For many Australians, owning a home has been the big dream. But is this just a dream and will those not yet in the home market, be able to enter the market.
Let’s look at the issues!
That pesky deposit
Feeling the pinch when trying to put away that 10% deposit. We know, it’s hard. There’s always an emergency that comes along to take some of that money away and somehow it just seems to take so long to save.
If you are in Melbourne or Sydney, it will now take more than a year’s salary for that 10% deposit compared with six months of pay during the early 1990’s.
Home Loan Serviceability
For those who bought a few years ago, they are sitting pretty as the home loan serviceability (the measure of the interest payments that people are making on their loans compared with average income) has fallen to just 7%, at its lowest level since 2003.
So for many of these people, repayments have decreased whilst home values have increased, which can allow them to borrow more to upgrade or purchase an investment property.
Interest Rates – how low can they go?
Whilst Australian’s are basking in some of the lowest interest rates in history which is great from a borrowing perspective, for those trying to save, it’s not a great time as the return can be small and makes building that deposit even harder.
Record number of high rise apartments are being approved, however not every first home buyer wants to live in one. The competition on prime properties will be fierce as there will be other first home buyers or those with a good repayment history looking to purchase an investment home or to upgrade.
What can you do to build that deposit?
- Have a written budget
- Write a weekly meal plan
- Take your lunch to work
- Pay your bills on time to avoid late fees
- Pay off your credit card – this is usually a high interest rate and this is costing your money
- Shop around on anything for large purchases or services to get a better deal
- Have money taken out each pay and put it straight into a higher interest savings account
- If you get an increase or bonus – put it straight into your savings, you didn’t have it before so you won’t miss it
- Consider term deposits or investments to take advantage of compound interest
Thinking of Refinancing?
All of us at some point will consider refinancing. Now is the best time to look at it. Refinancing for existing owner-occupied mortgages reached its highest rate, 36% of total borrowing in April 2016 since recording began in 1991.
So what should we be looking for when refinancing?
- Compare the lenders offers
- To fix or not to fix – talk to Paul so that he can guide you on what is best for your personal situation
- Calculate the savings that you will gain from switching and compare against any fees or charges from your current bank
Paul recommends that you allow a minimum of four weeks to undertake the entire switching process. Thinking of refinancing, give Paul a call for his expert advice.
Commercial/ Business Funding
With the recent mortgage interest rate reduction by banks, it is noted that the reduction being passed onto commercial/business borrowers is not widely publicized. Many commercial and business borrowers usually have their house encumbered to secure the lending facilities.
How to assess what interest rate you are being charged on your commercial loans
This is often difficult to ascertain as most of the major lenders utilize a “Risk for Reward matrix.”
Whilst the major commercial lenders broadcast that they are open for business, the stumbling block is how to prepare and submit the application to a commercial funder.
If seeking additional borrowings or just switching lenders for business funding , the process is cumbersome as the credit criteria has tightened. Each commercial funder has different lending criteria and to navigate through their credit criteria, is at times is a nightmare.
As an example, lenders look at the last 3 years financial accounts of a business and look at the business profitability to ensure that the business has the capacity to meet loan current payments and proposed loan payments. All loan payments are assessed at an “Assessment or Sensitivity Rate” to combat any future interest rate increases.
Apart from the serviceability aspect, the lenders would look at the conductivity of the business trading accounts to ensure that the accounts are operated without any concerns. Other factors include payment of taxation, ( are all taxes paid to date), other statutory charges and management of the business.
Generally, a commercial/business loan with a commercial bank may take up to 6 weeks to finalise.
Paul is highly experienced in assisting with all types of commercial/business finance and can navigate through the process, enabling the client to continue working on their business whilst this happens.