Refinancing your home loan has the potential to save you thousands, reduce your monthly repayments and free up your finances to achieve your goals.

However, mastering the art of refinancing requires strategic planning, an understanding of the process and taking numerous considerations into account. Whether you plan on external or internal refinancing, here’s what to keep in mind.

Understand the different types of refinancing

While many people think of refinancing as switching lenders, you can also choose a better deal but stay with your original lender. Refinancing through your original lender but opting for a different deal is referred to as an internal refinance; external refinance is where you find a different lender.

In 2023, it was reported that Australia had the largest boom in mortgage refinances in history over the past three years. And according to Finder’s Housing Market Report 2023, while in 2019 just over half of refinancers were external refinancers, by mid-2023, this had jumped to 72%.

Know the market and interest rate movements

As the stats show, in recent times more mortgage holders than ever, are swapping lenders in order to chase a better deal. Often this is the main goal – to refinance to get a lower interest rate.

Given the fluctuations in the market and the rise and fall of interest rates, it’s smart to keep informed as to what’s happening. It’s also a good idea to touch base with a financial expert to get their take on whether now is a good time to refinance.

Assess your financial health

It’s then time to look at your financial situation, so you have a clear understanding of your credit score, current financial position and equity, income, and debt-to-income ratio.

It may have been some time ago that you last did this and it’s likely that some things have shifted, especially given the higher cost of living at the moment.

Understand your loan

Whatever your reasons for wanting to refinance are, you need to understand what your current commitment is and what changes you want to make.

Read through your current loan’s terms and conditions, as it may have been a while since you’ve checked them. You can chat to your current lender to see if there are any benefits you haven’t been utilising or costs you are unaware of.

Understand refinancing costs

A follow-up from knowing your loan is ensuring you have a clear understanding of refinancing costs. While the lure of a better deal can be hard to resist, you may find that it may cost you more than you had thought.

Calculate your break-even point to determining if refinancing is beneficial – this includes taking any valuation fees and payout costs (such as exit fees) into consideration. If you are on a fixed rate home loan, you may need to pay a break free if you refinance.

Consider the impact on your credit score and LVR

Another thing to be aware of is how refinancing can impact your credit score. Aspects that come along with refinancing, such as ending a loan and needing another credit check, can cause your credit score to dip. And if there is the possibility that you skip out on a mortgage payment (should the refinancing process take longer than expected, for example), this will further damage your credit score.

Loan to Value Ratio (LVR) is the difference between the amount you’re borrowing to the value of the property. If your LVR is over 80%, you need to pay Lender’s Mortgage Insurance (LMI). When refinancing, it’s likely that your LVR has shifted due to your mortgage repayments, so your LVR tends to be lower as a result. However, if your property has fallen in value and your LVR has risen, then you may need to pay LMI when refinancing.

We can assist with refinancing to ensure it’s not only beneficial for you, but that it also frees up your finances. Get in touch today so we can discuss your options.

If you have any questions or need any information please give us a call on 039723 0522.

Suite 2, 1 Railway Crescent
Croydon, Victoria 3136

Email: integrityone@iplan.com.au

Telephone : 03 9723 0522

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If you are building or undertaking major renovations to your home, you may be looking for a construction loan. Unlike a standard loan, a construction loan allows you to pay for each stage of the build without having to come up with all the funds upfront.

How construction loans work

Also referred to as building loans, this type of loan is aimed at people either building a new home or making significant structural changes, such as adding a room or changing the roof, to their pre-existing home.

Construction loans allow for flexibility throughout the build or renovation, through the process of drawing down progress payments.

Draw down progress payments

A key feature of a construction loan is the flexibility to draw down your loan in instalments throughout the building process, which is referred to as a draw down or progress payments, rather receiving the full loan at the start of your major project.

There are usually five to six stages in which you’ll receive the instalments, including the deposit, foundation works, the framework, lock-up, fixing (plumbing and electrical) and completion.

While this payment arrangement, rather than receiving a lump sum at the beginning, can seem cumbersome, it means that you’ll only be drawing down on your loan to pay your builder and other contractors as they complete stages of work.

This can be beneficial as you will only be charged interest on the amount drawn down, not the total. You also don’t have to pay back the principal loan amount until after construction has been completed. helping you manage your cashflow throughout the project.

Fixed price contract

Construction loans are usually based on a fixed price contract, whether that be the land you are building on or the property you are renovating. This means that there is little room for change while the building or renovations are going ahead.

