Negative gearing is a term often tossed around in property investment circles, but what does it actually mean? Understanding this concept is crucial if you’re considering adding property to your investment portfolio. Let’s break down what is negative gearing and why many Australian property investors opt to use this financial strategy. We’ve written this guide with the basics to start you on your informed property investment journey. Read on to learn what is negative gearing and how it works.
How Does Negative Gearing Work?
How does negative gearing work? The loss you incur from your investment property can offset your taxable income from other sources, such as your salary. This reduces the amount of tax you pay. While you’re out of pocket in the short term, and you must cover the property expenses during the year, the hope is that the property’s value will increase over time. This potential capital gain can then be used to offset the losses incurred through negative gearing.
Why You Should Know About Negative Gearing
Having negative gearing explained in a way you understand is crucial for making informed investment decisions. It’s a complex strategy with potential benefits and drawbacks. That’s why seeking professional advice from a mortgage broker like Professional Lending Solutions is essential. We can help you assess your financial situation, investment goals, and risk tolerance to determine if negative gearing is right for you.
Negative gearing is just one piece of the property investment puzzle. It’s important to consider other factors like property location, rental yields and potential capital growth when making your investment decisions.
Negative Gearing Explained: A Real-World Example
Let’s look at a hypothetical example of negative gearing.
Scenario
- You purchase a property for $500,000.
- You borrow $400,000 with interest-only repayments of $24,000 per year.
- You rent the property for a rental income of $20,000 per year.
- Other expenses (rates, body corporate, property management, repairs) total $8,000 per year.
Calculations
- Rental income: $20,000
- Expenses:
- Interest: $24,000
- Other expenses: $8,000
- Total expenses: $32,000
- Negative gearing loss: $32,000 – $20,000 = $12,000
In this example, you have a loss of $12,000 on the property. However, this loss can be claimed as a tax deduction, reducing your taxable income by $12,000. If your marginal tax rate is 32%, this equates to a tax saving of $3,840.
Important Notes
- This is a simplified example and doesn’t account for all potential costs or income.
- Tax laws and rates can change.
- Negative gearing is a long-term strategy and property values need to increase to offset the ongoing losses.
Would you like to learn more about the potential benefits and risks of negative gearing? Or perhaps you’re interested in exploring other property investment strategies? Contact Professional Lending Solutions for a chat about your needs and financial goals today.
Phil’s journey from banking to mortgage brokering reflects a career driven by a commitment to personalised service and tailored financial solutions. With a distinguished background in banking, including roles at NAB, ANZ and Lloyds TSB Bank in the UK, Phil spent 12 years developing expertise in personal and commercial finance, while also completing a Bachelor of Business (Finance), followed by an MBA majoring in International Business.
Securing competitive home loan interest rates is an essential step for anyone buying a property. But considering over 100 different lenders in Australia are offering almost 4,000 different mortgage products, how are you supposed to find the best home loan interest rates?
The key is to find interest rates from a wide range of lenders and then compare them. If this sounds like an awful lot of work, then don’t worry – that’s what mortgage brokers are for! But first things first. What should you know about home loan interest rates in Australia? Why is an accurate comparison so important? And how can a mortgage broker save you time and money when it comes to interest rates?
Understanding Home Loan Interest Rates Australia
Interest rates are the cost of borrowing money from a lender, expressed as a percentage of the total loan. They determine how much interest you’ll be required to pay the lender over the life of the loan. The higher your interest rates, the higher your monthly repayments will be.
The most common types of interest rates are:
- Fixed Rates: When your rate is locked in at a set amount for a specified period (usually 1-5 years). Fixed rates are great for borrowers seeking stability.
- Variable Rates: These will move up or down in response to market conditions. This means you could end up paying less interest if rates fall but more if they rise.
- Split Rates: This is when a percentage of your loan has a fixed rate, and the remaining portion is variable, offering a good balance between flexibility and stability.
Interest rates are heavily influenced by the Reserve Bank of Australia (RBA), which sets the official cash rate. However, individual lenders may also choose to adjust their rates based on their operating costs, risk assessments and what kind of competition they’re facing from other lenders.
How to Compare Home Loan Interest Rates
How can you accurately compare home loan rates to ensure you’re getting the best possible deal?
Step 1: Research Loan Options
You’ll need to collect information on the various loan products being offered by banks, credit unions and online lenders.
Step 2: Understand Comparison Rates vs. Advertised Rates
Advertised rates are what lenders use to attract new borrowers, but they often won’t include all the associated loan costs. You can get a more accurate picture by considering the comparison rates, which will also include any additional fees and charges. These added costs (such as monthly fees, application fees or discharge costs) can significantly add up over time, so it’s important to include them when comparing loan products.
Step 3: Assess Loan Features
Loans come with a variety of different features, such as offset accounts, redraw facilities or flexible repayment options. These features may incur additional costs, so evaluate what features offer the greatest financial benefits.
Step 4: Use a Loan Comparison Calculator
A loan comparison calculator is an online tool that can help you evaluate a shortlist of loan products side-by-side.
Step 5: Consider Future Rate Changes
If you’re considering a variable interest rate, think about how future rate increases might affect your repayments. Will you still be able to service the loan if interest rates were to substantially increase?
Step 6: Seek Professional Advice
An experienced mortgage broker can quickly and effectively compare loan products from an extensive panel of lenders (they may even have access to exclusive deals). Brokers can give you expert advice tailored to your specific financial situation and will make recommendations based on your compatibility with set lending criteria.
How to Get the Best Home Loan Interest Rates
Securing a competitive rate is crucial for affordable homeownership. To ensure you get the best home loan interest rates to suit your needs, contact a mortgage broker. At Professional Lending Solutions, we can help you look beyond the headline rates to understand the total cost of the loan, saving you a whole lot of time and money.
Contact Professional Lending Solutions today, then sit back, relax and let us do all the hard work for you.
Phil’s journey from banking to mortgage brokering reflects a career driven by a commitment to personalised service and tailored financial solutions. With a distinguished background in banking, including roles at NAB, ANZ and Lloyds TSB Bank in the UK, Phil spent 12 years developing expertise in personal and commercial finance, while also completing a Bachelor of Business (Finance), followed by an MBA majoring in International Business.
Hey there first home buyers, if you are asking, “How much can I borrow for a house purchase?” then you have come to the right place! If terms like “borrowing power” and “credit score” make you feel a little overwhelmed, we get it. First-time home buyers can’t be expected to know everything about how to buy a home or get a home loan with no experience. In this blog, we’ve outlined what borrowing power is, along with some other first home buyer basics.
After reading, you’ll likely have more questions…and that’s ok! You can book a chat with one of our expert brokers and we’ll guide you through the process from start to settlement.
How Much Can I Borrow?
As new home loan commitments rise again this year, first-time home buyers are seeing a lot of competition in the housing market. Understanding your borrowing power is crucial so you can make confident offers and secure a property. The good news is, knowing “how much can I borrow for a home loan?” doesn’t have to be complicated.
How Is Borrowing Power Calculated?
Lenders use a number of factors to determine how much money they will lend you for a home loan. These factors include:
- Income: All income of loan applicants is factored into the final calculation.
- Expenses: These include household living costs, debts (including credit cards and student loans) and any other financial commitments. The lower your expenses, the higher your potential borrowing power.
- Savings: A healthy deposit saved in a bank account shows you’re responsible with money and reduces the amount you need to borrow.
- Credit history: A good or excellent credit score shows lenders you can manage debt responsibly.
Let’s Get Calculating!
While nothing beats talking to a mortgage professional, an online borrowing calculator is a great start to give you an idea of your borrowing power. These calculators typically ask for your income, expenses and desired loan term. Based on this info, they provide an estimated borrowing limit.
Home Loan Basics
Saving up: Aim for a 20% deposit, and if you have less, Lenders Mortgage Insurance is available.
First Home Buyer Grant: People buying their first home in Queensland can access a government grant.
Extra costs: Some extra costs that can’t be rolled into your loan can include stamp duty, legal and conveyancing fees and building and pest inspections. You’ll also have council rates, utilities and home insurance costs as part of your ongoing home ownership costs.
Loan options: Many different loan types are available including fixed vs variable interest rate loans and different loan features (like offset accounts).
Pre-approval: Lender pre-approval shows sellers you’re a serious contender and streamlines the offer process.
Getting help: A mortgage broker can help you compare lenders and find the right loan deal for your situation.
Next Steps
Phil’s journey from banking to mortgage brokering reflects a career driven by a commitment to personalised service and tailored financial solutions. With a distinguished background in banking, including roles at NAB, ANZ and Lloyds TSB Bank in the UK, Phil spent 12 years developing expertise in personal and commercial finance, while also completing a Bachelor of Business (Finance), followed by an MBA majoring in International Business.
