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first home owner

Client stories in the 2020-21 financial year

Over the past 12 months we have worked side-by-side with many clients to support them in making life changing purchases. We get satisfaction out of securing finance to fund purchases that will never be forgotten.

Below is a review of just some of the people we have helped over the last year and a summary of how we assisted them in securing their new property.

Having the right mortgage advice from an honest adviser makes what can be a daunting process a walk in the park. If you would like assistance in securing finance to fund your next property purchase or refinance please give us a call on 03 5434 7690 or email endeavor@endeavorbendigo.com.au

 

Eloise

Eloise settled on her first home after we assisted her with securing finance and navigating through the range of First Home Buyer benefits available at the time. The First Home Buyer Stamp Duty exemption allowed Eloise to save $15,000 on stamp duty for the purchase of her established home.

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Jake and Laura

We assisted Jake and Laura at the end of 2020 to purchase some vacant land. The couple then begun their build which is now complete. Exciting times ahead! They were able to take advantage of both the regional First Home Owners Grant of $20,000 and the $25,000 New Home Builder Grant which were available at the time.

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Erin and Ryan

Erin and Ryan settled on the purchase of their first home in the middle of this year. This was particularly exciting as we were able to secure them the $20,000 regional First Home Owners grant, even though the house was already built. Pretty good perk for new eligible properties, particularly when you can move in straight away.

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Tom

When Tom’s parents decided to move interstate he couldn’t pass at the opportunity to purchase the house he grew up in! Often when a sale happens between family members, the State Revenue Office (SRO) will not allow for the first home buyer stamp duty waiver if the house is sold under market value.

We worked with Tom, his parents and the SRO to ensure the house was purchased at a price which would allow for Tom to still be eligible for the stamp duty waiver.

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Albert and Quynh

We assisted Albert and Quynh by working through their borrowing power and arranged finance prior to attending an auction in a hot market, allowing the newly engaged couple to bid with confidence. Being prepared before the auction proved useful given their complex self-employed income and existing investments.

The couple were successful in winning the auction, a good result for all involved!

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McKinley Builders

Working with McKinley Builders involved “owner builder” which many banks aren’t comfortable with even for self-employed licenced builders. This also involved bridging finance which allows clients to build and move in to their new house before selling their existing house.

Better than living in a rental while you build and needing to move twice!

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Tom

We guided Tom through the regional Victoria $20,000 First Home Owners Grant and also the $25,000 Home Builder grant to help him finance his new home. He was referred to us by his employer, McKinley Builders, who are in the story above.

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Dill and Georgia

We helped Dill and Georgia take advantage of both the regional Victoria $20,000 First Home Owners Grant and the $25,000 Home Builder Grant. The couple were referred to us by their accountant as Georgia had become newly self-employed.

We worked with her and formed a plan of attack and timing for her and Dill to get their build off the ground.

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Hayden and Tilley

We helped Hayden and Tilley take advantage of the regional Victoria $20,000 First Home Owners Grant as well as the $25,000 Home Builder Grant. The couple were referred to us by their friends Georgia and Dill, the clients in the story above. They recommended Hayden come and talk to us, and we also later found out that we had been recommended to Tilley by one of her colleagues who is also an exciting client! So they knew they were in good hands.

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Homing in on retirement

Pick an Australian, any Australian, and chances are they dream of buying a home or upgrading the one they already own. There’s the emotional satisfaction of knowing you own the roof over your head, the freedom to rip up carpets and keep a pet, and the stability it offers as you raise a family. But home ownership also has a role to play in retirement planning.

For most of us, the long-term goal is to retire with a home fully paid for and enough investments both inside and outside superannuation to support a comfortable lifestyle. What is less well understood is that the better you manage your mortgage and other debts along the way, the more money you will have for income-producing investments to fund your dream retirement.

Spending too much on renovations or buying in the wrong location are common mistakes that may potentially reduce your retirement income. Moving is costly and if a renovation doesn’t add value then it is money that can’t be recouped if you decide to downsize later in life.

The right loan
The loan you choose can also make a big difference to your retirement nest egg. Interest rates may be at historic lows, but there are big difference in the rates available from different lenders so it pays to shop around. If you already have a mortgage, ask your lender for a better deal. More often than not they will reduce your interest rate to keep your business, which saves you the cost of refinancing.

It also pays to think about the type of loan you choose. While interest-only loans often make sense for investors, they can be an expensive choice for owner-occupiers even though on the face of it they appear more affordable.

The catch with this type of loan is that without any repayment of the loan principal, interest-only borrowers are continually paying interest on the full amount of the loan.

The Australian Securities and Investments Commission (ASIC) recently crunched the numbers and found that on a $500,000 loan at 6 per cent, making interest-only payments for just five years can add $37,000 to the long-term cost of the loan.

Once again, that money could be earning compound interest in super and bankroll some memorable travel experiences in retirement.