This loan tends to be interest only for the period of building/renovations, then become principal and interest once completed. You may be able to negotiate that the interest only term can be continued, so discuss this with us if it is something that appeals to you.

Should changes need be made to your build along the way, you must discuss this with your lender as this can be likely to vary the forecast costs. As variations are very common in building and renovating, it’s wise to make sure you have accounted for possible changes when applying for the loan.

How to apply

To apply for a construction loan, you will need to show the lender your council approved building plans and fixed price building contract from a registered builder. Usually, you will also be asked to make a deposit of 10% – 20% of the total cost, it’s worth noting that you might have to pay Lenders Mortgage Insurance if your deposit is less than 20%.

Having a licensed builder greatly increases your chances of getting the loan, though in some instances you can still apply for the loan as an owner builder. Applying as an owner builder involves more paperwork and can be more arduous, so be prepared that this process may take longer.

You may be visited by a valuer during the construction/renovation process, to ensure that everything is running to plan. Based on the valuer’s report, the lender will either continue the payments or alert you of a problem.

Be aware of the dates of your loan, such as when the build must be completed by (for example, within 24 months from the date of your first draw down). If the build has been delayed, keep us informed, as we will need to discuss your moving timelines with the lender.

Once the building or renovations are completed, you will need to provide the final paperwork, such as the builder’s final invoice or receipt, building insurance policy and certificate of occupancy.

The building and renovating process can be stressful as it is, so chat to us today to see how we can help you navigate construction loans. We can step you through the process to get you on your way to securing the money to fix up or create your home.

If you have any questions or need any information please give us a call on 039723 0522.

Suite 2, 1 Railway Crescent
Croydon, Victoria 3136

Email: integrityone@iplan.com.au

Telephone : 03 9723 0522

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The recovery continues with a second place shake up

It’s been a positive quarter in the three months to May 31, albeit a period of slight to modest growth for most capital cities and the combined regions.

CoreLogic’s Home Value Index (HVI) rose 1.9 per cent nationally over the quarter, with Perth taking the top spot for growth after a 6.1 per cent increase in the median dwelling value. The West Australian capital also earns the gong for the best-performing city annually with a 22 per cent jump since May last year to a median of $736,649.

Melbourne, however, was the only capital to record negative dwelling growth with a -0.2 per cent move over the quarter taking the 12-month change to 1.8 per cent and a median of $780,437.

A second place shake up

Perhaps one of the most intriguing revelations of this month’s HVI was that there has been yet another changing of the guard on the totem pole of Australia’s priciest cities. As usual, Sydney still sits far out front with a median of $1.156 million. Canberra had been in the runner up position, but after a bumper quarter of 3.9 per cent growth (an annual movement of 16.3 per cent) Brisbane has taken the silver with a median value of $843,231. According to CoreLogic figures, the Queensland capital hasn’t held this second position since 1997. Coming into the pandemic Melbourne’s median dwelling value held around a 37 per cent premium over Brisbane’s, and the ACT’s median was approximately 24 per cent higher.

In the three months to May, the nation’s capital moved into bronze place on the price podium with a 0.7 per cent rise over the quarter to a median of $840,100.

Tim Lawless, CoreLogic research director, said extremely low levels of supply across the strongest markets provide the best explanation for the difference in growth rates. “The number of properties available for sale in Perth and Adelaide remain more than -40 per cent below the five-year average for this time of the year while Brisbane listings are -34 per cent below average,” Mr Lawless said.

“Inventory levels in these markets remain well below average despite vendor activity lifting relative to this time last year. Fresh listings are being absorbed rapidly by market demand, keeping stock levels low and upwards pressure on prices.”

Travelling the peaks and troughs

Sydney spent the last quarter in recovery mode as values increased by 1.2 per cent. In May, the HVI revealed the improvement was nominal, equalling the earlier record high set in January 2022. After that price peak, the Harbour City’s dwelling values dropped by a dramatic -12.4 per cent, hitting a trough approximately a year later. The local market has since picked up by 14.1 per cent through the cycle to-date.

Since the onset of Covid to May this year, Sydney has seen a 27.2 per cent rise in its median dwelling value.

Hobart, however, is the capital sitting the furthest off its pandemic-induced peak. Between its high in May 2022, the Tasmanian city is still -11.5 per cent down recording a $655,170 dwelling median. Despite the significant decrease, Hobart is still up 28.4 per cent on its pre-Covid median. Although CoreLogic places Melbourne, Brisbane, Adelaide, and Perth back at their peak positions for the current cycle, no capital has surpassed its peak as of yet.