Thinking of buying a house and wondering if an online home loan calculator can help you? Buying a house is an exciting time, but navigating the mortgage process can feel daunting, especially when it’s your first time. Professional Lending Solutions is here to guide you, and a powerful tool to get you started is our suite of free online loan calculators (also known as a mortgage calculator or loan repayment calculator).
What is a Home Loan Calculator?
A home loan calculator is a free, online tool that helps you estimate your monthly mortgage repayments. Simply enter some basic details like the loan amount, interest rate and loan term, and the calculator will provide you with an estimated monthly payment amount.
How Can a Home Loan Calculator Help You?
Here are just a few ways a mortgage calculator can be your secret weapon when it comes to finding the right mortgage:
Understanding your potential monthly repayments is crucial. These online calculators help you determine if a particular house price fits comfortably within your budget or if you need to re-evaluate your price range.
Thinking about a fixed or variable interest rate? Mortgage calculators allow you to explore how different interest rates can impact your repayments before you lock any loans in.
Wondering how repayments will differ comparing a 30-year loan length to 35 years? The calculator will show you how the loan term affects your monthly payment and total interest paid by inputting different numbers into the fields.
Thinking about making additional payments towards your mortgage to pay it off faster? There are special calculators online that can show you how much you could save in interest by paying extra amounts on top of your regular repayments.
Benefits of Using a Mortgage Calculator:
- Free and easy to use: Home loan calculators are readily available online and require no financial commitment.
- Empowering information: Gain confidence by understanding the financial implications of different mortgage options for buying a house before you speak to anyone.
- Informed decisions: Be prepared for your meeting with a mortgage broker with a clear understanding of your affordability range.
Using a home loan calculator is just the first step. While a home loan calculator is a valuable tool, it’s important to remember it only provides estimates. For a personalised assessment and expert guidance throughout the home buying process, contact Professional Lending Solutions. Our experienced mortgage brokers will work with you to find the perfect home loan solution for your unique needs and financial goals.
What Types of Online Finance Calculators Are Available?
At Professional Lending Solutions, we are committed to helping you with the right finance for your personal circumstances. That’s why we provide a number of online loan calculators to start your journey so you can get an understanding of what is possible for you. Once you’ve had a look at the calculators, you can book in for a free consultation with us to see how we can help you.
Available on our website are the following calculators:
Home Loan Repayment Calculator:
Estimates your monthly mortgage payments based on loan amount, interest rate and loan term.
Borrowing Power Calculator:
Helps you understand how much you can potentially borrow for a home loan based on your income and debts.
Stamp Duty Calculator:
Estimates the government tax you’ll pay when purchasing a property.
Extra Loan Repayment Calculator:
Shows how extra payments towards your loan can save you interest.
Loan Comparison Calculator:
Compares the features and costs of different loan options.
Budget Planner Calculator:
Assists you in creating a realistic budget for your monthly expenses.
Deposit Planner Calculator:
Estimates how much time it might take to save for your desired home deposit.
Car Loan Calculator:
Calculates your estimated monthly car loan repayments based on loan amount, interest rate and loan terms.
Get Started Today!
Use our free home loan calculator to get a sense of your affordability, and then contact Professional Lending Solutions to schedule a consultation with a qualified mortgage broker. Let’s turn your dream of Gold Coast homeownership into a reality!
Phil’s journey from banking to mortgage brokering reflects a career driven by a commitment to personalised service and tailored financial solutions. With a distinguished background in banking, including roles at NAB, ANZ and Lloyds TSB Bank in the UK, Phil spent 12 years developing expertise in personal and commercial finance, while also completing a Bachelor of Business (Finance), followed by an MBA majoring in International Business.
When talking about owning an investment property, some folks might feel as if this kind of financial goal is too far out of their reach…they just seem too expensive. This is especially the case since rising interest rates started putting added financial pressure on many Australian homeowners. Throw in the rising cost of living and escalating inflation, and getting finance for an investment property loan might seem like a total pipe dream.
However, with the right approach and a clear understanding of the current economic landscape, buying a property for investment is possible…without breaking the bank!
In fact, what if we were to tell you that it could cost you less than $20,000 per year to invest in a $700,000 property in Queensland?
Does that sound too good to be true? We promise you, it’s not! Let’s explore how you can secure a property for investment in Queensland for a surprisingly affordable amount.
Just a little caveat before you proceed: this may not be applicable to everyone. So please chat with us if you are interested and we can help assess your specific circumstances.
Has the Australian Investment Property Market Changed?
With so much news speculating about interest rate rises and mortgage pain, we know you might be feeling uneasy at the moment. But it’s also important to remember that the Australian property market has historically moved in cycles – essentially, what goes down will always come back up again. This is one of the reasons why we know property funding in the current economic climate is not necessarily out of reach.
According to a report published by Westpac in 2019, Australian property has seen an average growth rate of 6.3% over the last 150+ years. So, for a property valued at $700,000, investors can potentially anticipate appreciation of $44,100 in the first year alone (based on the historical average). However, in recent years, this appreciation has escalated, with the median house price on the Gold Coast increasing by 21.2% per cent over the 3 years leading up to January 2024. If property prices continue to climb at the same rate, that would deliver a potential increase in value of $148,400 over just 3 years.
What are the Costs of Buying an Investment Property?
When it comes to buying a property for investment, it’s important to consider both the initial purchase costs and the ongoing costs involved in owning the property. Initial purchase costs typically include:
- Stamp duty
- Title search fee
- Mortgage registration fee
- Building and pest inspections
Stamp duty in Queensland is based on the purchase price of the property, as well as whether you’re a first home buyer, an owner-occupier or an investor. An estimate of stamp duty costs can be determined using an online calculator. For an investor buying a $700,000 property in Queensland, the estimated stamp duty payable would be $24,525.00.
Let’s just say that on average, initial purchase costs are equal to around 5% of the entire property value. For a $700,000 property, this means $35,000 in initial purchase costs. As you can see, this figure is largely determined by the stamp duty cost. However, these initial purchase costs can go higher depending on which state your property is located in.
For instance, a property located in South Australia with the same purchase price will have stamp duty costs of around $32,330. And that’s just your starting cost – you’ll still need to add in the title search fee, mortgage registration fee and the cost of pre-purchase building and pest inspections (which can range in cost between $300 to $1,100).
What are the Ongoing Costs of Owning an Investment Property?
What about the ongoing costs of owning and maintaining a property for investment? These may include:
- Building insurance
- Landlord insurance
- Property management fees
- Council rates
- Strata or Body Corporate fees
- Repair costs
- Ongoing maintenance costs
- Utility costs
A modest estimate of these costs would be 1% of the total purchase price. For a property valued at $700,000, this would be about $7,000 in ongoing annual costs.
How Will Investment Property Mortgage Rates Impact Repayments?
Securing competitive investment property mortgage rates will help to reduce the ongoing cost of owning your investment. As of May 2024, the average mortgage rate on a 5-year fixed-rate mortgage is 6.54%. According to our home loan repayment calculator, this means that for a property valued at $700,000, your annual mortgage costs will amount to $53,316 for the next five years.
This calculation is based on home loan solutions where the investor pays principal and interest repayments to reduce debt over time. And given the Reserve Bank of Australia hasn’t ruled out further interest rate rises over the coming months, we can’t rule out the possibility that interest rates will continue to go up as the year progresses. We are watching the RBA decisions closely to give our customers the very latest and best advice on home finance.
Note: Borrowing the full property purchase price means you may have to use equity from another property or secure a guarantor loan. If you are able to get funding for an investment property loan with a cash deposit, then your loan and mortgage repayments will be smaller.
How to Make Money on an Investment Property in Queensland
Now, here is where we explain the benefits of owning a property for investment and the legal tax trick you can use to reduce costs.
Investing in property often requires taking on a sizable investment property loan with a long-term mortgage commitment. However, there can also be huge financial benefits that come with owning a property for investment purposes. On top of your asset growing in value over time, you can also earn passive income through rent.
For example, rental properties on the Gold Coast had an average rental yield of 4.98% during 2023. For a property worth $700,000, this works out to be $34,860 in rental income generated per year.
Understanding Tax Deductible Property Costs
If you’re incurring expenses on your investment property that are higher than your income, you can leverage your marginal tax rate and claim this amount as a tax deduction.
For the 2023-2024 tax year, the marginal tax rate for Australians earning between $45,001 – $120,000 will be 32.5%. This means that you can claim 32.5 cents tax payable for every dollar your investment property costs you (please note that this amount does not include Medicare levy or the impact of tax offsets such as LITO or LMITO).
What this basically tells us is that you will get at least a third back of whatever you pay, which will definitely help reduce the after-tax cost of managing your property. You can also get a bigger tax return if your income is higher than the specified income threshold.
Sample Costs of an Investment Property in Queensland
Okay, now that we’ve sorted out the average costs and potential tax deductions, it’s time to crunch some numbers.
