As-A-First-Home-Buyer-Whats-Available-To-You?

First Home Buyers – What’s Available To You?

First home buyer grants, concessions and benefits chop and change, but in recent years, they have mostly been aligned to the construction of new homes. By helping first home buyers (FHB) buy new properties, governments are also stimulating the building industry and incentivizing the supply of extra homes.

FHB grants have been around since 2000, when they were introduced to ease any slowing in home ownership caused by the GST. More recent benefits to come out of Covid and in response to low interest rates and rising house prices include the New Home Guarantee and First Home Loan Deposit Scheme, which allow 5% deposits instead of the usual 20%. And then there’s the Family Home Guarantee, which allows 2% deposits for single parents.

So what do they all mean and are you eligible?

New Home Guarantee

The New Home Guarantee is a federal initiative, recently extended for an additional 10,000 borrowers from 1 July 2021 to 30 June 2022.

Usually, FHBs need a 20% deposit or must pay lenders mortgage insurance (LMI).

This scheme allows a 5% deposit, while the remaining 15% (maximum) is guaranteed by the government. Note, it’s a ‘guarantee’, not a cash payment.

If you are covered by this Scheme, you can also access other government benefits for FHBs, that may be offered through states and territories.

Eligible New Home Guarantee properties include:

  • newly-constructed dwellings
  • off-the-plan dwellings
  • house and land packages
  • land and a separate contract to build a new home

For all types of eligible properties, a contract of sale and/or an eligible building contract must be entered into prior to the expiry of the 90 day pre-approval period.

First Home Loan Deposit Scheme

This scheme has also had 10,000 extra places added through to June 2022. The same 5% deposit is required as the New Home Guarantee, with a maximum of 15% of the property’s value guaranteed by the government. You can also still access state and territory FHB concessions.

The main difference is that existing properties are included in this scheme, not just new ones.

Eligible First Home Loan Scheme properties include:

  • an existing house, townhouse or apartment
  • a house and land package
  • land and a separate contract to build a home
  • an off-the-plan apartment or townhouse

Which scheme is for me?

To apply, you must be:

  • an individual or couple (married / de facto)
  • Australian citizen(s)
  • at least 18 years of age
  • earning up to $125,000 for individuals or $200,000 for couples
  • intending to be owner-occupiers of the purchased property
  • first home buyers who have not previously owned, or had an interest in a property in Australia

Family home guarantee (for single parents)

This scheme supports single parents with at least one child, by allowing a deposit as low as 2% to be used to buy a family home. The remaining 18% is guaranteed by the government and parents don’t have to be a first home buyer.

There are 10,000 guarantees available until 30 June, 2025 and applicants can also access other state and territory grants they may be eligible for.

You are eligible if you:

  1. are single (no spouse or de facto partner),
  2. have at least one dependent child (as defined by the Social Security Act 1991)

You must be able to show you are legally responsible for the day-to-day care, welfare and development of the dependent child and the dependent child is in your care.

Eligible Family Home Guarantee properties include:

  • an existing house, townhouse or apartment
  • a house and land package
  • land and separate contract to build a home
  • an off-the-plan apartment or townhouse

If you are purchasing an existing dwelling, the property must be purchased under a contract of sale dated on or after 1 July 2021.

Where do I apply?

All the above schemes are available through a number of participating lenders, a list of which can be found at: https://www.nhfic.gov.au/what-we-do/support-to-buy-a-home/new-home-guarantee/how-to-apply/

All applications need to be made directly with a participating lender (or an authorised representative such as a mortgage broker). Speak to the Zinger Finance Mortgage Brokers to help you through the application process.

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What-The-New-APRA-Restrictions-Mean

What The New APRA Restrictions Mean

This week the Australian Prudential Regulation Authority (APRA) intervened in the property market by tightening some of its rules around borrowing and loan serviceability.