High end home growth in hiatus

Despite a handful of multimillion dollar trophy homes selling over the past three months, CoreLogic data has shown that upper quartile home values (those sold in the top 25 per cent of prices) are at their lowest rate of growth in 12 months. This phenomenon is occurring in all capital cities, except Darwin, demonstrating stronger conditions in the more affordable price points.

“After recording a higher rate of gain through the early months of the growth cycle, conditions have faded across the upper quartile as borrowing capacity reduced and affordability constraints deflected demand towards middle-and-lower-priced properties,” Mr Lawless said.

Across the combined capitals index, upper quartile dwelling values were up 6.7 per cent annually compared with a 13.4 per cent gain across the lower quartile of the market.

Prices moving forward

Unsurprisingly, the interest rate status and the imbalance in the supply and demand equation, are being tipped as the catalysts for future home price growth.

Eleanor Creagh, senior economist with PropTrack from REA Group, said in the May Home Price Index that with housing supply not keeping up with demand, national home values have now cycled through 17 consecutive months of growth according to their data.ⁱ

“Despite a rise in the number of homes for sale this year, strong population growth, tight rental markets, and home equity gains continue to bolster strong demand. Meanwhile, building activity remains challenged by capacity constraints and higher costs, with consequent tight housing supply pushing prices and rents higher,” she explained.

“This mismatch between supply and demand is continuing to offset the higher interest rate environment. Further, current interest rate stability has sustained buyer and seller confidence, while ongoing home price rises are likely incentivising many to overcome affordability challenges and transact with the expectation of further growth.

Although, it is likely the pace of growth will continue slowing through the seasonally quieter winter period, particularly with interest rate cut expectations pushed out to late 2025.”

Dwelling values over the quarter

Melbourne

The Victorian capital posted a -0.2 per cent quarterly move according to CoreLogic figures taking the city’s median dwelling price to $780,000. Investors should take note that the gross rental yield figure for Melbourne now sits at 3.6 per cent.

Sydney

In the three months to May’s end, Sydney experienced a subtle dwelling value change of 1.2 per cent resulting in a median of $1.156 million. The gross rental yield for the Harbour City is currently the lowest in of the capitals at 3.1 per cent.

Brisbane

Gaining momentum, the Queensland capital has taken the second most expensive spot for dwelling values at $843,231 after a quarterly rise of 3.9 per cent. Brisbane has recorded a gross rental yield of 3.8 per cent.

Canberra

Knocked off its second spot, the national capital had a modest 0.7 per cent increase during the quarter with the median now sitting at $840,100. For Canberra, the gross rental yield is 4.1 per cent.

Perth

By far the best-performing capital over the quarter, Perth jumped 6.1 per cent in three months taking its medium to $736,649. At 4.5 per cent, Perth has the second most impressive gross rental yield in the country, only behind Darwin at 6.5 per cent.

For more information about how you might be able to purchase a property in the current market, get in touch with us today.  

Note: all figures in the city snapshots are sourced from: CoreLogic’s national Home Value Index (June 2024)

If you have any questions or need any information please give us a call on 039723 0522.

Suite 2, 1 Railway Crescent
Croydon, Victoria 3136

Email: integrityone@iplan.com.au

Telephone : 03 9723 0522

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Slowly but surely: Home values are on the way up

Home values across the country have largely settled into positive territory despite interest rates remaining elevated. Perhaps it’s the talk of impending rate cuts and easing inflation that has caused prices to inch up in every capital over the quarter, except for Melbourne and Hobart.

Values gaining momentum

In the three months to February 29, CoreLogic’s Home Value Index (HVI) reported national values had risen by 1.3%. Over the same period, the combined capital cities increased by 1.2% and the combined regions were up by 1.3%.

During the quarter, Perth surged ahead jumping 5.2% in three months taking the 12-month hike in the West Australian capital to an incredible 18.3%.

CoreLogic research director Tim Lawless said ongoing financial challenges haven’t overwhelmingly dampened the Australian demand for bricks and mortar.“Housing values have been more than resilient in the face of high interest rates and cost of living pressures,” he said. “The ongoing rise in housing values reflects a persistent imbalance between supply and demand which varies in magnitude across our cities and regions.”

Home values moving forward

Historically, the major capitals of Sydney and Melbourne do a lot of the heavy lifting when it comes to housing values. The HVI demonstrated that Melbourne values had just come out of a “three-month slump” to record a modest 0.1% rise in February and in Sydney values returned to positive territory by February after recording declines late last year.