Tax efficiency
Tax also has a role to play when it comes to managing your housing debt for the best retirement outcome. While your family home is generally exempt from capital gains tax, the favourable tax treatment of the family home does not extend to your home loan.

Unlike investment loans, your mortgage is not tax deductible so paying down the mortgage and freeing up money for investment is an important step in your retirement planning. However, the best place for your surplus cash may depend to some extent on your marginal tax rate.

For people on high marginal tax rates, salary sacrificing into super may be more effective than paying down debt. That’s because pre-tax contributions are generally taxed at just 15 per cent rather than your marginal rate. This strategy is even more effective when investment returns are higher than home loan interest rates.

For people in lower tax brackets it is generally preferable to pay down debt first and reduce interest costs.

Home and hosed
The closer you get to retirement the more important it is to be debt free, especially if your resources are limited.

Unless you rent out a room or enter into a reverse mortgage – a product that has never really taken off in Australia – your home won’t produce any income in retirement. So a balance needs to be struck between the amount of money you sink into your home and the amount you direct into income-producing investments.

If you would like to take a more holistic approach to your retirement planning, including the role of your family home, give us a call.

Finance brokers make the difference as banks tighten up

Access to finance has become difficult and time consuming, leading to a surge of enquiry to finance brokers, who are able to get a positive result efficiently by having market knowledge and access to dozens of institutions.

While major Australian banks are expected to face further scrutiny on their lending practices as a result of the Royal Commission, many smaller finance providers – who are far less impacted – have embraced the opportunity and are now growing their market share.

Non-bank housing credit has risen by approximately 13% over the past 12 months, compared to growth of just 4.8% for the big four Banks.

Growth in loans to housing investors has dramatically decreased with the big four banks too, jointly by the impact of the Royal Commission, but also due to the Australian Prudential Regulation Authority (APRA) placing a cap on interest-only lending, a favoured product for investors.

These policies do not apply to the entire market, leading to a sharp rise in interest-only investment home loan issuance among non-bank lenders who are able to offer the product and also at comparatively cheaper rates.

Obtaining finance will remain difficult for some time still, however the banking marketplace is large and knowing where to go for your particular circumstance is vital.

Endeavor Finance is available to help with a range of finance options. Whether you have been turned away by a bank or want to assess your options, they can assist. Call today to discuss what you need. 03 5434 7690.

What are white label loans and why you should consider one

White label loans are essentially a home-branded loan, much like the home-branded products you see in the supermarket. Like these products, white label loans aim to deliver many of the same great features as bank branded home loans, but for a lower cost. Read more

Opportunities in the cooling property market

Things are looking up for first home buyers for the first time in years as house price growth begins to slow across the country. Read more

Why choose a finance broker over a bank?

It’s a question that most people ask when needing a loan – finance broker or bank?

If you’re on the market for a loan chances are you currently bank somewhere and have been a loyal customer for 10+ years. They are the first place that comes to mind when you need a loan. They’re easy to talk to, know your history and have your trust. They’ll get you the best deal, right?

Wrong. Just because you have a ‘relationship’ with your bank doesn’t mean they have the best market rate and fees compared to other banks. Sure they’ll try their best to get you attractive rates available within the company, but their best might be higher than a bank two streets across.

This is where a finance broker comes in handy. A finance broker is your secret weapon. There are a number of reasons why it’s worth choosing a finance broker, here are a few:

Time

Going through the process of a loan can be tiring and frustrating. A finance broker is there to do all the work for you and present it in an easy-to-understand way.

Variety

Finance brokers are associated with a number of financial institutions and will explore a variety of options to find what is the most suitable for your unique situation.

Knowledge

Finance brokers do one thing – loans. They deal with banks daily and are aware of the latest market rates and fees between banks. They know what needs to be done to get the ball rolling and will help with all paperwork and applications.

Funds

Brokers don’t just look at the now, they consider where you will be in five years and whether this loan will still be the right one for you. That includes lower fees, lower rates and special features.

 

A loan can be one of the biggest financial decisions you will ever make so it’s worthwhile getting professional advice when trying to find a lending solution. Let us help you on the journey. Get in touch today.

Using tax for effective property investing

With Australian property remaining expensive and banks tightening their lending criteria, investors need to ensure their property investments are a financial success.

A key element is maximising the taxation benefits flowing from your investment. This includes correctly structuring the loan and ensuring your deduction claims don’t fall foul of the tax man.
Getting the structure right

As with any investment, having the correct ownership structure for a property asset is vital and can make a big difference to your tax benefits. For example, couples negatively gearing their investment property loan usually find it best to have a larger ownership percentage in the name of the higher income earner.

On the other hand, with a positively geared property, it may be better to have the lower income earner holding a larger ownership percentage. If the property is held jointly, all rental income and losses must be split in line with the ownership percentages and detailed records maintained to substantiate all claims for tax deductions.