APRA wrote to banks and told them they had until the end of this month to increase the rates at which they calculate a borrower’s servicing power from 2.5% to 3%. What this means is that banks will now stress test loan applicants by calculating whether they can pay 3% higher than their current interest rate, rather than the previous 2.5%. So if you are applying for a loan with a 2% interest rate for example, you’ll have to demonstrate you were able to service a 5% loan in order to be approved. The reason they do this is to make sure individual borrowers can handle future interest rate rises without going bust.

What APRA hopes will happen as a result is that some of the steam will come out of the housing market.

They made the call after their latest data revealed more than a fifth of new loans have people borrowing six times or higher their annual income, something they regard as a level of concern. In the meantime, national property values have increased by more than 20%.

What does this mean money wise?

In a nutshell, APRA believes the change will result in a 5% reduction in a household’s maximum borrowing power.

So if your borrowing capacity was $1 million previously, it will now be $950,000. If it was $500,000, it will now be $475,000.

The numbers are significant enough to knock a bit of buyer competition out of the market and also stop those close to full capacity from biting off more than they can chew. However, those who borrow well within themselves won’t necessarily be negatively affected.

The fix is in

For variable rates, the 3% buffer is added to the rate that you are offered.

However, if you’re wanting to apply for a fixed rate loan, beware, you may be in for more of a shock under the new rules. This is because banks will calculate your 3% buffer based on the revert rate, rather than the fixed rate. The revert rate is the rate the loan will roll over into once the fixed period is up. So, if you are applying for a fixed loan with a 1.99% rate in the fixed period, but that rate reverts to 3.5% afterwards, the bank will calculate your serviceability at 6.5%, rather than 4.99%.

Seems like APRA always targets investors

Investors are often seen as cashed up magnates who swoop in and whisk properties away from the first home buyers and families who so desperately need them.

This is why APRA restrictions in property booms are usually set up in a way that investors are deterred by higher rates or more taxes, so that owner-occupiers can buy homes with less competition from people who may already own multiple properties.

APRA believes investors tend to borrow at higher levels of leverage than owner-occupiers and also have existing debt already, which may expose them to more risk. This is why investor loans always have higher interest rates than owner-occupier homes. Because the rates are already higher, the new buffer will affect investors even more. Not only that, but the buffer will be applied to their existing debt too.

Is this temporary?

It might be temporary, but if the measures don’t have APRA’s desired effect, things might get even tougher before they get better, so it’s important to adapt and evolve if you’re looking to build the kind of property portfolio that will help you live life on your own terms.

Things just got harder for investors, but there are always options out there and value to be found.

If you need help making sense of the new rules, what it means for you and how to tailor you strategy going forward, reach out to the Zinger Finance team.

 

 

RBA Announcement October 2021

There were no surprises today as the RBA voted to keep rates on hold at 0.1% at its October meeting.

The central bank also decided to maintain the target of 10 basis points for the April 2024 Australian Government Bond and continue purchasing government securities at $4 billion a week until at least February next year.

RBA governor Philip Lowe noted that the Delta outbreak of Coronavirus continued to disrupt the recovery of the Australian economy, but maintained it was still just a temporary setback.

“Many businesses are now planning for the easing of restrictions and confidence has held up reasonably well,” he said in a statement. “There is, however, uncertainty about the timing and pace of the bounceback and it is likely to be slower than earlier in the year…In our central scenario, the economy will be growing again in the December quarter.”

For AMP economist Shane Oliver, it was a case of another month having passed, rate movements no closer than before.

“The RBA’s stated conditions for a rate hike, i.e. actual inflation sustainably in the 2% to 3% target zone, are far from being met,” he said. “This will require sustained employment of around 4% and wage growth of 3% or more and that’s a fair way off.”

Rate expectations

But while the RBA reaffirms its promise not to raise interest rates until at least 2024, there is gathering talk among analysts that major banks will take their own action and raise variable rates out of cycle.

An October survey of 28 economists by comparison platform Finder found that 50% expected Big Four lenders would lift their standard rates within the next year.

Stability in the official cash rate did not mean lenders would follow suit, according to Finder head of consumer research Graham Cooke.