“Potentially we are seeing some early signs of a boost to housing confidence as inflation eases and expectations for a rate cut, or cuts, later this year firm up,” Mr Lawless added.

However, Mr Lawless said multiple factors are holding the domestic housing market back from a “significant rebound”.“Affordability constraints, rising unemployment, a slowdown in the rate of household savings and a cautious lending environment, are all factors likely to keep a lid on value growth over the near term.”

Eleanor Creagh, senior economist at REA Group’s data business PropTrack, was more optimistic. “Housing demand is being buoyed by population growth, tight rental markets, resilient labour market conditions and recent home equity gains. Meanwhile, the sharp rise in construction costs and labour and materials shortages have slowed the delivery of new builds, hampering the supply of new housing,” she said.

Rents still on the rise

The start of the calendar year has always been a strong period for rental growth and the beginning of 2024 has been no exception. CoreLogic figures show national rental values had risen by 0.9% in February, the highest reading since March 2023. As a result, the rolling quarterly change in rents rose to 2.4%, the highest since May last year.

Dwelling values over the quarter

Melbourne
The Victorian capital has once again recorded a median dwelling value below Brisbane at $778,941 – sitting close to the national median of $765,762. The city saw negative growth across the quarter with a -0.6% change in dwelling values, however, this last month figures moved into positive territory, up 0.1%. The annual increase for Melbourne was 4%.

Sydney
Maintaining its place as the country’s most expensive city, quarterly figures show that the Harbour City had a very subtle movement in dwelling values rising only 0.6% to $1.128 million. The annual figure demonstrates a more impressive number having jumped 10.6% in 12 months.

Brisbane
Brisbane’s median home price is now $805,593 after a quarterly increase of 2.9%, but it is a longer term picture that showcases the Queensland capital’s impressive year in property. During the 12 months to February 29, median dwelling prices jumped 15.6%.

Canberra
Sitting in its relatively new position as Australia’s second priciest city for property, Canberra had a quarterly home price movement of just 0.3% taking the current median to $840,103. Over the past year, the nation’s capital rose by 1.6%.

Perth
Often proving to be a city that dances to the beat of its own drum, Perth has leapt streets ahead over other capitals with an annual home value surge of 18.3% to a median of $687,004. It has also been a strong quarter with a local home value growth of 5.2%.

For more information about how you might be able to purchase a property in the current market, get in touch with us today.

Note: all figures in the city snapshots are sourced from: CoreLogic’s national Home Value Index (March 2024)

If you have any questions or need any information please give us a call on 039723 0522.

Suite 2, 1 Railway Crescent
Croydon, Victoria 3136

Email: integrityone@iplan.com.au

Telephone : 03 9723 0522

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Among all the voices analysing the Australian property market, you’ve probably heard many truisms about how to secure a home loan. The real truth is that there are lots of options.

We thought it was time to correct some frequent misconceptions we hear from our clients. Hopefully this will help you identify the path to home ownership that best suits your circumstances.

Beat the deposit treadmill

A common belief is that you need the holy grail of a 20% deposit before the banks will even look at you. It may be their ideal, but they also realise it’s out of reach for many – even with the help of mum and dad. The vast majority of lenders have a variety of deposit options. These include deposits as low as 5% and, if you qualify for a government guarantee, not having to pay mortgage insurance.

Guarantor home loans are becoming more common. These allow you to avoid stumping up a cash deposit by having a guarantor (usually a close relative) pledging their home equity to cover the equivalent of your 20% deposit.

You may also qualify for the Government Equity Scheme where the government pays 50% of your home loan. This lets you to enter the market with less deposit and reduces your repayments. However, it also means the government owns half the equity in your home.

When 30 years is too long

Most people want the longest mortgage possible as it means smaller monthly repayments. Of course, the downside to a 30-year mortgage is paying more interest over the long-term. For some situations, like if you want to increase your equity quickly, it might be better to opt for a shorter term where you pay more interest each month but less over entire the length of the loan. Knowing your timeline and expected cash flow will help decide what’s right for you.

The pros and cons of fixed rates

Now that there’s serious talk of interest rates falling, people are once again seeing the value of not locking in their interest rates for long periods. When deciding on a fixed or fluctuating mortgage you need to think about your long- and short-term financial goals and cash flow.