Purchase Costs: $735,000
- Property value: $700,000
- Upfront purchase costs at 5%: $35,000
Ongoing Income: $34,860
- Gross rental yield: At 4.98% per annum
Ongoing Costs: -$60,316
- Ongoing property expenses at 1%: -$7,000
- Total mortgage payments: -$53,316 ($45,780 in interest)
Cashflow Cost/Net Income: -$25,456
- Cashflow cost/net income: Total costs – ongoing income
Tax Refund: $5,824
- Tax refund: Loan interest + annual expenses x 32.5%
Average Annual Property Growth Rate: $44,100 per annum
- Average annual growth: 6.3% historical average
Net Annual Costs After Tax: $19,632
Net Annual Benefit: $24,478
A Summary of Sample Costs
Feeling confused? Ok, let’s break it down into something a bit simpler:
If you own a $700,000 property on the Gold Coast, the investment will generate approximately $34,860 in rental income each year. However, ongoing expenses would total around $60,316 annually. This leads to a net cash outflow of $25,456 per year. However, you can expect a tax refund of $5,824 due to negative gearing. As a result, the overall net cost of owning the property amounts to $19,632 per year. And if you factor in property appreciation (6.3% long-term average), your investment is actually growing by about $24,478 per year.
One last caveat: these figures are based on a number of assumptions, and interest rates are ever-changing. That said, there is a potential for substantial annual benefits from this hypothetical Queensland property.
If this has piqued your interest in property ownership, talk to your local lending brokers to get funding for property development.
Talk to a Broker About an Investment Property Loan
The Reserve Bank of Australia hasn’t ruled out raising the official cash rate again, which in turn would increase the interest rates all across the country. There is a lot of uncertainty in the economy at the moment, and talking to credible finance brokers will definitely help you gain clarity around your financial circumstances and what you can afford when it comes to buying an investment.
Our highly experienced Gold Coast mortgage brokers would be more than happy to sit down with you to discuss your investment goals. We’ll happily answer questions, work out the maths and help you evaluate your best loan options for securing an investment property.
If you’re interested in obtaining an investment loan, but you’re not quite sure where to begin, start by booking a free consultation with one of our experienced investment brokers.
Phil’s journey from banking to mortgage brokering reflects a career driven by a commitment to personalised service and tailored financial solutions. With a distinguished background in banking, including roles at NAB, ANZ and Lloyds TSB Bank in the UK, Phil spent 12 years developing expertise in personal and commercial finance, while also completing a Bachelor of Business (Finance), followed by an MBA majoring in International Business.
Are you a nurse or midwife looking to buy your first home or investment property? Are you feeling anxious about rising property prices and the intimidating obstacle of getting approved for a mortgage? If so, we have some exciting news: we’ve got 90% LVR home loans for nurses and midwives available! And here’s the kicker: there is no Lenders Mortgage Insurance (LMI) required!
Yes, that means you get to hang on to more of your savings to help cover any additional purchase costs. Keep reading to learn more about these unbelievable deals and how YOU can benefit from them today!
Why Do Lenders Offer Special Home Loans for Nurses and Midwives?
What Are the Benefits of Home Loans with No LMI for Nurses?
The LVR is a measure used by lenders to assess the risk of a mortgage. They compare the amount of the loan with the appraised value of the property being purchased. For example, if you have a deposit that is equal to 25% of the total purchase price, then you only need to borrow the remaining 75%. This means your LVR is 75%.
- Will only have to pay a deposit as low as 10% of the purchase price.
- Won’t have to pay the Lenders Mortgage Insurance, which can save you thousands!
- May be able to access exclusive discounts through the lender’s partnership with relevant industry organisations.
- Can benefit from a streamlined application process tailored to suit the unique financial situation of healthcare workers.
For example, imagine you wanted to buy a house on the Gold Coast worth $750,000. To apply for a mortgage with a 20% deposit, you’d need to save up $150,000 in cash. But by accessing a specialised home loan for nurses with a 90% LVR, you’d only need a deposit of $75,000. This means you could be buying your home a whole lot sooner!
Who Is Eligible for a Home Loan for Healthcare Workers Australia?
Nurses and midwives, previously considered to be more high-risk clients, are now eligible for the above benefits like most other medical professionals. To be eligible for a no LMI home loan for healthcare workers in Australia, a borrower must:
- Be an Australian citizen or approved permanent visa holder.
- Be a registered nurse or midwife.
- Be earning a minimum of $90,000 per annum (some lenders may accept 100% of your overtime income in this calculation).
- Have at least a 10% deposit saved.
- Have proof of genuine savings (the exact amount or percentage will depend on your choice of lender).
- Apply for a loan that is less than $1.35 million for metro locations, or less than $1 million for non-metro locations.
What is Required When Applying for Home Loans for Healthcare Workers?
To apply for a specialised home loan with no LMI for nurses and midwives, you must present one or more of the following documents:
- Your most recent Australian tax return.
- A copy of your Australian university degree or qualification.
- A copy of your registration with the Medical Practitioners Board of Australia or equivalent body.
- A printout from the Australian Health Practitioner Regulation Agency (AHPRA) online registry is acceptable, provided the registration is current.
You’ll also need to provide standard mortgage documentation, including current photo ID and proof of income.
What Other Mortgage Options Are Available with No LMI?
If you are not a healthcare professional, or you are looking for alternative home loans that won’t require you to pay LMI, the below options could be worth investigating further:
- Lawyers, accountants, engineers and other high-income earning professionals may qualify for specialised industry loan products offering LMI discounts and waivers.
- The First Home Guarantee allows eligible buyers to purchase their first home with a deposit as low as 5%, with no LMI required.
- The Family Home Guarantee lets single parents who are also first home buyers kickstart their homeownership journey by applying for a loan with as little as a 2% deposit, and no need to pay for LMI.
- The Government has also announced a proposed Help to Buy Scheme that is expected to launch in mid-to-late 2024. Under this new scheme, eligible borrowers will be able to secure a loan with a 2% deposit and no LMI. The government will contribute equity valued at up to 40%, reducing the overall value of the loan.
Talk to Professional Lending Solutions About Home Loans for Nurses
So, there you have it, nurses and midwives! If you’re looking to purchase your first home or if you’re considering buying an investment property, now could be the perfect time! These incredible 90% LVR home loans for nurses and midwives (with no LMI required!) will help to fast-track your home ownership goals without breaking the bank.
With specialised loan packages, personalised support and a wealth of experience, the team at Professional Lending Solutions are dedicated to helping nurses achieve their homeownership goals and secure their financial future. We’ll happily answer all your questions, assess your current financial situation and provide expert advice that will always be in your best interests.
Book an appointment with one of our dedicated mortgage brokers today and don’t miss out on these fantastic opportunities!
Phil’s journey from banking to mortgage brokering reflects a career driven by a commitment to personalised service and tailored financial solutions. With a distinguished background in banking, including roles at NAB, ANZ and Lloyds TSB Bank in the UK, Phil spent 12 years developing expertise in personal and commercial finance, while also completing a Bachelor of Business (Finance), followed by an MBA majoring in International Business.
Could the First Home Buyers Grant QLD help you buy your first home sooner?
It’s not easy being a first home buyer in 2024. According to a Senior Economist from ANZ, first-time buyers are currently facing some major hurdles, including rising prices, higher interest rates, inflation and escalating rents. Fortunately, there is some good news. Since November 2023, the QLD First Home Owners Grant has doubled in value.
What is the First Home Buyers Grant QLD?
The First Home Owners Grant (FHOG) is a government incentive aimed at helping Australians buy their first home. It offers eligible buyers a one-off financial grant to help manage the high costs associated with buying a first home.
The QLD First Home Owners Grant is designed to make homeownership more attainable for those who might be struggling to save for a deposit. By enabling first home buyers to purchase a home, this initiative helps young Australians to achieve greater stability and security in their lives.
Eligibility Criteria for the FHOG
To qualify for the FHOG QLD, applicants will first need to demonstrate that they meet the following criteria:
- You must be an Australian citizen or permanent resident aged 18 years or over.
- You can’t have previously received the grant or owned residential property in Australia.
- After settlement, you must move into the property within 1 year, and live there continuously for at least 6 months.
- You must be buying or building a new home (one that hasn’t been lived in by anyone else) with a total value of less than $750,000.
Certain exemptions to the above criteria may apply, under specific circumstances.
How Much is the First Home Owners Grant QLD in 2024?
For contracts signed prior to 20th November 2023, the grant for first home buyers was $15,000. However, for contracts signed on or after that date (up until 30th June 2025), the grant amount will increase to $30,000!
For owner-builders, the above dates refer to when the property foundations are laid, rather than to when the contract was signed.
First of all, make sure you’re eligible to apply for the grant. Do some research so you’re familiar with the criteria and you know what counts as a “new home”.
