Author: Comparable

When buying property, it’s good to know the market value. After all, you want to know you’re paying a fair amount. But the property’s value is an important consideration for your lender too. And their valuation may be quite different.

Just how much is a property worth? Well, it depends on who’s asking.

When buying a property you’ll find there are different terms to estimate how much it’s worth, including market value, market appraisal and bank value.

And you’ll most likely find they can differ, which can be confusing.

Fortunately, we’ve got the low down to help you understand the difference. And how bank valuations affect your loan.

Market valuations vs market appraisals vs bank valuations

So, what is the difference between them all?

A market valuation, which is usually undertaken by a professional and qualified valuer, gives an estimate of the expected sale price of the property on the open real estate market.

It’s based on current market trends and is valuable to both sellers and buyers during sale price negotiations.

It can also be conducted for tax purposes for owners (ie. to calculate the taxable capital gain or capital loss).

A market appraisal (aka market estimate), on the other hand, is usually completed by a real estate agent and is often done to give homeowners an idea of how much their property could sell for in the current market.

But a bank valuation has an entirely different purpose.

When you’re buying a home or refinancing your loan, the bank will often need to conduct a bank valuation.

And it can feel like a real sting if the bank valuation comes in lower than expected.

But there’s a reason for this.

Banks are in the risk mitigation business. So their valuation is designed to provide an estimate of the property’s sale price as security against your loan should you default.

The valuations can be more conservative because lenders don’t take into consideration the property’s value in terms of an investment.

They’re looking at the property in terms of recouping loan costs with a quick sale.

And, rather than being provided by a real estate agent who may have a vested interest in price, bank valuations must be conducted by an accredited valuer.

Bank valuation process

When conducting a bank valuation, typically, the following factors are considered by the appraiser:

Current market conditions – just like with a market valuation, the current market climate and recent sales data for your area are examined.

Physical attributes – the location of the property, surrounding amenities, its layout, fixtures and features, size, structural condition, and council zoning information are considered.

Upon completion of the valuation, a report is provided to the lender to be used in assessing your loan application.

This brings us to our next point.

Pitfalls to watch out for

They say that being forewarned is forearmed. So here are some pitfalls to be aware of when it comes to bank valuations.

Say you apply for pre-approval, find a place and make an offer, but then the bank valuation is a lot less.

Or you pay a deposit on a $700,000 off-the-plan property, only to have your bank come back with a $650,000 bank valuation when it’s time to move in.

If the bank valuation is less than expected, it may lead to the bank loaning you less than you hoped for.

You may need to come up with extra funds to close the gap or pay lenders mortgage insurance (LMI), which can cost thousands of dollars.

Alternatively, your loan application could be rejected outright.

Therefore, it’s a good idea to save up a bit of a buffer to handle any valuation headaches that may crop up.

Working with an experienced broker, like us, can help you to prepare for any nasty surprises and make for a smoother home-buying journey.

Find out more

If you’re on the hunt for the perfect home, let us help you track down the right loan and lender for you.

We’ll be there every step of the way to help you navigate the loan process with ease, and help get the keys in your hand.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

Business owners wanting to buy a vehicle, asset or important piece of equipment and immediately write off the full cost have just over a month to act.

That’s because the temporary full expensing scheme is set to expire on 30 June 2023.

It will be superseded by a much less generous scheme, known as the instant asset write-off, so if your business could do with expensive new equipment, an asset or commercial vehicle, you might want to act quick!

What is temporary full expensing?

Temporary full expensing is similar to the popular instant asset write-off scheme, but with an expanded scope.

Originally a stimulus measure to address the effects of the COVID-19 pandemic, the scheme allows businesses to make significant asset investments.

Businesses can have eligible depreciating assets immediately written off in full with no cost limit.

Yep, that’s right … no cost limit on eligible assets.

Applied for with your tax return, the scheme can reduce the amount of tax you have to pay for the financial year – which means you can reinvest the funds back into your business sooner.