Also consider whether either partner expects a career change that will affect their future income, as changing ownership structures down the track can be costly.
Managing the loan

Once the investment property loan is set up, there are more tax issues to consider. Property investors can only legally claim a tax deduction to the extent the borrowed funds are used for income producing purposes, regardless of the security offered to obtain the loan.

In cases where the loan monies are used for both private and income producing purposes (such as a property partly used for rental and partly as your home), you must split all expenses into deductible and non-deductible amounts.
Watch your deductions

Many property investors focus on tax deductions, but care is required as the rules are complex. For example, if you make extra repayments on your investment loan and then use the redraw facility to obtain money for private purposes, you cannot claim a deduction for the interest attributable to that money.

Normal tax deductions for a rental property include the cost of advertising for tenants, professional property management, interest, council rates, land tax and strata fees, building and landlord insurance, pest control and accounting fees. These costs, however, can only be claimed when the property is tenanted or available for rent.

Other points to watch include claiming a deduction for loan establishment fees. This must be spread over the term of the loan or a five-year period, whichever is shorter. If you claim travel expenses for inspections, the main purpose of the trip must be to visit the property; if there is a private portion all expenses must be split.
Depreciation or capital works?

Claims for depreciation, or the decline in value of assets with a limited effective life (such as freestanding furniture, washing machines and TVs), can be made each year, but deductions for any capital works must be spread over 40 years. Capital works include improvements or alterations such as removing an internal wall or replacing capital equipment such as old kitchen cupboards.

Investors need to be careful when claiming for the cost of repairs to their property. These are immediately deductible, but improvements such as replacing a damaged laminated kitchen bench top with a granite one must be claimed as capital works expenditure.
Check your CGT

CGT is another tricky tax area, but the key to minimising your bill is to ensure you identify all legitimate expenses that contribute to the cost base of the property used to calculate any capital gain.

The cost base includes the price paid for the property plus buying and selling costs like stamp duty, legal fees and the agent’s commission. Rental properties owned for more than 12 months attract a 50 per cent discount on any capital gain.

To ensure you are making the most of the tax rules relating to your investment property, call our office today on 03 5434 7690.

Fast track your home loan

With interest rates on the rise, now is the time to look at ways to fast track your mortgage. After all, the sooner you pay off your mortgage, the less you will pay in interest.

That’s probably why nine out of ten Australian mortgage holders told a recent finder.com.au survey that they try to pay back their mortgage ahead of time.i

So what are the ways you can fast track your mortgage and minimise your interest payments?
Increase your repayments

The most popular strategy is to make extra payments. Rather than paying your designated monthly repayment, why not pay more? Not only does this reduce your interest charges but if rates should rise you will be able to absorb the increase.

You can also make extra payments if you get a windfall or a bonus at work. But if you have chosen a fixed home loan, you may find you can’t make extra payments, so check with your lender.

More frequent payments are also a good strategy. Instead of paying your mortgage off monthly, pay half the monthly amount each fortnight. After all, there are only 12 months in a year, but 26 fortnights, so you effectively end up paying an extra month each year.

Most home loans are structured so you pay mostly interest in the first five to eight years without making any inroads into the principal. If you can manage to pay some principal off too during that period, then you can cut the interest you’ll pay on an average 25-year loan.

Consider an offset account

An offset account can also prove useful. With your salary going into your mortgage account, the principal will drop and that means you will pay less interest. For instance, if you had a 100% offset account with $30,000, on a home loan of $400,000, you would see interest only calculated on a balance of $370,000 instead of $400,000.

If you’re looking at a honeymoon rate on a new home loan, do your homework and make sure that the rate you pay at the end of the honeymoon period is not substantially higher. If that is the case, it could eliminate any gains you may have made in that first year of lower rates. But be aware that switching to a cheaper loan might incur a high exit fee.

It’s always a good idea to review your home loan annually to make sure it’s still working for you. For instance, do you really need all the bells and whistles that are on offer? Often, you’ll be paying for these extras through higher interest rates.

Negotiate a better deal

If you are unhappy with your current rates, then talk with your existing lender to see if you can negotiate a better deal. But make sure you do your homework first and check out what other lenders are offering so that you are in a better negotiating position with your current lender. Most lenders would rather hold on to existing clients than lose them to a competitor.

When negotiating your home loan, you might be able to access a package from the lender giving you some beneficial extras such as discounted home insurance, fee-free credit cards or fee-free transaction accounts. Or you might be able to waive the fees associated with the loan.

When you initially take out a loan, consider making your payment before the due date. That way you are always ahead of the game.

With interest rates expected to rise in 2017, this may be a good time to consider fixing part of your loan to cushion yourself against future rises.

If you want to make sure that you are doing all you can to minimise interest payments on your loan and fast-track your mortgage, call us to discuss the financial strategies that might work best for you.

Checklist

  • Make extra repayments
  • Pay more frequently
  • Use an offset account
  • Review your mortgage annually

i ‘Aussies go above and beyond to pay down home loan sooner’, Nov 2016, finder.com.au