You’ll need to fill out an application form, available through the Queensland Revenue Office or an approved agent (such as a bank or non-bank lender). Along with your application, you’ll need to supply photo ID, evidence of income, a contract of sale and proof that you’re an Australian citizen or permanent resident.
The fastest way to secure the grant is by applying through your lender since they’ll be able to confirm your eligibility and then manage the application on your behalf. Alternatively, you can apply online through the Queensland Revenue Office.
Additional Assistance for First Home Buyers
In addition to the First Home Owners Grant, first-time home buyers may be eligible for additional assistance programmes, including:
- Stamp duty concessions.
- The First Home Guarantee.
- First Home Super Saver Scheme (FHSSS).
- Regional Home Building Boost Grant.
To find out more about additional assistance for first home buyers, talk to an experienced mortgage broker.
Ask Professional Lending Solutions About the First Home Buyers Grant QLD
The increased First Home Owners Grant QLD is a fantastic opportunity for savvy first-time home buyers. How can you make sure you don’t miss out? Start by getting the right advice.
At Professional Lending Solutions, our expert brokers specialise in guiding first home owners through the entire property buying process. From understanding eligibility criteria to navigating the application process, our team can provide tailored advice and support, every step of the way.
Take your first step towards homeownership with confidence. Contact Professional Lending Solutions today for expert assistance on how to access the First Home Buyers Grant QLD and secure your first home loan.
Phil’s journey from banking to mortgage brokering reflects a career driven by a commitment to personalised service and tailored financial solutions. With a distinguished background in banking, including roles at NAB, ANZ and Lloyds TSB Bank in the UK, Phil spent 12 years developing expertise in personal and commercial finance, while also completing a Bachelor of Business (Finance), followed by an MBA majoring in International Business.
Property development in Australia used to mean national corporations subdividing enormous parcels of land to create new suburbs. But times have changed. Thanks to property development loans, smaller-scale and even first-time investors can now enjoy the financial benefits of property development.
How to Finance Your Property Development
Whether you’re constructing a duplex on a vacant block of land or demolishing an older property to make way for 4 new townhouses, the key to a successful outcome is securing the right property development finance. According to a poll by CrowdProperty Australia, 56% of smaller developers listed securing project finance as their biggest hurdle.
So, what is a property development loan? And how much can you borrow when you apply for property development funding?
What Are Property Development Loans?
Property development loans are a specialised finance product designed for those planning a development project. Unlike a traditional mortgage, these loans are typically short-term and tailored to fund the construction or renovation of residential, commercial or mixed-use properties.
When considering a development loan application, lenders will look at a range of factors, including the project feasibility, the borrower’s financial stability and how likely it is that the project will turn a profit. This will then be used to determine loan eligibility and terms. Development finance generally offers more flexible repayment terms and can be structured to cover construction expenses, as well as the cost of purchasing land and any associated professional fees.
Residential Vs Commercial Property Development Finance
One of the main factors determining how much you can borrow for property development funding is whether your project is classed as residential or commercial.
- Residential Development: Residential finance can be used to fund residential properties such as single-family homes, townhouses or apartment complexes intended for private occupancy. If your proposed development is for four units or less, then this will usually qualify for residential finance (which has a simpler application process).
- Commercial Development: Commercial finance can be used for projects such as office buildings, retail spaces, industrial complexes or mixed-use developments. Commercial developments usually cater to both businesses and tenants, making the application more complicated.
While residential and commercial property development finance are both similar, lenders are usually a lot more conservative when it comes to approving commercial loans. This means you’ll need to supply a lot more paperwork for a commercial application and may face stricter lending criteria.
How Much Can You Borrow with a Property Development Loan?
How much you can borrow will depend on a range of factors, including:
- Type of project
- Your current financial standing
- Specific lender criteria
- Loan-to-Value Ratio (LVR)
The LVR is the loan amount shown as a percentage of the total project cost. Generally, lenders will allow you to borrow up to 80% LVR for smaller development projects and up to 70% LVR for larger ones.
For example, if you had a small residential project that was going to cost $1.5 million in total, you could potentially borrow up to 80% of that cost, or $1.2 million. The remaining 20% you would need to fund yourself, either with cash savings or with equity from another property.
Property Development Funding: Maximise Your Borrowing Capacity
Before applying for development funding, there are 4 simple steps you can take to maximise your borrowing capacity:
- Have a comprehensive business plan ready that highlights the project’s market demand and potential worth.
- Try to improve your credit rating by reducing debt, paying bills on time and increasing income and/or assets.
- Show that you’ve minimised risk by doing thorough market research.
- Talk to experienced development finance specialists for expert advice.
Talk to Professional Lending Solutions About Property Development Loans
Finding the right property development loans is essential for successful projects. Fortunately, this isn’t something you have to navigate on your own. At Professional Lending Solutions, our brokers can guide you through the borrowing process, negotiate favourable terms for your loan and connect you with lenders offering competitive financing options tailored to your project’s needs.
To find out more about how much you could borrow, book an appointment today.
Phil’s journey from banking to mortgage brokering reflects a career driven by a commitment to personalised service and tailored financial solutions. With a distinguished background in banking, including roles at NAB, ANZ and Lloyds TSB Bank in the UK, Phil spent 12 years developing expertise in personal and commercial finance, while also completing a Bachelor of Business (Finance), followed by an MBA majoring in International Business.
Buying a new car? Want to make sure you get the best deal to suit your needs? If so, a car finance broker could be the solution.
Car finance lending is at an all-time high, increasing to $1.4 billion by October 2023 (according to data from the ABS). This isn’t surprising considering how car prices have gone up post-COVID. But it means more people than ever are now searching for competitive car loans.
So, where should you go for car financing?
What is a Car Finance Broker?
A car finance broker is someone who can act as a middleman between a borrower and a lender. They’ll analyse your current financial situation, compare loan options from different lenders, negotiate for the best terms and help you with the paperwork.
The best thing about using a broker to apply for a car loan is that you know they’re working for you, not for the lender (or the car dealership!).
What Are the Advantages of Using a Broker for Car Loans?
Applying for car loans through a broker brings definite advantages, such as:
- Better Range: Brokers have established relationships with a panel of lenders, giving you access to a wider range of loans. This makes it easier to find a competitive loan that suits your needs.
- Expert Guidance: A broker provides expert advice tailored to your individual circumstances. They can help you understand complex loan terms and conditions so you can make an informed decision.
- Saving Time: A broker will take care of everything, including the paperwork, negotiations and follow-up communication with the lender. This will save you a lot of time and effort.
- Great Deals: Brokers negotiate directly with lenders to get the best possible rates and terms. They can do this because they have expert knowledge of the industry and pre-existing relationships with the lenders.
- Customised Solutions: When you use a broker for car financing, you won’t end up stuck with a “one-size-fits-all” loan. Instead, a broker can help you find a loan that meets your needs, whether that’s flexible repayment options, a longer loan term or a lower interest rate.
What Are the Disadvantages of Using a Broker for Car Financing?
There are some potential downsides to using a broker for your car loan, including:
Some brokers may charge an upfront fee for their services. To make sure you’re not paying more than necessary, look for a broker who won’t charge any added fees.
When using a broker, you’ll have to rely on them to manage the application and approval process. This means relinquishing some control so that they can liaise directly with the lender.
Many car dealerships will promote finance that allows you to drive away on the same day. Using a broker generally involves a few extra steps, so it can take longer for your finance to be approved.
Tips for Getting the Best Car Finance Deal
What can help you get the best finance deal for your needs? Try these simple tips:
- Improve Your Credit Score: A higher credit score can lead to better loan offers with lower interest rates.
- Set a Budget: Create a detailed budget to see how much you can comfortably afford to spend on a car loan payment each month.
- Get Pre-Approval: Loan pre-approval will help to establish your final budget and strengthen your negotiating power.
- Research: Do some basic research before meeting with a broker. This will help you have more meaningful discussions and make informed decisions.
Talk to A Car Finance Broker at Professional Lending Solutions
Can you trust a car dealership or a bank to put your best interests ahead of their own? Probably not. But brokers are legally obligated to always work in your best interests. So, you can have total peace of mind that you’re getting the best deal to suit you.
Ready to hit the road in your brand-new car? Book an appointment with our experienced car finance brokers at Professional Lending Solutions today.
Phil’s journey from banking to mortgage brokering reflects a career driven by a commitment to personalised service and tailored financial solutions. With a distinguished background in banking, including roles at NAB, ANZ and Lloyds TSB Bank in the UK, Phil spent 12 years developing expertise in personal and commercial finance, while also completing a Bachelor of Business (Finance), followed by an MBA majoring in International Business.
As a small or medium business owner, do you want to grow your business? If so, you’re going to need the right financing. How can you ensure you’re getting the best commercial finance to suit your needs? The key is to talk to a business loan broker.