Trucks, coffee machines, excavators, and vehicles are just some examples of assets eligible under the scheme.⁣⁣

But to take advantage of it, the asset must be installed and ready to roll by 30 June 2023.

So you’ll have to act quickly!

Asset eligibility

To be eligible for temporary full expensing, the depreciating asset you purchase for your business must be:

– new or second-hand (if it’s a second-hand asset, your aggregated turnover must be below $50 million);
– first held by you at or after 7.30pm AEDT on 6 October 2020;
– first used, or installed ready for use, by you for a taxable purpose (such as a business purpose) by 30 June 2023; and
– used principally in Australia.

What if I miss the deadline?

If you miss out on the 30 June 2023 deadline, or your order doesn’t arrive in time, hope may not be lost.

You may still be able to take advantage of the instant asset write-off.

This scheme will allow for eligible purchases of up to $20,000 to be written off by 30 June 2024, as recently unveiled in the 2023 Federal Budget.

However, as you might have noted, the available write-off amount is significantly lower than the temporary full expensing scheme that’s coming to an end.

Need a hand with a business loan?

When purchasing an asset with the intention of using this scheme, it’s crucial to select a finance option that’s suitable for your business.

And that’s where we can help out. We can present you with financing options that are well-suited to your business’s needs now, and into the future.

So if you’d like help obtaining finance that’s gentle on your cash flow, and helps you achieve your long-term goals, please get in touch ASAP so we can help you beat the EOFY deadline.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

More Australians (and permanent residents!) will soon be eligible for a leg up into the property market under an expanded Home Guarantee Scheme. Today we’ll run you through all the upcoming changes to the low deposit, no lenders mortgage insurance scheme.

Officially unveiled as part of the 2023 federal budget, the expanded Home Guarantee Scheme will have broader eligibility criteria from 1 July 2023.

So if you’re a single parent or guardian, first home buyer, haven’t owned property for a decade, permanent resident, or looking to buy a home with your friend or sibling – be sure to read on to find out if you’re eligible.

What is the Home Guarantee Scheme?

Getting a deposit together can be a massive hurdle when buying a home.

And if your deposit is lower than 20%, you can get stung with lenders mortgage insurance (LMI), which can cost you anywhere between $4,000 and $35,000, depending on the property price and your deposit amount.

But through the NHFIC, the federal government has three low deposit, no LMI schemes.

Which means if you’re eligible, you won’t need to wait until you’ve reached the standard 20% deposit.

The First Home Guarantee and Regional First Home Buyer Guarantee support eligible buyers to purchase a home with a low 5% deposit and no LMI.

And the Family Home Guarantee assists eligible single parents to buy a home with a deposit of just 2% and no LMI.

Access to these schemes can, on average, bring forward the home-buying process by five years!

It’s worth noting there is an eligibility criteria, which covers property types, locations and prices.

But an experienced broker (that’s us!) will be across all the ins and outs to help you work out if you qualify.

What are the upcoming changes?

Good news if you are among the increasing number of Australians joining with friends, siblings, and other family members to buy a home.

Come 1 July 2023, you may be eligible to lodge a joint application under the First Home Guarantee and Regional First Home Buyer Guarantee; previously you could only apply as an individual or married/de facto couple.

Meanwhile, the Family Home Guarantee is set to expand to include single legal guardians, such as an aunt, uncle or grandparent. Previously it was only for eligible single natural or adoptive parents.

All three schemes will expand to eligible borrowers who are Australian permanent residents, in addition to citizens.

And all three guarantees will include eligible borrowers who haven’t owned a property in Australia in the last ten years.

What you need to know

The Home Guarantee Scheme can be a great way to fast-track getting into the property market.

But you’ll have to get in quick because places are strictly limited.

That includes 35,000 places per financial year across the First Home Guarantee, 10,000 places per financial year under the Regional First Home Buyer Guarantee, and 5,000 places per financial year under the Family Home Guarantee.