“Data from the RBA shows banks changed their rates seven times during the last stable period. Four of those changes were rate increases,” he said. “Those who aren’t on a fixed mortgage rate should stay alert to any changes from their banks as it could mean substantially higher monthly repayments.”

Pressure on home buyers

Any rate rises would have to be managed carefully, with borrowers stretching themselves to keep up with rising property values. In fact the research revealed first home buyers are borrowing over $53,000 more mortgage debt this year than they did last year, exposing them to more pressure should rates rise.

Because of this, 55% of the experts in the survey said they expected the Australian Prudential Regulation Authority (APRA) to intervene with lending restrictions in order to stem market growth.

“APRA recently confirmed they were looking closely at income to price ratios,” Cooke said. “This could be an early indication that lending restrictions are coming.”

APRA restrictions usually target investors to deter them from taking affordable stock off the hands of first home buyers, so watch this space to see how your portfolio might be affected.

Not so fast

Before we start to panic about lenders going rogue and hiking rates, current trends show they are still reducing their variable rates in order to compete for borrowers.

The latest RateCity research found 27 lenders cut at least one variable rate during September.

RateCity research director Sally Tindall suggested variable cuts were where lenders could compete in the short term, while adopting a “wait and see approach” on most fixed rates “as they work out what impact Australia’s Covid recovery plan will have on the economy”.

“However, this hasn’t stopped many lenders from taking the scissors to their more malleable variable rates, which were lagging well behind fixed rates,” she said. “When the RBA cut the cash rate last November there were just six variable rates under 2%. Today there are 48, including five investor rates. After the last two cash rate cuts, variable rates barely moved as most lenders opted to drop fixed rates instead. If anything, these cuts are overdue.”

Rush to refinance

It’s easy to see why banks are cutting variable rates at the moment, because borrowers are in a refinancing frenzy and there is plenty of new business to be acquired.

The last two months have seen record highs with refinanced loans valued at $17.8 billion in August.

With all the deals out there, it’s a great time to score a better rate or more flexible loan features. Reach out to Zinger Finance and our team of financial strategists can help you build a strategy, with the deals that suit you best.

 

 

When-was-the-last-time-you-had-your-loan-reviewed?

When Was The Last Time You Had Your Loan Reviewed?

The lending environment is changing all the time, so it’s important to regularly review your loan or loans and make sure you’re getting the best deal you can.

Say you’ve had a loan for the last 2 years for example, chances are that you’ve missed one or more potential interest rate reductions. On top of this, your life may have changed. Have you accrued some equity? Got a promotion at work? Had children? Any changes mean your current loan may not be the most suitable for you.

Rate expectations

One of the major reasons to review your loan is that there may be a better deal on interest rates available.

If you are paying more than you need to on interest, you are essentially donating money to the bank. 

Interest rates have been trending downwards for the past decade. In fact, multiple banks have cut rates on their variable loan offerings in the past month, so it’s well worth testing the market.

There are variable rate loans out there for owner-occupiers for below 2% and investment loan rates below 3%. On the flipside, some rates are above 5%. If you have a $300,000 loan and swap a 5% interest rate for a 2.5% one, that’s $7500 a year you are taking back from the bank and using elsewhere.

Once compound interest is factored in, you save even more money because you take years off your loan.

Flexible features

Loans are complex beasts these days with a raft of features that can be tailored to the diverse needs of borrowers.

A couple of years out of the market could mean you are unaware that lenders are offering extra repayment options on fixed loans, better offset facilities or waiving certain fees. All of these changes can add up to money and time saved.

The flipside of this is that if you sign up to a loan with more bells and whistles than you need, you may find you are paying for the privilege of features that you never use.

And sometimes you can be trapped by a loan’s fine print…ie, the rates are great, the features are great, but you’re locked in for 2 years and can’t revalue to access your equity.

So, always look further than just interest rates, when choosing a loan.