Commercial Finance Vital for Australian Businesses
The Australian commercial landscape is dominated by small and medium businesses, providing jobs for 7.4 million Australians and contributing over $700 billion to the economy. For these businesses to succeed, they need finance. According to a government report, 15% of small or medium-sized businesses applied for finance in 2018-2019:
- 47% to maintain cash flow
- 41% to upgrade or replace existing capital
- 32% to invest in new capital
- 31% to enable business growth
- 27% to ensure the survival of the business
Clearly, commercial finance plays a vital role. But it’s not enough to just secure funds. For your business to succeed, you need the right finance.
How Can a Business Loan Broker Help You and Your Business?
A business loan broker is a financial expert who can help business owners secure funding from a bank or a lender. What are the benefits of using business finance brokers rather than just going straight to the lender? Here are 6 ways a business finance broker can help you and your business:
1. Business Loan Brokers Give You Access to More Lenders
If you apply for finance through your business banker, you’re limiting yourself to just a single lender. In contrast, business finance brokers have access to an extensive panel of lenders, including banks, credit unions and independent lenders. This means they can compare an extensive range of loan products, giving you access to the finance that will best suit your business needs.
2. A Business Finance Broker Can Provide Expertise and Guidance
Brokers are experienced professionals, often with extensive experience in the finance industry. This means they can explain the nitty-gritty details of a loan product and recommend which lenders will be most likely to approve your application. They can also advise which loan structures will be most beneficial for your unique situation.
3. A Business Loan Broker Can Save You Time and Money
To ensure you get the right business finance product with the most competitive terms, you’ll need to do some research. Attempting to do this on your own will take up a significant amount of time, with no guarantee of success. But a business loan broker can do all of the hard work for you, saving you time and money.
4. Business Finance Brokers Will Deliver Tailored Solutions
Business loan brokers will take the time to understand your unique business requirements. They can then recommend loan solutions tailored to your specific industry, operational requirements and goals for the future. Whether you need to upgrade equipment, manage your cash flow or expand the business, a broker can help you find the most suitable loan.
5. A Business Finance Broker Has More Negotiating Power
A business finance broker will already have established relationships with their panel of lenders. This puts them in a much stronger position when it comes to negotiating for specific terms or more competitive interest rates on your behalf.
6. Business Finance Brokers Will Offer Ongoing Support
A broker can continue to support your business, even after the loan has been finalised. They can answer any questions that might pop up, provide advice on refinancing opportunities and, should the needs of your business change, help you secure a new finance solution that better fits your new circumstances.
Talk to a Business Loan Broker at Professional Lending Solutions
At Professional Lending Solutions, our brokers specialise in helping business owners get the funding they need. By partnering with our experienced brokers, you can access finance solutions to help you manage cash flow, buy new equipment and grow your business. To get started, book an appointment with one of our business loan brokers today.
Phil’s journey from banking to mortgage brokering reflects a career driven by a commitment to personalised service and tailored financial solutions. With a distinguished background in banking, including roles at NAB, ANZ and Lloyds TSB Bank in the UK, Phil spent 12 years developing expertise in personal and commercial finance, while also completing a Bachelor of Business (Finance), followed by an MBA majoring in International Business.
What’s the difference between a home renovation loan and a construction loan? How do you decid which option is right for you? And what is the process for applying for renovation loans?
Australia is a nation of builders and renovators. At least, that’s what some of the latest data is saying. According to PropTrack, Australians build around 190,000 new homes each year on average. Australia also ranks third in the world when it comes to interest in home renovations per capita. So, it’s not surprising that we get so many enquiries about applying for a renovation loan or a construction loan.
In this article, we’ll look at the pros and cons of both types of loans and explain how to go about applying for a construction or home renovation loan.
Home Renovation Loan or Construction Loan?
When deciding between a renovation or the construction of a new home it’s important to first assess your specific needs and goals. Factors including budget, timing, location and the current property market will all need to be considered. Additionally, take time to weigh up the flexibility, potential cost savings and long-term investment value of both options.
The decision of whether to build a new home or renovate an existing one will often come down to personal preferences and lifestyle considerations. A thorough evaluation of all these elements will help you make an informed decision about which option will best suit your needs.
What Is a Renovation Loan?
A loan for renovation works is a short-term loan designed for home improvement projects. This could include a kitchen or bathroom renovation, roof repair, etc. A loan for renovation works is available from banks, as well as other lenders. The amount borrowed will vary depending on your proposed project and the lender’s specific requirements.
Unlike long-term mortgages, a loan for renovation works will typically have shorter repayment periods. This means you’ll be able to finance your renovation without committing to extended repayment terms. This aspect of a home renovation loan makes them a practical choice for homeowners seeking immediate improvements with manageable repayment schedules.
What are the Pros and Cons of Home Renovation Loans?
As with any major financial investment, it’s important to evaluate the various pros and cons before deciding what to do. When it comes to a loan for a renovation, some of these include:
Pros of Renovation Loans
- Flexible financing for a range of home improvement projects.
- They’re accessible for existing homeowners looking to upgrade.
- Potential cost savings (when compared to building a new house).
- Faster project initiation and completion.
Cons of Renovation Loans
- May not be suitable if the renovation involves extensive structural changes.
- There’s the potential for unexpected costs during renovations.
- Won’t always cover the full cost of major construction projects.
What is a Construction Loan?
A construction loan is a financial product designed specifically for building new homes from scratch, or for covering extensive, full-scale renovation projects. The purpose of a construction loan is to finance the various stages of building, from the initial permits through to completion.
Unlike traditional mortgages, construction loans provide funds in stages as the project progresses. The benefit of this is that you will only be charged interest on the portion of the mortgage that has already been paid out (not the total value).
What are the Pros and Cons of Construction Loans?
Construction loans can be very beneficial, but they do still have certain limitations. Some of the positives and negatives of construction loans include:
Pros of Construction Loans
- Allows you to build a brand new home tailored to your specifications.
- Potential access to government grants that can help offset costs.
- Ensures compliance with the latest building codes and energy efficiency standards.
- Provides a long-term investment with potential property value appreciation.
Cons of Renovation Loans
- Higher upfront costs and longer project timelines (a new build takes almost a year to complete, on average).
- Planning and coordination challenges.
- Limited negotiating power during the construction phase.
To find out more about renovation loans vs construction loans, book an appointment with an experienced mortgage broker.
Loan for Renovation vs Construction: What Else Should You Consider?
What else should you consider when evaluating whether to renovate an existing house or build a new home from scratch? In addition to weighing up the different finance options available, you’ll also need to think about:
- Current housing market conditions.
- Future resale considerations.
- Environmental and sustainability preferences.
- Personal preferences and lifestyle considerations.
With this in mind, what are some of the pros and cons of renovating an existing house compared to building a new home?
What are the Pros and Cons of Renovating an Existing House?
It’s exciting to start with an old home and remake it in your own vision. However, a renovation can have a huge impact on your lifestyle.
Pros of Renovations
- Your upfront costs will be lower since old houses tend to be cheaper.
- Some older homes are very solid as they were built to last generations.
- It’s easier to re-imagine a house with an existing framework.
- Renovating can significantly increase the value of the property in a short space of time.
- It’s possible to live in the property while renovations are underway (saving you money on rent).
Cons of Renovations
- There are often hidden costs to renovating that will only be uncovered once the project commences, e.g., plumbing issues, old wiring, etc.
- Some old homes may contain toxic materials like asbestos.
- Renovations are noisy, messy and can be quite stressful (particularly if you’re living at the property while works are in progress).
- There’s the risk of overcapitalising by spending more than the property will be worth.
What are the Pros and Cons of Building a New House?
It may seem more expensive at the outset to build from scratch; however, there are grants (especially for first home buyers) that can help offset some of these costs.
Pros of Building
- You can choose a design to suit your needs, without compromising to suit an existing structure.
- You won’t have to worry about hazardous substances or structural issues.
- Everything will be brand new, reducing initial maintenance costs.
- Improvements to the building code have made new homes more energy-efficient.
- You may qualify for government grants and stamp duty concessions to help offset construction costs.
Cons of Building
- There’s a bigger upfront cost.
- Planning a new house from scratch can be overwhelming.
- The project will generally take longer to finish compared to a renovation.
- You won’t be able to live at the property while construction is underway.
- You have limited negotiating power when buying a property off the plan or working with a builder.
How To Get a Home Renovation Loan
If you’ve built up sufficient equity in your existing home, then you may be able to refinance your existing home loan to fund your renovation. Alternatively, for a large-scale renovation or extension, you could take out a construction loan to cover the proposed renovation works. To determine which option is best, make an appointment to speak with a local broker.
The amount you can borrow for your renovation home loan is dependent on several factors, such as your current expenses, income and debts. Most lenders will base the size of your home improvement loan on your capacity to meet your minimum monthly repayments. To find out more about your potential borrowing capacity, try using an online calculator, or better still, book an appointment to speak with a broker.