Also, not all lenders are involved with the scheme. But we can help you to identify and compare participating lenders.

So give us a call today to get the ball rolling.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

The Reserve Bank of Australia (RBA) has increased the official cash rate for the 11th time in the past year, taking it to 3.85%. Have we finally reached the peak of this cycle? And how much will this latest rate hike increase your monthly repayments?

In what will undoubtedly be tough news for many households around the country, this latest rate hike comes despite many pundits predicting the RBA would keep the cash rate on hold for at least another month.

RBA Governor Philip Lowe said while inflation in Australia has passed its peak, at 7% it was still too high and it would take some time before it was back in the target range of 2-3%.

“Given the importance of returning inflation to target within a reasonable timeframe, the Board judged that a further increase in interest rates was warranted today,” he said.

However, in what may come as welcome news to mortgage holders, Governor Lowe softened his language around the possibility of further rate hikes.

“Some further tightening of monetary policy may be required to ensure that inflation returns to target in a reasonable timeframe, but that will depend upon how the economy and inflation evolve,” he said.

How much could this latest hike increase your mortgage repayments?

Unless you’re on a fixed-rate mortgage, the banks will likely follow the RBA’s lead and increase the interest rate on your variable home loan very shortly.

Let’s say you’re an owner-occupier with a 25-year loan of $500,000 paying principal and interest.

This month’s 25 basis point increase means your monthly repayments could increase by almost $75 a month. That’s an extra $1,060 a month on your mortgage compared to 3 May 2022.

If you have a $750,000 loan, repayments will likely increase by about $112 a month, up $1590 from 3 May 2022.

Meanwhile, a $1 million loan will increase by about $150 a month, up about $2,130 from 3 May 2022.

What happens if the cash rate increases further?

Economists at the big four banks are forecasting that the cash rate will now either remain at 3.85% or have one more hike to 4.10%.

Assuming you’re an owner-occupier with a 25-year loan, here’s how much more you could be paying each month if the cash rate reaches 4.10%:

– $500,000 loan: approximately $75 more = up $1135 from 3 May 2022, to a total of approximately $3,470 per month.

– $750,000 loan: approximately $112 more = up $1702 from 3 May 2022, to a total of $5,200 per month.

– $1 million loan: approximately $150 more = up $2280 from 3 May 2022, to a total of $6,950 per month.

Worried about your mortgage? Get in touch

There’s no denying that a lot of households around the country are feeling the pain of these rate rises.

There are also lots of people on fixed-rate home loans wondering just what options will be available to them once their fixed-rate period ends.

Some options we can help you explore include refinancing (which could involve increasing the length of your loan and decreasing monthly repayments), debt consolidation, or building up a bit of a buffer in an offset account ahead of more rate hikes.

So if you’re worried about how you might meet your repayments going forward, give us a call today. The earlier we sit down with you and help you make a plan, the better we can help you manage any further rate hikes.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

With every RBA rate rise announcement, mortgage holders brace themselves for impending repayment increases. Here’s how to stay on top of your mortgage and feel financially secure.

Let’s face it, the RBA’s rate rise cycle hasn’t been easy for mortgage holders, with average monthly repayments now hundreds of dollars (and in some cases, thousands of dollars) more expensive than they were a year ago.

Pair this with the rising cost of living and many Australians are eager to bolster their finances to weather the storm, especially as there are one or two more rate rises predicted to come.

But rest assured, there are things you can do to help manage your mortgage and stay on top of your finances.

1. Review your loan

Regularly reviewing your loan can help you assess whether it’s best suited to your current situation.

You may be able to access features that may benefit you such as an offset account. And even get a better interest rate.

Canstar research shows 63% of Australians haven’t attempted to negotiate their interest rate with their lender in the last year.

And only a quarter of those who did were knocked back. But you don’t have to run the risk of rejection yourself.

Get in touch with us and we can go in to bat for you.

And if we don’t think your lender is playing fair, we can help you look elsewhere. Which brings us to our next point…

2. What are competitor lenders offering?

Canstar research shows that 77% of mortgage holders may be paying more than if they switched loans.