Introducing…a better deal

If it’s been some time since your last loan review, you’d better believe you’re not on the best deal that bank can offer you.

See, banks count on you paying the “lazy tax”. Why do you think the bank sent people to your primary school when you were a kid to “educate” you about saving money and using deposit and withdrawal books?

It’s because they know that once people sign up with a certain bank, the vast majority never bother to leave.

Once you are on their books and have been for years, do you think they are offering you the kind of deals they are offering potential new customers?

Of course not. They don’t need to. But go online and you might find they are offering customers of other banks a $3000 cashback deal to jump ship to them. That’s because their business models are based on recruitment and retention.

But what about you? You’ve been a loyal customer for years, shouldn’t they reward you for your loyalty? The reality is that if you want access to those deals, it’s all on you.

Research what is out there at other banks. Are there lower rates, cashback offers, better features, introductory deals? If there are, you should be fully prepared to switch.

And if you like your bank and want to stay, simply go back to them and threaten to leave if they don’t match the deals. That’s where the retention part of their business model kicks in and you might just find they have something a little better up their sleeve for you.

 

 

RBA Announcement September 2021

The RBA left the cash rate on hold at 0.1% at its September meeting, surprising no one..

The central bank has been telling everyone for some time now that it won’t consider a rate rise until at least 2024, even though some analysts are predicting it will hike earlier than this. And it also remains determined not to cut again and risk going into negative territory, though other analysts think negative interest rates are far more likely than an increase anytime soon.

“Prior to the Delta outbreak the Australian economy had considerable momentum,” RBA governor Philip Lowe said. “GDP increased by 0.7 per cent in the June quarter and by nearly 10 per cent over the year. Business investment was picking up and the labour market had strengthened. The unemployment rate had fallen below 5 per cent and job vacancies were at a high level.”

Lowe said Australia’s economic recovery had been “interrupted by the Delta outbreak and the associated restrictions on activity” and that he expected a decline in GDP in the next quarter and a rise in unemployment.

However he said some areas are “continuing to grow strongly” and the setback to the economic expansion “is expected to be only temporary.”

Taper the talk of the town

Much of the contention and anticipation in the lead up to the meeting had all been about whether the RBA would taper down its buying of bonds from $5 billion a week to $4 billion a week.

September was the month it planned to make that reduction, but there had been widespread debate from forecasters and major lenders about whether it would actually happen.

On one side of the coin, NAB was predicting it would continue with the reduction as planned. On the other side, ANZ anticipated a month’s delay to get a better idea of when and what lockdown restrictions might be lifted or eased in major cities. Most analysts expect a strong post-lockdown economic rebound, which could come this year or next year.

So what was the call?

Spoiler alert, the RBA surprised quite a few when it decided to stick to its plan.

The Board’s decision to extend the bond purchases at $4 billion a week until at least February 2022 reflects the delay in the economic recovery and the increased uncertainty associated with the Delta outbreak,” Lowe said. “These bond purchases, together with the low level of the cash rate, the yield target and the funding that has been provided under the Term Funding Facility, are providing substantial and ongoing support to the Australian economy.

Banks battle for borrowers

Continued uncertainty is a win for would-be borrowers, with banks dropping variable rates in a bid to attract new customers.

Fixed home loan rates may continue to rise, but in a further show that we won’t have to worry about higher variable mortgage payments for a long time yet, RateCity research found the number of variable rates under 2% in the market has leapt from 28 products to 46 in just 2 months.

The 68% increase has happened in spite of there being no official rate movement since November last year.

“Since COVID, the battleground for the banks has been fixed rates. However, with record numbers of customers now locked in, some lenders are shifting their sights to variable rates,” RateCity research director Sally Tindall said, adding that ABS data showed refinancing hit another record high in July with $17.22 billion in loans settled for the month. “The latest surge in refinancing is putting pressure on the banks to keep their rates competitive.

“Banks need to be winning new business, not losing it, if they want their loan books to keep moving in the right direction.

“Well over half of all mortgage holders are still on a variable rate. That’s a huge market of potential refinancers for the banks to target.”