For example, at the time of choosing your mortgage, the fixed rate is usually higher than the fluctuating rate so you need to ask yourself if you can afford it. Many buyers decide to hedge their bets by splitting between the two. You can also fix rates for different time spans. Again, in general, the longer the ‘fix’, the higher the rate.

When interest-only makes sense

Getting an interest-only loan is often seen as risky and isn’t as popular as it once was. However, some people still find them useful, especially property investors. With an interest-only loan you just pay back the interest on your home loan and not any of the capital. This results in smaller monthly repayments but limits your equity growth in the property. Some people choose to start out interest-only so they can pay for renovations or get on top of their cash flow. They then switch to an interest and principal repayment structure later on.

Pre-approval is no guarantee

Estate agents love you to have ‘pre-approval’ for a home loan. It tells them you are serious about buying and that you know your limit. Pre-approval also speeds up the buying process because some of the basic paperwork has been submitted.

What it doesn’t do is guarantee that you will get the loan. Lenders still need to go through due diligence before approving you. You also need to be aware that pre-approvals last three months. After that, you have to apply to have it renewed.

With all the advice out there, identifying your individual path to home loan approval can appear tricky, but that’s only because you have options. There is no one size fits all. So, why not start the ball rolling by having a chat with us about your goals and options. We can arm you with the facts and help you set off on your property-owning path.

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Email: integrityone@iplan.com.au

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When getting ready to buy property, there are many things to keep track of as settlement approaches. An important consideration is what you will need in terms of insurance – admittedly not the most exciting part of buying a new home, but one which can save you money and stress in the future.

Why lenders often require insurance

While not a legal requirement, insurance is often required by lenders, and they may want to see your policy before either the exchange of contracts or ahead of the settlement.

As the lender has a stake in the property during the life of the loan, they will want to know should the property be damaged or destroyed, if any large insurance claims are made, and if your insurance lapses.

Types of insurance

There are various forms of insurance relating to your property, these include:

• Home or building insurance – to protect you against damage to the property (such as due to an extreme weather event like fire or floods).
• Contents insurance – to safeguard you against theft or accidental damage to your belongings.
• Lenders Mortgage Insurance (LMI) – to cover the lender should you default on your repayments (note: LMI is a one-off payment by the buyer, not the lender).
• Landlord insurance – to protect your property if you are renting it out.
• Mortgage protection insurance – to cover your mortgage payments in case you or your partner become unemployed, seriously ill or die.

Home and contents insurance

Home and contents insurance, is often what buyers think of when it comes to getting insurance.

There are two main types of home insurance: sum-insured cover (which means the insurer will pay for repairs or a rebuild up to an estimated amount you specify in your policy) and total replacement cover (which means you will be covered for your home to be repaired or rebuilt as it was without you having to set a specific sum-insured limit).

Total replacement cover is more expensive and not all lenders offer it, so keep that in mind. As for contents insurance, you tend to be covered for the replacement value of your belongings.

According to statistics from Finder in January 2023, 60% of survey respondents have some form of home insurance policy. An interesting finding was that only 43% of respondents with home insurance said that they fully understood their home insurance policy. While 48% said they partially understood it, 8% didn’t understand the benefits and inclusion of their policy.

It’s important to know what you are covered for, such as which type of event. Home and contents insurance don’t cover everything, so check the exclusions – these might be a house left unoccupied that is then damaged, doing renovations, any existing damage and damage caused by pets.

You can usually request additional insurance, for example, covering high value items such as expensive jewelry or fixing that hole in the wall, so it’s worth checking what is included in your policy and whether it’s worth paying extra.

Do you need insurance before settlement?

As mentioned above, some lenders will ask to see proof of insurance before any contracts are exchanged. In some instances, the lender will ask that your insurance be effective from the date you sign the contract or before the loan becomes conditional.

Depending on which state or territory you live in, you may be responsible for damage to the property as soon as contracts are exchanged. Here is a list on each area’s requirements:

• ACT, TAS & SA – the buyer is responsible for damage to the property as soon as contracts are exchanged.
• NSW & VIC – the buyer is responsible for damage to the property on settlement.
• QLD – the buyer is responsible for damage to the property from 5.00pm the next business day after the contract date (before settlement).
• WA & NT – the buyer is responsible for damage to the property on whichever comes first: either the date the whole purchase price is paid, or the date the buyer is entitled to or is given possession of the property.

Please feel free to contact us if you have any questions about this or any other mortgage related matter – we are here to help.

Suite 2, 1 Railway Crescent
Croydon, Victoria 3136

Email: integrityone@iplan.com.au

Telephone : 03 9723 0522

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