And RBA data from November 2022 shows that on average, existing variable owner-occupier home loan rates were 5.29%, while new loans had an average rate of 4.79%.

This is known as the “loyalty tax” – where banks often only pass on better interest rates and features to new customers.

But we can help you out.

Let us do the legwork and find suitable refinancing options so you can save.

3. Avoid the mortgage trap

Before you refinance, it’s good to get a picture of your debt-to-income and loan-to-value ratios.

This can help you avoid being trapped in a mortgage without the ability to switch to a better interest rate.

Your debt-to-income ratio is your total debt divided by your gross income. Lenders use this to assess how you manage money and to calculate your borrowing power.

So if you’re seeking to refinance a $700,000 home loan (and have no other debt), and you have $160,000 in gross household income, your DTI is 4.375 – a ratio most lenders would be very comfortable with.

So make sure your other debts – such as car loans, and credit cards – are being managed, as well as your mortgage. It can help bolster your credit rating.

Your loan-to-value ratio is the comparison between your loan amount and the assessed value of your home.

This means that a drop in your property’s value can affect your ability to refinance.

And thus, if your equity drops below 20% some lenders may not accept your application to refinance. So refinancing at the right time (ie. before prices fall too low) can help you avoid being locked into your current mortgage.

If all this sounds complex or you just don’t have the time, we’re only a phone call away.

4. Track your spending

Like many of us, you’ve probably cut back on spending already.

But there’s a popular saying that rings true: “what gets measured gets managed.” Track your spending and see where additional changes can be made.

It can be a real eye-opener.

You may think “they can pry my daily cafe-bought triple shot latte from my cold dead hand” … but when the cost is tallied up, you may change your mind.

And that streaming subscription you never use and forgot about is still coming out of your bank account like clockwork.

5. Speak to us

Want a hand with all the above?

We can help you to refinance, consolidate your debts, manage application processes, and much more.

Get in touch today and we can help you through the refinancing process, even if there is possibly another rate rise or two to come.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

As property prices start to climb, listings are following suit. So if you’re hunting for a home, what does this mean for you?

If you’ve been looking at the property market over the last six to 12 months, you probably already know that while property prices have dropped, it’s been a case of slim pickings due to the drastically low number of listings.

But prices look like they are starting to bounce back, with March heralding a 0.6% increase in national property prices, according to CoreLogic. And listings are following suit.

PropTrack data for March showed new listings on realestate.com had risen by 10.5% month-on-month, making it the busiest month for new listings since May 2022.

So why has the market changed? And what does it mean if you’re looking to buy?

Property prices and increased demand

When the RBA announced its rate rise pause in April, we all let out a collective sigh of relief.

And many financial and property analysts, including CoreLogic, estimated the pause may give rise to increased prices due to a boost in buyer confidence.

But there are other compounding factors that were influencing the pricing upswing before the rate rise pause.

Record low listings, a competitive and expensive rental market, and elevated migration placed increased demand on limited housing supply.

And prices started to climb despite consecutive rate rises.

Rising prices, combined with the Autumn selling season, have seen vendor confidence pick up and property listings increase.

But how does this affect you if you’re looking to buy?

Opportunity may be knocking

If you’ve been ready to buy but haven’t been able to find the right place due to low supply, now may be the time to purchase – before FOMO starts to kick into the market.

More listings mean you’ll have a greater chance to find a suitable abode, rather than sifting through the dregs.

But before you pounce on that perfect property, it helps to have your finance sorted.

Finding out your borrowing capacity and loan options are important steps when planning to buy.

And while the RBA’s pause bolstered our spirits, it’s wise to be mindful that there are a couple more cash rate rises expected.

Getting advice on the right type of loan, assessing your borrowing power, and organising your finances could make things smoother.