Reach out for a better deal

Each month, regardless of what the RBA decides to do, there are deals out there to be made. It’s a great time to be a borrower and it’s rare that your current deal is the best one available to you. Reach out to Zinger Finance and our team of financial strategists can help you build a strategy for structuring your finance and find the deals that suit you best.

 

 

Looking to climb up the property ladder

Looking To Climb Up The Property Ladder

So you want to make the most of low interest rates and rising property markets and build a bigger property portfolio?

Unfortunately, those same low interest rates make it much harder to save for a deposit the old fashioned way. But that doesn’t mean you can’t climb up the property ladder. That’s where equity comes into the picture.

Equity is the amount your property is worth minus what you still owe on it. Basically, it’s the portion of the property that you own outright. If you owe $200,000 on a property that’s worth $300,000, your equity is $100,000. If that property rose by another $50,000 in value the next year and you paid off another $10,000 of it, your equity would go up by $60,000.

If you already have at least one property, chances are that it’s gained in value over the past 12 months.

Revaluing it can unlock that extra equity, so that you can use a portion of it as a deposit on your next investment property.

New way of thinking

Back in the days when interest rates were high, the biggest hurdle to buying property was actually paying off the loan. Deposits were easier to save because your cash was boosted by those same high rates. So, saving a 20 per cent deposit on a $100,000 property didn’t take long, but paying it off could take 30 years!

These days, super low interest rates mean servicing a loan is the easiest part. But saving a 20% deposit, plus stamp duty costs when there are returns of less than 1% interest on the cash you have in the bank is much more difficult.

And this is basically why property investors have been dominating first home buyers at the affordable end of the market in recent years. They have equity ready to use as a deposit while the first home buyers are stuck trying to save money.

So how do I do it?

First things first, talk to the experts. Zinger Finance has a team that specialises in helping people build big property portfolios by using smart financing strategies and regularly pulling equity out of their assets.

Zinger can organise a valuation on your existing property. If, like most real estate in Australia, it has increased in value since its purchase or last valuation, you will have made some equity.

But you can’t use it all. Say for example, you have $200,000 equity on a property, the bank won’t let you use the full amount to invest because it would be exposed to too much risk if there was a dip in values for your existing property, or new property.

Instead, they will allow you to access a portion of it. Usually around 80% of your existing property’s current value minus the debt still owing.

So, in the case of that example property at the beginning of this article; if it’s now worth $350,000 and you owe $190,000, your overall equity is $160,000.

But your useable equity might be $280,000 (80% of $350,000) minus $190,000. That leaves you $90,000 to invest with.

The Zinger difference

A lot of mortgage brokers set you up with loan products where you are locked in and unable to refinance for a certain period of time (usually years). This ensures they receive their full commission from the lender.

But Zinger Finance aren’t like your typical mortgage brokerage. They’re a team of Mortgage Strategist. It was founded to cater to property investors looking to build big property portfolios and one of the ways to do so is to ensure you have the flexibility to revalue and refinance as often as you need to.

Zinger’s team of strategists can help you get your properties valued and revalued regularly to unlock all the useable equity you need, at the right time to help you reach your property investment goals.

Reach out

If you need help building a strategy to climb the property ladder by maximizing your use of equity and being educated on the best way to structure loans, get in touch to our team of Mortgage Strategists.

 

 

RBA Announcement – August 2021

The RBA left the official cash rate on hold at 0.1% today, as rolling lockdowns keep Australia in a state of economic uncertainty.

RBA governor Philip Lowe had already reaffirmed his intention not to raise rates until at least 2024, but some analysts thought the move might come earlier. However, the Delta variant of Covid and the constant lockdowns called around major capitals has that speculation on ice for now.

At its monthly board meeting, the RBA also decided to maintain the target of 10 basis points for the April 2024 Australian Government Bond and continue its stimulus measures of purchasing government securities at a rate of $5 billion a week until September and then $4 billion a week until November and potentially beyond.