Professional Lending Solutions: Experts in Renovation Loans
There’s a lot to consider when it comes to choosing between building a new house or renovating an existing one. The key to achieving your construction dreams is to make an informed decision based on expert advice.
At Professional Lending Solutions, we’re your go-to renovation loan specialists. We can answer all your questions, help you weigh up the relevant pros and cons and find the construction or home renovation loan that is best for you. Get in touch today so we can help make your renovation dream a reality.
Phil’s journey from banking to mortgage brokering reflects a career driven by a commitment to personalised service and tailored financial solutions. With a distinguished background in banking, including roles at NAB, ANZ and Lloyds TSB Bank in the UK, Phil spent 12 years developing expertise in personal and commercial finance, while also completing a Bachelor of Business (Finance), followed by an MBA majoring in International Business.
Should I Use a Car Loan Broker or Dealer Financing?
Thinking of buying a new car but don’t know whether to go with a car loan broker or dealer financing? If you are, then this article is something you should read.
There’s nothing quite like the excitement of buying a new car. Whether you’re looking for a reliable workhorse, a people-mover for your expanding family, or something a bit flashy to go with your recent promotion, buying a car can be exhilarating. But it can also cause a bit of anxiety.
Once the thrill of that first test drive wears off, reality sets in and, somehow, you have to pay for the thing! And for most Aussie car buyers, that means you have to make a choice – do you apply for dealer finance or talk to a car loan broker?
Gold Coast Car Loan Broker or Dealer Finance?
According to the Royal Commission into the Financial Services Industry, 90% of all car buyers in Australia use some form of vehicle finance. Of those that use finance, almost 40% will opt for dealership finance, while the rest use a variety of other sources (including online lenders and car loan brokers).
What’s the main difference between dealer finance and car loan brokers? Typically, a dealer will have a standing arrangement in place with a preferred lender. So, the car loan that they offer you will be the same loan that they offer to everyone else. In contrast, car loan brokers will have access to a panel of lenders, allowing for more choice and flexibility.
Obtaining New Car Loans Through a Dealership
Many car buyers opt for dealership finance purely for the on-the-spot convenience. It’s a fast and simple way to obtain new car loans. However, this speedy process doesn’t always allow time for an accurate assessment of your financial needs or a comparison of different loan products. So, before you decide between using a car loan broker or dealership finance, take a few moments to consider the pros and cons of both.
Car Dealer Financing Pros
- It’s fast and easy: You agree on a price, sign a few forms, and the dealer will sort out the rest. The dealer needs finance to be approved if they’re going to make their sale, so they’re highly motivated to push the loan through ASAP.
- It’s an option for buyers with low credit scores: Obtaining a new car loan usually involves a standard check of a borrower’s credit history. If your credit history is a bit spotty, you may have issues securing finance. However, some car dealerships may be able to help you secure finance, regardless of your current credit score.
Car Dealer Financing Cons
- You have less power to negotiate: When you organise finance through a dealer, you have limited power to negotiate for a better price. The dealer knows exactly how much you can get approved for, so there’s no motivation to lower the price.
- You have to put a lot of faith in your car dealer: How much do you trust the person trying to sell you this car? When they tell you this is the best car finance deal available and it’s in your long-term best interests, do you believe them? It can be hard to read between the lines when the person selling you the car is also the person organising your finance.
- You probably won’t get the best finance deal: When you apply for dealer finance, you’re missing out on an opportunity to compare loan products. This makes it almost impossible to ensure you’re getting the best deal to suit your needs, and it may end up costing you a lot more over the life of the loan.
Using Car Loan Brokers for Gold Coast Car Finance
Car Loan Broker Pros
- An expert does all the hard work for you: By working with a car finance broker, you gain the support of a skilled industry expert who is willing to do all the hard work for you. We’ll take care of the research, fill out the forms, and chase up the lender to prevent delays.
- You get access to a wide panel of lenders: Car loan brokers use sophisticated software to compare suitable loan products from a panel of lenders. We’ll compare loan fees, interest rates, features, and the loan term. This enables us to find you the best car loan to suit your needs.
- You have an advocate working in your best interests: Finance brokers are committed to working in your best interests. This means we’ll work hard to secure your loan approval, but we won’t compromise your long-term financial well-being. Instead, we’ll talk directly with your preferred lender, explaining any irregularities in your application and negotiating for the best possible loan terms.
- You can negotiate for a better price: By applying for a car loan pre-approval, you can find out exactly how much you can afford to spend on your new car. This gives you a lot more power when it comes to negotiating the final price of your car because your dealer knows you can’t be talked into paying more.
- You get personalised service: A car loan broker won’t just offer you the “one-size-fits-all” approach to car finance. This means you’ll not only receive a new car loan tailored to your needs, but you’ll also have someone willing to answer all your questions, discuss various scenarios, and find workable solutions to any roadblocks you might encounter.
Car Loan Broker Cons
- You need to plan ahead: The process for obtaining a car loan through a broker can be simple and fast, but it does require slightly more forethought (you can’t walk into the dealership and make a same-day purchase). This is why it’s a great idea to talk to us about pre-approval as soon as you start thinking about buying a car. That way, when you’re ready to make a purchase, you’ll have a faster turnaround time on your loan approval.
Access Multiple Lenders for the Best Car Loan Deals
A car loan broker’s diverse panel of lenders gives you access to a broad spectrum of financial solutions. This makes it much easier to tailor the finance product to your unique situation and preferences. Because we have an extensive lender network, we’re able to match clients with lenders accommodating various credit scores, income levels and financing needs. Whether you’re looking for competitive interest rates, flexible terms or specialised loan features, we’ll be able to help you find what you need.
This versatility is what distinguishes car loan brokers from dealership financing. The power to choose your lender makes it easier to gain the best possible loan terms for your needs.
Car Loan Broker vs. Dealer Finance: Which is Best?
To illustrate the benefits of using a car finance broker, consider the following scenario:
Sarah is a Gold Coast resident with an average credit score who wants to finance her dream car. With dealership finance, she would face limited options and a predetermined interest rate. In contrast, a car loan broker would assess her financial profile and provide access to a diverse network of lenders. By leveraging this panel, Sarah would be able to secure a competitive interest rate tailored to her budget and financial goals. The expertise of the broker would ensure transparency during negotiations with lenders, giving Sarah confidence that she’s getting the best possible deal.
Talk to a Car Loan Broker for Access to the Best Deals
New car loans can help car buyers transform a dream into a reality. But finding the best new car loans can present a challenge. At Professional Lending Solutions, our experienced team of car loan brokers is committed to finding you the best car loans to suit your unique circumstances.
We’ll compare a range of new car loans from our diverse panel of lenders and determine which loan products will be most suitable.
Don’t gamble on dealership finance. Book an appointment with a car loan broker at Professional Lending Solutions today for expert advice that you can trust.
Phil’s journey from banking to mortgage brokering reflects a career driven by a commitment to personalised service and tailored financial solutions. With a distinguished background in banking, including roles at NAB, ANZ and Lloyds TSB Bank in the UK, Phil spent 12 years developing expertise in personal and commercial finance, while also completing a Bachelor of Business (Finance), followed by an MBA majoring in International Business.
How Debt Recycling Can Help You Build Wealth
Have you ever heard of the term debt recycling? If you have, do you know what it’s for and how you can use it?
Australians appear to have a real love-hate relationship with debt. Everyone seems to agree that debt is terrible… until we’re offered a new credit card with “6-months interest-free”. As a nation, Australians now own a total of 17.7 million credit cards, with a combined national credit card debt of $40.57 billion.
This raises some serious questions about debt management. First of all, is all debt bad debt? How do you tell the difference between good debt and bad debt? What is debt recycling? Can you use debt recycling to build wealth? And how can a Gold Coast finance broker help you achieve an effective debt recycling strategy?
Is All Debt Bad?
It might sound crazy, but not all debt is necessarily bad. Now, not being able to repay your debt – that’s bad. Taking on more debt than you can handle can lead to a bad credit rating and a lot of unnecessary stress. In a worst-case scenario, you could even end up losing your home. But manageable debt that is helping you work towards a specific goal – now that can be a very good thing.
What Are the Different Kinds of Debt?
So, what are the different kinds of debt? While debt comes in various forms, it can be listed in three distinct categories:
Necessary Debt
This refers to debt that is for essential purposes (i.e., keeping a roof over your head). For debt to be classified as “necessary” it needs to be “reasonable and justifiable” (so, no, a jet ski does not count). Your home loan is a good example of a necessary debt. It’s not tax-deductible, but in the long run, it will result in you owning your own home (an asset that should increase in value over time). Another example would be HECS-HELP debt, which pays for your higher education.