So if you’re keen to purchase in 2023, give us a call and we’ll get cracking on finding you a mortgage solution that will suit your individual needs.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

You’ve probably heard the term “fixed-rate cliff” bandied about in finance news feeds. But what is it? And if you’re about to head over it, how can you prepare for a soft landing?

A staggering 880,000 fixed-rate loans are set to end this year, and when they do, many Australian households will be facing significantly higher mortgage repayments.

That’s because the variable interest rates now on offer are much higher than the fixed rates locked in years ago.

So today we look at what this so-called “cliff” might mean for your budget and how you can reduce the impact by refinancing.

But first, why is the fixed rate cliff looming in 2023?

Before 2020, fixed-rate mortgages equated to about 20% of total Australian home loans.

But during the pandemic, the RBA dramatically slashed the cash rate to a record low of 0.10%, and many savvy Australians pounced on the opportunity to lock in a low interest rate in early to mid-2021 for two to three years.

This saw 2021 fixed-rate borrowing basically double to 40% of total Australian home loans.

However, as with all good things, the low rate times came to an end.

Since May 2022, the RBA has hiked the official cash rate back up to 3.60%.

Those on fixed-rate loans have had a reprieve, until now – with 880,000 mortgage holders set to start rolling off their fixed rate throughout 2023.

And CoreLogic warns “the pain will be felt most acutely from April” this year.

What effects can a fixed rate cliff have

According to CoreLogic data, a mortgage holder who took out an average-sized loan of $538,936 with a fixed rate of 1.98% could see their repayments increase by over $1000 per month when rolling over to a standard variable rate.

Those who locked in 2020/2021 interest rates that hovered around the 1.75 to 2.25% range will be transitioning to interest rates as high as 5 to 6%.

That’s an increase greater than the 3 percentage point minimum interest rate buffer that lenders use to assess the serviceability of home loan applications.

How to refinance (properly)

When a fixed-rate loan period ends, lenders often don’t roll existing clients over to the best rates they have on offer.

The most attractive interest rates are usually reserved for new customers as an incentive.

But by refinancing with another lender you can access lower introductory rates, which can potentially save you thousands of dollars in repayments over time.

Working with a broker like us can take the stress off your shoulders when navigating the end of a fixed rate period.

We’ll use our vast network of lenders to zone in on suitable loans and lenders that are right for you.

And importantly, we’re (happily) bound by a best interests duty.

So while banks and digital lenders might try to tempt you with cashback offers for loan products that may not really be in your best interests (due to fees, high interest rates, and other undesirable loan terms), we’ll only ever try to match you up with lenders and loans that are in your best interests.

Get in touch

Is your fixed-rate cliff looming?

Get in touch today and we’ll get to work on finding you great refinancing options to soften the landing.

And if the landing is still looking a little bumpy, we can help you explore some additional options, such as increasing the length of your loan and therefore decreasing monthly repayments, debt consolidation, or helping you identify ways to build up a bit of a cash buffer in the meantime.

Whatever your situation, the earlier we sit down with you and help you make a plan, the better we can help you manage the transition.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

And … exhale. After 10 straight rate hikes the Reserve Bank of Australia (RBA) has today decided to put the official cash rate on hold. But for how long?

The decision to keep the official cash rate at 3.60% will be welcomed by homeowners around the country after monthly repayments increased by about $1000 per $500,000 loaned (for a 25-year loan) since 1 May 2022.

RBA Governor Philip said the RBA board took the decision to hold interest rates steady this month to provide additional time to assess the impact of the increase in interest rates to date and the economic outlook.

“The Board recognises that monetary policy operates with a lag and that the full effect of this substantial increase in interest rates is yet to be felt,” he said.

However, while the cash rate was not increased at today’s RBA meeting, Governor Lowe signalled there might be more rate hikes in the coming months.

“The decision to hold interest rates steady this month provides the Board with more time to assess the state of the economy and the outlook, in an environment of considerable uncertainty,” he said.

“In assessing when and how much further interest rates need to increase, the Board will be paying close attention to developments in the global economy, trends in household spending and the outlook for inflation and the labour market.”