In its media statement the RBA noted that while the economic recovery in Australia has been stronger than was expected, recession was on the cards, saying “the recent outbreaks of the virus are interrupting the recovery and GDP is expected to decline in the September quarter”.

However, the central bank expects a fast recovery next year. “The economy is benefiting from significant additional policy support and the vaccination program will also assist with the recovery,” it said.

The RBA says it will continue to monitor and review its approach to the rate of bond purchases, according to economic condition and the nation’s health situation. The board still believes conditions will not warrant a rate increase until 2024.

Sentiment suffers

Meanwhile, a recent survey of 40 experts and economists by Finder revealed that two in five believed another two months of lockdown could cause another recession.

The positivity around Australia’s quicker than expected recovery from last year’s lockdowns has disappeared in a flash, with confidence in key indicators such as housing affordability, employment, wage growth, cost of living and household debt all plummeting. Confidence in employment had the sharpest fall, going from 71% in July to 29% in August.

Other key takeaways from the survey of experts included 52% believing household debts would increase due to lockdowns; while 43% believe Australia’s response to the pandemic has seen our international reputation take a hit.

“Economists fear that a prolonged lockdown could push us into recession, and the extension of the measures in Sydney will get us a third of the way there,” said Graham Cooke, Finder head of consumer research.

Give yourself a rate cut

There may be a pause on talk of official cash rate rises, but there have been a number of interest rate movements from lenders in recent times. While fixed rate products have been subject to interest rate hikes, the opposite is happening in variable rate markets according to further research.

A RateCity study shows 49 lenders have cut at least one variable rate in the past two months. Sounds good, but your bank is unlikely to come to you with a better deal, according to RateCity research director Sally Tindall.

“Variable rates are at record lows, however, most of these deals are reserved for new customers, not existing ones, unless you specifically ask,” she said, adding that the best way to get a better deal was to pick up the phone and ask.

“Before you call, check what rate your bank is giving new customers for the same home loan, but also find out what other lenders have on offer,” she suggested.

“If you are paying significantly more than a new customer, pick up the phone and ask your bank ‘why?’.”

The RateCity study found that more than 73% of bank customers they had surveyed were successful when they asked their bank for a personal rate cut.

“If you have a good track record of paying down your debt, and the bank thinks you might switch to a more competitive lender, they’re likely to play ball,” Tindall said, noting that a reduction of just 0.25% could save you more than $1000 a year on loan repayments.

“A lot of people think a handful of basis points won’t make much of a difference, but if the discount is permanent, then the savings can potentially run into the thousands in just a few years.”

 

 

RBA Announcement – July 2021

The first RBA board meeting of the new financial year was one of the most eagerly anticipated in some time. Not because of what might happen with interest rates – which incidentally were left on hold at 0.1% for the eighth consecutive month – but because the RBA was expected to begin winding back parts of its quantitative easing program as the economy continues to recover from coronavirus ahead of schedule.

Since Australia first went into lockdown in 2020, the RBA has splashed out hundreds of billions of dollars on government bonds and kept the yield on three-year government debt under control in order to offer cheap loans to banks…who would then pass more affordable money onto borrowers.

But is all that still necessary?

Three main goals

There has been plenty of speculation from economists and so-called experts that the RBA will raise official interest rates earlier than its repeated promise of “not before 2024”.

In order to consider moving rates away from the historic low of 0.1% and back up towards longer term averages, the RBA wants to see the unemployment rate keep travelling down, wages growth begin to grow again and inflation to get back to a target bracket of 2 to 3%.

And at least one of those boxes is ticked, with unemployment now down to 5.1%, a 17-month low, even as we head into another series of lockdowns in various parts of the country. There are more people employed than before the pandemic kicked off, which is also partly due to the decline in overseas worker arrivals with international borders closed.