Bad Debt
Bad debt is when you owe money, but you’re unlikely to see any real benefit once the loan is finally repaid. Credit card debt is a classic example of bad debt. Generally, you’re paying high interest on items that lose their value very quickly, possibly even by the time you’ve paid off the debt. Other examples of bad debt would include ‘buy now, pay later’ schemes and ‘payday loans’ (where you get a short-term loan with high interest).
Good Debt
Good debt is the kind that can help you achieve your financial goals and build wealth. For example, when you take out a loan on an investment property, you’re gaining debt. But the interest on that loan is tax-deductible (so it’s beneficial now), and it’s paying off an asset that is highly likely to increase in value over time.
What is Debt Recycling?
Understanding the difference between good debt and bad debt is crucial if you want to succeed at debt recycling. What is debt recycling? According to Michael Yardney (a multi-award-winning property investment advisor), debt recycling is “a sound investment strategy” that can help you build personal wealth.
Debt recycling is when you borrow against the equity in your existing property and then use those funds to invest in income-generating assets (such as an investment property). The debt is tax-deductible and provides an ongoing income (usually in the form of rent) which can then be used to cover the mortgage repayments. This cycle can then be repeated once you build up more equity.
Should You Use A Debt Recycling Calculator?
As with any kind of financial strategy, debt recycling involves a certain level of risk. One key element is ensuring that you can manage the added debt successfully. Because of this, some potential investors will use a debt recycling calculator to estimate their potential costs vs. returns.
While an online debt recycling calculator can be useful as an initial indicator, it’s important to keep in mind these tools are generic by design. This means that a debt recycling calculator can’t offer advice tailored to your financial situation.
This is why it’s a good idea to talk to an experienced mortgage broker before you decide to implement a debt recycling strategy.
How Can You Use Debt Recycling to Build Wealth?
A good debt recycling strategy involves taking necessary debt (your existing mortgage) and then using it to create good debt. Basically, the process works like this:
- You use the equity in your existing home as a deposit for an investment property loan.
- You buy an investment property.
- This investment property delivers immediate income (in the form of rental returns), which can then be used to service the loan repayments.
- You continue to pay off your investment property loan while also paying down your home loan. Both properties experience long-term capital growth, increasing the total value of your assets.
- By the time you’re ready to retire, you’ve paid off both loans, leaving you with a home you can live in and an investment property that will provide a steady income stream throughout your retirement.
How a Debt Recycling Strategy Works
This all sounds good in theory, but in practice, what would a debt recycling example look like? Consider the following debt recycling example:
Shannon is a homeowner in Brisbane with a $500,000 mortgage and $200,000 in home equity. Shannon talks to an experienced broker about debt recycling strategies and decides to use the available equity as a deposit for an investment purchase. Shannon buys a $400,000 investment property, rents it out, and uses the rental income to cover the loan repayments.
Over time, Shannon pays off both home loans in full, resulting in a debt-free home and an investment property that now provides an ongoing income stream. This strategic debt recycling approach allowed Shannon to leverage existing debt for wealth creation, which now funds a comfortable retirement. Shannon decides to celebrate by buying a boat.
A Gold Coast Finance Broker Can Help with Your Debt Recycling Strategy
Of course, any kind of significant financial investment should only be made after seriously considering your personal financial situation. But if you’re interested in obtaining an investment property loan and you’re not quite sure where to begin, start by giving me a call on Ph: 0421 934 033 or Ph: 07 5597 6049. As an experienced Gold Coast finance broker, I can explain in more detail exactly “what is debt recycling?” and help you evaluate the various pros and cons of this particular finance strategy.
Phil’s journey from banking to mortgage brokering reflects a career driven by a commitment to personalised service and tailored financial solutions. With a distinguished background in banking, including roles at NAB, ANZ and Lloyds TSB Bank in the UK, Phil spent 12 years developing expertise in personal and commercial finance, while also completing a Bachelor of Business (Finance), followed by an MBA majoring in International Business.
Home Loan Refinancing in 2024: Is It a Good Time to Refinance?
With interest rates rising (along with the cost of everything else!), it’s no wonder so many people are now showing interest in home loan refinancing. The Reserve Bank of Australia (RBA) has spent the past 18 months increasing the official cash rate in a bid to control inflation. From a historic low of 0.10% in early 2022, the cash rate just kept climbing!
By the time Christmas 2023 rolled around, the cash rate was sitting at 4.35% and thousands of Aussie homeowners were paying significantly more for their mortgages than they were back in 2021.
Aussie Homeowners Feeling the Pinch of Rising Interest Rates
As per the latest Finder survey, one in five mortgage holders (that’s over half a million Aussies) admit to struggling with their repayments once their interest rate increased by 3%. Of those affected, about 65% are concerned about defaulting on their home loan payments and around 145,000 said they might be forced to sell their homes in a worst-case scenario.
Despite these shocking statistics, an overwhelming 8.5 out of 10 Australians admit they haven’t taken any kind of action to remedy the situation.
How Much Would an Interest Rate Rise Cost You?
In another alarming statistic, 75% of Australians are unaware of how a cash rate increase would impact their household budget. To paint you a picture, here’s a real-world scenario using the PLS Refinance Home Loan Calculator:
Imagine you had a 30-year home loan with a balance of $650,000 and an interest rate of 2.6%. In this situation, your monthly repayments would be $2,603. But then your 4-year fixed term ends and the loan automatically rolls over onto the lender’s standard variable rate of 6.55%. All of a sudden, your monthly repayments would increase to $4,130. That means you’d be paying an extra $1,527 every month, or over $18,000 more in the first 12 months alone! This example illustrates why home loan refinancing is so important in 2024.
Fortunately, there is some good news. As interest rates have climbed, so have the number of Australians choosing to refinance a home loan (over 450,000 during FY23!). This has generated some serious competition amongst lenders, who have responded with some excellent home loan refinance offers.
To find out how much you could save with a home loan refinance, talk to an experienced mortgage broker.
How Can a Home Loan Refinance Help You in 2024?
Everything will be more expensive in 2024. Our grocery bills have gone up, our power bills have spiked, our insurance bills just keep climbing…and don’t even get me started on the cost of a takeaway coffee! But while these price hikes may be causing a little discomfort, the successive interest rate hikes are likely to trigger the greatest amount of financial stress for the average Australian homeowner.
But by regularly reviewing your home loan, you can check the competitiveness of your current rate against the home loan refinance rates now available. A mortgage broker specialising in home loan refinancing can help you lock in a competitive rate now so you can have peace of mind that you’re not paying too much over the months and even years ahead.
At Professional Lending Solutions, we encourage you to review your home loan annually with the help of a mortgage broker. A routine home loan refinance could save you as much as 1% in a year. And while 1% may not sound like much, it can translate into thousands of dollars of annual savings!
How Does Home Loan Refinancing Work?
When you refinance a home loan, you’re essentially taking out a new loan to pay off your old one. This new loan usually has a lower interest rate, which can save you a lot of money in the long run.
Home loan refinancing allows you to switch from a variable to a fixed interest rate, or vice versa. A variable interest rate will go up and down with the market, while a fixed interest rate will stay the same for the entire life of the loan.
Home loan refinancing also enables you to tap into any equity you may have built up in your property. This equity can be leveraged to get you better home loan refinance rates or cashed out to finance a renovation or new vehicle purchase.
One thing to keep in mind when it comes to refinancing and equity is your Loan to Value Ratio (LVR). The LVR shows how much of the property value you own (or how much equity you have) and what percentage is still covered by the mortgage. You’ll want to make sure you have at least 20% equity to avoid paying the Lenders Mortgage Insurance (LMI) on a home loan refinance.
Chat with a mortgage broker to find out how much equity you have and how it can benefit you when you refinance a home loan.
What are the Benefits of a Home Loan Refinance?
There are significant benefits to home loan refinancing. These include:
Lower Monthly Repayments
Refinancing allows you to lock in a lower interest rate, resulting in reduced monthly mortgage repayments.
Enhanced Financial Flexibility
Transitioning between variable and fixed interest rates can provide greater financial flexibility. It can also shield you from market fluctuations and provide added stability in the face of rising interest rates.
Long-Term Cost Savings
By capitalising on lower home loan refinance rates, you could achieve significant long-term cost savings (improving your overall financial situation).
Access to Home Equity
Home loan refinancing unlocks your ability to access equity in the property. This could help you achieve various financial goals such as debt consolidation or renovation projects.
Reduced Financial Strain
Reduced monthly repayments will help to alleviate financial strain, making mortgage commitments more manageable and minimising the risk of default.
Customised Loan Terms
When you refinance a home loan, you can often tailor the loan terms to suit your evolving financial circumstances. This ensures that your mortgage will continue to align with your future goals.
Debt Consolidation
Accessing equity through home loan refinancing could enable you to consolidate high-interest debts. This will help to streamline your finances and reduce overall interest payments.
Improved Financial Position
Overall, home loan refinancing is a strategic financial move that not only helps improve your current financial situation but also positions you for improved financial health and resilience.