How much have your repayments increased since 1 May 2022?

Let’s say you’re an owner-occupier with a 25-year loan of $500,000 paying principal and interest.

The wave of 10 successive rate rises means the repayments on your mortgage have increased by about $985 a month compared to 1 May 2022.

If you have a $750,000 loan, repayments will likely have increased $1,478 from 1 May 2022.

Meanwhile, a $1 million loan is up about $1,980 from 1 May 2022.

What happens if the cash rate increases further in future months?

Economists at the big four banks have forecast that the cash rate will peak at either 3.85% or 4.10% in the months to come (so, just one or two more cash rate hikes to go).

Assuming you’re an owner-occupier with a 25-year loan, here’s how much more you could be paying each month if the cash rate reaches 4.10%:

– $500,000 loan: approximately $75 extra per rate rise = up $1135 from 1 May 2022, to a total of approximately $3,470 per month.

– $750,000 loan: approximately $112 extra per rate rise = up $1702 from 1 May 2022, to a total of $5,200 per month.

– $1 million loan: approximately $150 extra per rate rise = up $2280 from 1 May 2022, to a total of $6,950 per month.

Worried about your mortgage? Get in touch

Despite today’s reprieve, there’s no denying that a lot of households around the country are feeling the pain after 10 successive rate rises.

There are also lots of people on fixed-rate home loans wondering what options will be available to them once their fixed-rate period ends.

Some options we can help you explore include refinancing (which could involve increasing the length of your loan and decreasing monthly repayments), debt consolidation, or building up a bit of a buffer in an offset account ahead of more rate hikes.

So if you’re worried about how you might meet your repayments going forward, give us a call today. The earlier we sit down with you and help you make a plan, the better we can help you manage any further rate hikes.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

We all know being on our monetary best behaviour can help to land a home loan. But did you know there are common spending habits you may have that are red flags to lenders?

Smart money management and cutting back on expenses can help your home loan application. That’s no secret.

But a bit of measured discretionary spending can add a little spice to life. We’re human after all. And lenders will see this as normal.

However, there are certain spending habits and types of transactions that can be a red flag to lenders. And these may hinder your chances of home loan approval.

Check out our list of potentially problematic spending habits below; avoiding them just might make all the difference when you apply for your next home loan.

PayPal transactions

There’s nothing inherently wrong with using PayPal. It’s often a convenient and safe way to make online purchases.

But many expenses that lenders may scrutinise, such as online gambling, and other unmentionable vices, use PayPal with vague descriptors.

This makes it easier to hide spending habits some may not want the world to know about.

And even if your PayPal spending is mundane, if the descriptions are vague, lenders may still raise an eyebrow.

Purchases through bank accounts on the other hand make it easier for lenders to see your spending habits when assessing your application.

Buy now, pay later

It can be tempting to use a buy now, pay later (BNPL) service to splurge on a new outfit and leave future you to stump up the cash.

However, even though BNPL services aren’t traditional credit products, they can still affect your credit score.

That’s because when you apply for a BNPL service, there’s a chance it may be recorded as an enquiry on your credit report – and these enquiries may impact your credit score.

Worse still, a few missed payments later and that purchase may not seem like such a hot idea – BNPL services can notify credit reporting agencies that you’ve defaulted on a payment, leaving you with a blemish on your credit report.

Last but not least, the Australian Prudential Regulation Authority (APRA) recently amended its framework to include BNPL debts in the reporting of debt-to-income (DTI) ratios.

And a high DTI can lessen your home loan borrowing capacity, or even lead to rejection.

Dipping into savings too often

Having regular savings locked away, untouched, and accruing interest … well, that can make lenders smile when assessing your mortgage application.

But as we all know, life happens. Unexpected expenses may crop up that require you to dip into your savings.

This isn’t the end of the world when applying for a mortgage, but pinching too much from your piggy bank might get lenders thinking that you’re unable to put money aside and budget.

