you or your partner takes time off work to raise a child, will you still be able to cover your mortgage repayments with this reduction in income? You should also factor in the other costs of buying a property when making your budget. These include stamp duty, legal fees, insurance and other associated costs, which can add up to approximately five per cent of the home’s sale price. Remember to account for the cost of the deposit and Lender’s Mortgage Insurance (LMI), which will be an additional ongoing cost should you require it. LMI is a requirement from most banks if your loan is greater than eighty per cent of the property’s price (i.e., you don’t have enough for a twenty per cent deposit). 2. What type of loan do you want? Mortgage type and features Next you must decide what kind of loan you want. Whether it’s a fixed rate loan, a variable loan, principle and interest, interest only or a combination of fixed and variable, whichever you choose should best suit your own individual circumstances. You must also consider what type of features you want in a home loan, such as redraw facilities, a 100 per cent offset account or free additional payments, as this may direct you to a certain type of loan and help inform your decision. 3. Choose a lender Once you have an idea of what you can afford and what type of loan you want, you need to shop around and do some research. When you consider the thousands of products on the market from a variety of lenders, it’s easy to see how this is can be a time consuming process. However you should make sure you shop around to compare and get the best deal. If this is a little overwhelming, you can always enlist the help of a Mortgage Broker who will do this comparison and find you a suitable product and lender. Either way, pay attention to the interest rate being offered (that’s the big one) as well as any other features such as zero establishment fees or frequent flier points. 4. Submit your application Once you’ve found a lender you want to go with, you’ll need to submit your application and attend an interview. You’ll be required to supply relevant documentation such as ID, bank statements and proof on income. From here the bank will assess your situation and decide whether you are a suitable candidate and meet their criteria. This criteria generally includes proof of stable employment and income, your ability to meet loan repayments and your real savings. For example, most lenders like to see that you have at least five per cent of a home’s value in real savings in your account, as this shows you have the ability to save and manage your money. 5. Mortgage pre-approval If this bank is satisfied you’re a suitable candidate, they will issue you with a certificate of pre-approval. This basically states that you have been approved for a loan when you do find a home (often subject to valuation). They will state what the amount is that you’ve been approved for, so you know the price point you need to be looking at in your property hunt. A pre-approval certificate is usually valid for a certain period of time, usually six to twelve months. If you’re getting close to or at the end of this period, you may need to re-apply or request an extension. 6. Get house hunting Now that you’re been given the green light from the bank and know how much you can spend, the search for your dream property begins. It helps to research the average prices in different suburbs – with the amount you’ve been approved for in mind – so you know which areas will be suitable to look in. 7. The buying process and finalising the loan While the buying process itself can be complex and time consuming, here we’ll stick to the process in relation to your mortgage. Once you’ve found the house you want and have made an offer, you need to contact your chosen bank to finalise the loan. This is why getting pre-approval is a better idea than finding a property you want first and then applying for a loan. If you’ve already been approved, you don’t have to wait around while the bank reviews your situation and potentially miss out on your dream home. Once the loan has been finalised and the property settles, it’s all yours! And you have decades of mortgage repayments to look forward to. As always, it can help to speak to a financial advisor when dealing with money matters, especially if you’re purchasing a property as an investment.

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Five tips to set you up for your home loan

Chan Naylor Team — Wed, 19 Nov 2014 00:55:09 +0000

With the highest auction clearance rates seen for some time more Australians are looking to buy property than ever before, but what happens if you fall in love with a home and then discover the bank won’t lend to you? Even worse, what happens if the bank turns you down and it’s your fault? Here are 5 tips to make sure you are properly set up for that home loan. 1. Check your credit file Some of my clients were recently declined by a mid-tier bank because they had a couple of gas payment defaults on their credit file. Trouble is, this was the first that my clients knew about it because the defaults related to their old home. Thankfully, we were able to get approval with a Big Four lender – but it took a lot of work. All the stress could have been avoided if they had checked their credit file before they applied for a loan. The good news is, it’s free to check your credit file, check out the details on www.mycreditfile.com.au 2. Get your savings in order Lenders like to lend to people who can show they are responsible with money. So they like to see money in an account for at least three months without the account holder having succumbed to the temptation of spending some of it. If say a relative is going to help out with the deposit, then holding the cash in your account for some time before you apply for a home loan makes it so much easier. I once had a client whose family came from a developing country which was subject to quite a few UN sanctions. His family were gifting him some money, but getting money out of this country was very difficult so the money was appearing as odd random cash deposits made all over Australia. It took me ages to prove to the bank that the applicant wasn’t a drug runner or an arms dealer! Had the cash been ready and waiting in his Australian account for some time there again, it would have been much easier. 3. Pay your bills as soon as possible When you apply for a home loan, the first thing a bank does is check your credit file. Once upon a time, the credit file just showed if you were in default or had made too many credit inquiries. Now under a new law, credit files can show who is a prompt payer. So from now on, it’s in your interest to pay any bill as soon as you can. 4. Reduce your credit card limit It might boost your ego to have a platinum credit card with a $50,000 limit but do you need all that money? When the banks are assessing how much they will lend to you, they will take that credit card limit as money already lent (even if you pay it off every month). As a result, they may well reduce how much they will lend you based on that limit. You may want to reduce your credit card limit if you don’t need all that money. Banks have been known to first request clients to reduce their credit card limit before giving a final loan approval. 5. Know your limit Not all banks are the same. For example, if you were a brand new customer and you walked into a branch then chances are that the most they would lend you is 90 per cent of the value of the property (although some may go up to 95 per cent) – even if you are a multi-millionaire (it’s just their policy). You could be an excellent home loan candidate, but if you just go to your own bank because you think that all banks are the same then you may be in for a shock. However, good brokers know what each bank’s lending policy is and know where you are most likely to get home loan approval. For further information about how Chan & Naylor can help assist you with your Home Loan, contact Chan & Naylor today or call on 1300 306 868.

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Preparation tips for investment property profits

Mortgage Choice — Fri, 13 Jun 2014 06:41:07 +0000

Whether you’re new to property investment or you’ve been involved in this lucrative asset-building option for years, researching the latest tips about getting the most for your money can help you maximize your investment returns. Prepare for investment property ownership The Australian market is full of potential and property investing is popular right now. However, the fact that there is money to be made doesn’t mean that you’re necessarily ready to invest. Careful consideration must first be conducted to ensure you’re in a stable financial position now and into the future. Get your personal finances under control before you put money into an investment property. Paying down your debts is a must. You’re likely to be paying more in interest on your debts than you would be earning on an investment, so it just makes financial sense to get that taken care of first. Paying down debt also improves your credit score, and you’ll need to have a good score to borrow money for investing. The higher your credit score, the lower the interest rate will be on your loan. You’ll end up with a higher rate of return. Consider interest-only borrowing There are advantages to opting for interest-only loans when you’re investing in real estate. You’ll be able to borrow more, so you could invest in multiple properties. Most lenders allow you to pay down the principal as you please, so opting for interest-only loans doesn’t lock you into a high principal that never gets paid down. Increase property value The market dictates how much you can make on your investment to a point. You retain some control, so you have to be proactive about making your property worth more. Renovations offer the perfect opportunity to increase the value of a property. If you don’t have a lot of money left over to invest in renovations, consider keeping it simple. Even improving the outdoor area or a fresh coat of paint will boost property value. Get expert advice for the right investment from http://www.mortgagechoice.com.au/ This article was supplied courtesy of Mortgage Choice.

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