However, the RBA statement from today noted that “despite the strong recovery in jobs and reports of labour shortages, inflation and wage outcomes remain subdued”. The statement added that the RBA expects a gradual and modest pick-up in inflation and wages growth, with inflation likely to only reach 2% by mid-2023, after a short-term bounce to 3.5% over the next year due to the reversal of Covid-related price reductions from the previous year.

RBA takes cautious first steps

The anticipated first step to take in getting things back to some kind of normal was to end the targeting of a yield of 0.1 per cent on three-year government bonds. The RBA today however announced it would continue to maintain the current target to “keep interest rates low at the short end of the yield curve and support low funding costs in Australia”.

The next thing to do would be to wind back the level of spending on government debt. The $100 billion quantitative easing program announced in November last year will finish in September.

The RBA today confirmed that it would continue to purchase government bonds after September but would respond to the strengthening economy by adjusting its weekly spend to $4 billion, down from the current spend of around $5 billion. The new spend will be in place until at least mid-November, at which stage the RBA can take stock of the situation again.

So will official rates rise sooner than expected?

The RBA continues to stand firm and say it won’t be in a position to raise rates until at least 2024.

Even though the housing market is strong across major markets, with value growth, housing credit growth and increased borrowing from owner-occupiers and investors, the central bank says it will not increase the cash rate “until inflation is sustainably within the 2 to 3% target range”.

What about the unofficial rates?

As we’ve reported in recent months, Australian lenders are already increasing their rates independently of the central bank.

They began by raising rates on five and four-year fixed rate mortgage products but have since begun to target three and even two-year loans.

A recent analysis found that in the last month, 19 lenders increased a three-year fixed rate, including Westpac and NAB, while 17 increased a two-year fixed rate.

This was the first month that the number of lenders hiking a two-year fixed rate outnumbered those cutting (albeit only by one, 17-16). Meanwhile, for one-year fixed rates, 13 lenders cut, while 11 hiked.

There are still close to 200 loan products out there in the market for below 2%. So, if you are worried, you’re not on the best deal, remember to regularly see what’s out there and refinance when necessary.

 

 

Introduction-to-the-family-home-guarantee

Introduction To The Family Home Guarantee

The year has been a tough one so far for first home buyers trying to get into the property market, with asking prices headed for double digit growth in multiple capital city and regional markets around Australia according to Propertyology.

If you are a single income loan applicant, it has been even tougher, so imagine being a single parent on top of that.

But there was good news in the recent federal budget announcement, with single income earners with dependents to be eligible to borrow to buy a home with only a 2% deposit.

So, here’s what you need to know about the Family Home Guarantee.

Are you eligible?

From July 1, single income parents will be able to apply for a loan under the scheme. To do so, you will need to have a household income of under $125,000. After your 2% deposit, the government will guarantee up to a maximum of the remaining 18% of a regular 20% deposit usually required by lenders to avoid lenders mortgage insurance (LMI).

As a single parent with at least one dependent, you will need to demonstrate you are legally responsible for the day-to-day care, welfare and development of the child and that they are in your care. You must be the sole applicant on the form and intending to live in the home you purchase.

It doesn’t necessarily have to be your first home, but you won’t be eligible if you currently own a home already, including an investment property, commercial property or land holding.

Depending on existing custody arrangements, two separated parents of the same child may be eligible to apply in some cases.

What properties are eligible?

As with most government grants and concessions, there are limits around the values of the properties that apply to the scheme. These differ by state and territory, so it’s important to check what price caps apply to you.

NSW has the highest price caps, with $700,000 for an established property and $950,000 for a new build in the metro and major regional centres, and $450,000 (established) and $600,000 (new build) for the rest of the state.

VIC is next with $600,000 (established) and $850,000 (new) in major centres; and $375,000 (established) and $550,000 (new) in the rest of the state.

In QLD, it’s $475,000/$650,000 and $400,000/$500,000, while in WA, it’s $400,000/$550,000 and $300,000/$400,000.

In SA, it’s $400,000/$550,000 and $250,000/$400,000, while in TAS it’s $400,000/$550,000 and $300,000/$400,000.