Clearly, there are many benefits to a home loan refinance. However, as with any major financial decisions, it’s a good idea to seek expert advice. A mortgage broker can help you determine if any current home loan refinance offers are right for you.
When Can You Refinance a Home Loan?
The home loan market has seen significant change over the past 18 months, with new, more competitive products being offered constantly. Now is a good time to take advantage of these home loan refinance deals.
Are you trying to decide if you should refinance a home loan? The following situations are usually a good indication that it’s time to talk to a broker about refinancing a home loan:
- When you want to take advantage of ‘new customer’ home loan refinance rates
- When your introductory rate or honeymoon rate ends
- When your fixed term period ends
- When your economic circumstances change
- When you want to access equity in your home
- When you want more flexibility in your home loan
How Long Does It Take to Refinance a Home Loan?
How long it takes to refinance a home loan will usually depend on a few different variables. Mostly it will come down to how long it takes your existing lender to discharge your home loan to your new lender. On average, the total process will take 2-4 weeks (although, in some cases, it can take up to 6 weeks).
Talk to Professional Lending Solutions About Home Loan Refinance Offers
If you’re thinking about refinancing your home loan, NOW is the time to act. But that doesn’t mean you should just rush in and grab the first home loan refinance offer you see. It’s important to work with a professional who understands the current lending landscape.
At Professional Lending Solutions, our brokers are experts in comparing home loan refinance rates. We’ll analyse the various offers available and then make an impartial recommendation based on which home loan refinance offer is best for you. We’ll guide you through the entire process, from start to finish.
Let us help you take advantage of current home loan refinance offers. Get in touch today to discuss your home loan refinancing options with our friendly brokers.
Phil’s journey from banking to mortgage brokering reflects a career driven by a commitment to personalised service and tailored financial solutions. With a distinguished background in banking, including roles at NAB, ANZ and Lloyds TSB Bank in the UK, Phil spent 12 years developing expertise in personal and commercial finance, while also completing a Bachelor of Business (Finance), followed by an MBA majoring in International Business.
Guarantor Home Loan: Can Parental Guarantee Help You Buy a House?
Ever heard of a guarantor home loan? If you haven’t and you’re planning on buying your first home, then this article is for you. Now, picture this scenario.
You’ve been sticking to your budget; you’ve cut back on all non-essentials and you’ve been diligently saving for years…but it still feels like you’ll never be able to save that 20% deposit for a home loan. With a booming Gold Coast property market and skyrocketing interest rates, the goal of owning a home may feel like it’s drifting further and further away. As a result, many prospective first home buyers are now looking to their family for help. How can parents help first home buyers get a mortgage? A guarantor home loan could be the solution.
Gold Coast Property Prices Booming
Property prices on the Gold Coast have boomed recently, thanks to a surge in interstate and overseas migration. In 2021, the Queensland property market was one of the strongest performing in the country, with increases of over 30% in multiple locations. While this phenomenal growth has since slowed, we’re still seeing property prices increase. In
September 2019, the Gold Coast’s median house price was $642,000. By February 2023, it was $945,000. That’s an increase of 47.2% in less than 3.5 years! For first home buyers trying to save a 20% deposit, this increase in property prices has moved the bar of homeownership about $60,000 higher.
Add to this the significant increases in rent costs and grocery bills across the country, and it’s easy to see why it now takes 10 years on average to save a 20% deposit. But with a guarantor mortgage, you could buy your first home without having to wait so long.
Could a Guarantor Home Loan Help You Buy Your First Property?
It’s no surprise, then, that many first home buyers are looking for guarantor home loans. In fact, the ‘Bank of Mum and Dad’ is now recognised as one of the top 10 lenders in Australia, with loans totaling about $35 billion (for perspective, that’s more than the Bank of Queensland)! Back in 2010, only about 12% of first home buyers were applying for guarantor loans. By 2017, that figure had increased to 60%.
And data shows that guarantor loans have been instrumental in helping a growing number of first home buyers. The Australian Housing and Urban Research Institute (AHURI) has stated that borrowers with a home loan guarantor are twice as likely to enter the property market compared to those without this support.
What Is a Guarantor Home Loan?
A guarantor home loan is one of the most common ways parents can help their kids get a foot on the property ladder. When providing a parental guarantee, your parents basically use the equity in their own property as collateral for your home loan. How does this work?
Imagine you’ve saved up a 10% deposit for a home loan. But to avoid paying Lenders Mortgage Insurance (LMI), you need a minimum of 20%. Instead of making you wait until you’ve saved the extra funds, your parents offer the additional 10% from their equity as a form of security. They don’t have to physically hand over the cash, and you qualify for a home loan without paying LMI. Sounds like a winning situation!
What Else Should You Know About Parental Guarantees?
Keep in mind though, when your parents act as a home loan guarantor, they become liable if you default on your repayments. In a worst-case scenario, they could lose their home to repay your debt. That’s why a guarantor mortgage arrangement isn’t something to take lightly.
As with any major financial decision, it’s important to seek expert advice before weighing up all the relevant pros and cons. If you’re thinking about asking your parents to act as a home loan guarantor, why not start by contacting the experienced brokers at PLS for some free advice?
Besides Guarantor Loans, How Else Can Parents Help?
After evaluating all that’s involved, your parents may decide that they’re not comfortable acting as your home loan guarantor. If that’s the case, there are still plenty of other ways they can help.
From offering a financial gift or a cash loan to letting you move back in and live rent-free for a while, parents can provide valuable assistance to their first home buyer children.
1. Receiving a financial gift
Instead of a parental guarantee, a financial gift from your parents can be used to top up a deposit for a home loan. However, keep in mind that most lenders will also want to see a history of “genuine savings” as part of your home loan application.
If you have no savings and then receive a large cash deposit into your account, the lender won’t view this as “genuine savings”. You’ll either need to show a history of your own savings (at least 3 months) in addition to the cash gift or, you’ll need to hold the cash gift in your bank account (without spending any of it!) for a minimum of 3 months.
2. Accepting a cash loan
Another alternative to a guarantor home loan is for your parents to offer you a cash loan. Keep in mind that, with a cash loan, you’ll need to manage repayments to your mortgage lender and your parents simultaneously (which could place you under added financial stress).
It’s also important to know that a lender won’t view a cash loan as a form of “genuine savings”. For these reasons, careful financial management is essential when accepting a cash loan from your parents.
3. Letting you live with them rent-free
Rather than act as a parental guarantee or provide you with cash, your parents may feel more comfortable with having you move back home for a while. This might not be your preferred option (moving back in with the parents is never easy!) but living rent-free can be a viable alternative to a guarantor mortgage.
If you’ve been paying $500 a week in rent, you could potentially save an extra $26,000 in just 12 months of rent-free living. That represents a significant boost to your savings in a relatively short space of time. This option also allows your parents to provide valuable assistance with minimal financial risk to their own assets. This makes rent-free living a beneficial arrangement for both parties.
4. Buying a house with your parents
Instead of a guarantor home loan, you could consider buying a house in partnership with your parents. In this scenario, both you and your parents contribute funds to purchase a property and you are all registered as co-owners on the property title.
This would allow you to buy a property much sooner, and it would act as a form of investment for your parents. If you’re considering co-ownership with your parents, it’s important to work through and agree on all the details in advance. For example:
Who will live in the house?
Who is responsible for ongoing costs (council rates, maintenance, insurance, etc.)?
Will the person who lives in the house pay a form of rent?
What will happen if one party wants to sell their share in the property?
A detailed and signed agreement is essential when buying a property in partnership with your parents, as it will help prevent misunderstandings down the track.
These are just some of the alternate ways that parents can assist their children with buying a property, without signing on to a guarantor home loan.
What Other Help Is Available for First Home Buyers?
There are also various government and lender initiatives available that have been designed to assist first home buyers. For borrowers who don’t have a parental guarantee, these programs could be a viable alternative to help you secure a mortgage faster. These include the:
- First Home Loan Deposit Scheme
- Queensland First Home Concession
- Queensland First Home Owners’ Grant
- Parent Assist Home Loans
To find out more about any of these initiatives, talk to a mortgage broker today.
Talk to a Broker About a Guarantor Mortgage
A home loan guarantor could help you buy your first home sooner, without having to pay Lenders Mortgage Insurance. To find out more, book a free appointment with the friendly team at Professional Lending Solutions. Or give Phil a call on Ph: 0421 934 033 or Ph: 07 5597 6049.
Phil’s journey from banking to mortgage brokering reflects a career driven by a commitment to personalised service and tailored financial solutions. With a distinguished background in banking, including roles at NAB, ANZ and Lloyds TSB Bank in the UK, Phil spent 12 years developing expertise in personal and commercial finance, while also completing a Bachelor of Business (Finance), followed by an MBA majoring in International Business.