This could lead lenders to believe that you will struggle to make regular repayments.

Store credit cards

Many stores will entice you with swanky perks in return for signing up for their credit card. But often, when you look past the interest-free period sparkle, the interest rates are rubbish.

One or two forgotten payments can really end up costing you.

Also, lenders may view having a multitude of store cards as “fishing for credit” – sourcing credit from different places may make it look like you’re scrambling for money.

And every time you apply for a store credit card, your credit report is pinged, which as mentioned previously, can harm your overall score.

Frequent large ATM withdrawals

Some people still prefer to use cash, which is fine. But keep in mind that in the eyes of lenders it may make your spending habits hard to track.

Lenders may question your withdrawals. If you have a fair explanation, and possibly some supporting documentation, then cash withdrawals likely won’t have a negative effect on your application.

However, keep in mind that withdrawing a few hundred dollars every Friday night at the local service station or bottleo ATM isn’t a great look.

Get your ducks in a row

Nobody likes the sting of rejection.

But fear not because we’re experts in helping people shape up their finances for a schmick mortgage application.

So if you’re thinking about buying but are worried about how some of your recent transactions or money habits might look to a lender, get in touch today and we can help you start to smooth things out.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

Home loan headlines have been, let’s face it, a bit of a downer of late. But the good news is that first-home buyers are now reaching their 20% deposit goal faster.

First home buyers have been delivered a bit of well-deserved good news with the findings of the 2023 Domain First Home Buyer Report.

The analysis shows that first-home buyers aged between 25 to 34 are hitting their house deposit saving goal more quickly compared to April 2022 – a month before the first of ten consecutive cash rate hikes.

State-by-state breakdown

Sydney experienced the biggest decline – a whopping 17-month drop in average deposit-saving time frames, with it now taking 6 years and 8 months to save a deposit compared to 8 years and 1 month in April 2022.

Brisbane (now an average of 4 years to save a deposit) and Canberra (now 6 years) came in second, both experiencing a 14-month drop.

Melbourne (now 5 years 7 months) and Darwin (3 years 6 months) came next, both with an 11-month decrease in saving periods.

Hobart (5 years 8 months), Perth (3 years 7 months) and Adelaide (4 years 9 months) all saw smaller drops of 5 months, 2 months and 1 month respectively.

Why is it quicker to save a deposit now?

Well, 2022 saw a steady decline in national house prices in response to increasing interest rates. In January 2023, CoreLogic reported a record national home value decline of 8.40%.

And as property prices fall, so too does the cost of your 20% deposit.

Also contributing to the shorter savings periods is ABS data showing that wages have grown in both public and private sectors, while the unemployment rate is hovering at a low 3.5%. Rate hikes meanwhile have seen savings accounts accrue more interest.

Overcoming potential challenges

Despite the promising new CoreLogic findings, saving a 20% deposit can still be a stretch for many.

The increased cost of living means just paying for essentials takes a big chunk of the paycheck, leaving less for savings.

And with home loan interest rates on the up, borrowing capacity has dropped and mortgage serviceability can be difficult.

Also, CoreLogic has reported that house prices have begun to stabilise.

So, as a first-home buyer, how can you speed up the buying process?

Get in on government incentives

Taking advantage of government schemes can speed up your home-buying journey by 4 to 4.5 years, on average.

For example, the First Home Guarantee could see you paying a deposit of just 5% while avoiding an eye-watering lenders’ mortgage insurance fee.

But you’ll have to be quick because spots are limited and can disappear quickly. The next allocation period in July is creeping up, so getting on board with a mortgage broker (like us!) ASAP is a good idea.

We’ve got the know-how to get your First Home Guarantee application on track.

And, we can see if you’re eligible to maximise your savings by combining other government incentives.

Find out more

If you’re ready to take the plunge and buy your first home we can help get a plan in place to make it happen.

We’ll calculate your borrowing power, assess your finance options, and assist in taking advantage of government incentives.

Call us today.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.