In the ACT, it’s $500,000 for established and $600,000 for new properties all over the territory and in the Northern Territory $375,000 (established) and $550,000 (new).

Spaces are limited

Right now, the government estimates 125,000 single parents who may be eligible. Around 80% of these are single mothers.

But not everyone who is eligible will get a look in as the government plans to grant just 10,000 applications over the next four financial years.

How do I apply?

Applications will need to be made via one of 27 participating lenders across Australia, so check with a mortgage broker or potential lender before applying.

Applications will open on July 1 and the scheme is being administered by the National Housing Finance and Investment Corporation.

Still not sure if you qualify for assistance?

If you are unsure if you are eligible to apply for the Family Home Guarantee or wish to know more about the other first home buyer grants or concessions you may have access to, please reach out to the team at Zinger Finance.

Our Mortgage Strategists can help you understand your options and make an informed choice moving forward.

how-brokers-can-screw-you-over

How Mortgage Brokers Can Screw You Over

If you want to build a property portfolio to get you where you need to be, you need to make sure everyone you are relying on is on the same page as you.

Your accountant, legal team, buyer’s agent and, most importantly when it comes to loans, your mortgage broker.

Your average mortgage brokers out there may not be interested in your whole property journey. Often, they focus on one job only, getting a loan approved for the one property you are currently looking to purchase, and in doing so, secure their commission.

They are not thinking ahead and getting you the right loan that will allow you to purchase your next one, two or even 10 properties.

Here are a few common ways you can get screwed over by a mortgage broker who may be focusing more on their commission than your property portfolio.

Cross securitization

Cross securitization is a common one. When you are building a portfolio, you don’t want one under-performing property to drag down the rest.

Say you have three loans for three different properties. Loan 1 is worth $100,000; Loan 2 is worth $200,000 and Loan 3 is worth $300,000. You may think they are all their own entities, but let’s just say that unbeknownst to you, your mortgage broker has cross securitized them.

That means that there is a total loan of $600,000, secured against all three properties and you can’t sell or refinance one of the properties without the other two also being considered by the lender.

This situation can present a couple of nightmare scenarios.

Say you want to sell or refinance

Imagine the property attached to Loan 1 is in a property market that has seen some growth and you decide you want to sell that property and access the capital. The bank might say ‘OK, but first we need to do a valuation on the other properties because between them they need to be able to service the remaining $500,000 of that original $600,000 loan’.

If properties 2 and 3 have gone down in value, this may mean you will have to make up the difference to the bank.

Say you’ve paid down some of the loan and you only owe $400,000 but now properties 2 and 3 are only valued at $400,000, having lost $50,000 each in value of the properties. This means your loan to value ratio would now be 100% which the bank won’t allow. The bank may require you to pay $80,000 to get your loan down to $320,000 and 80% of the value of the properties. You’ve now lost any of the gain you may have realised by selling property 1.

The same applies for refinancing. Want to access some equity or get a better interest rate on one loan? Well, this won’t be easy if the two other properties and their loans must be considered, and they are holding you back.

If they weren’t cross securitized?

If the three loans were each stand alone, you could sell the top performing property, keep the money you make and continue servicing the loans of the two underperforming properties as long as you can make the repayments.

Inexperienced or unaccredited

Another trap with mortgage brokers is that you may end up with a higher interest rate than you should be paying or with a lack of flexibility in your loan product. This could be because your mortgage broker isn’t accredited to deal with the best lenders.

It’s important to realise that not all mortgage brokers have access to all the deals that are out there. They may be unqualified or inexperienced.

You need to ask a mortgage broker how many lenders are on their books and what commissions do they get from what lenders. The broker may have access to only a handful of options for you and may be steering you towards the loans that get him or her the best commissions.

Want to cut through the confusion?

The team at Zinger Finance has the best knowledge when it comes to structuring finance for maximum flexibility and growth and can make sure you are getting access to the loans most likely to help you through your whole property journey. If you need help building a finance structure strategy, reach out to us.

 

 

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