How long it takes to save a deposit (and how to fast-track it)

Planning to buy your first home? It takes (on average) about five to six years to save a deposit at present. But who’s got the patience to save for six years? Today we’ll look at four ways you could fast-track home ownership.

They say patience is a virtue. But the narrator/protagonist of the poem that coined that famous phrase was an idle vagabond – not exactly an inspiration for eager homeowners in a competitive market.

So today we’ll throw patience out the window and walk you through some ways you could beat the national average of 5.6 years when it comes to saving a house deposit (all while keeping your virtue!).

1. Buy with less than a 20% deposit

It is possible to buy a home with a deposit of less than 20%. Some lenders will take a 10% deposit. Others may accept a deposit as low as 5%.

The downside is that with anything less than 20%, you will usually be asked to pay lenders mortgage insurance (LMI), unless you tap into the scheme in number 3 below.

LMI protects the lender (not you) if you can’t keep up the loan repayments.

The downside is that the one-off LMI premium can be pricey, potentially adding more than $10,000 to the upfront cost of buying a home.

You may be able to add the cost of LMI onto your home loan and pay it off over time, although this will increase your repayments and you’ll end up paying interest on the insurance premium.

That said, paying LMI offers a way to get into the market sooner, before property values potentially rise higher.

It’s a solution that can work for some first-home buyers, and we can explain if it could work for you too.

2. Have a guarantor in place

A guarantor is a person, usually a close relative such as mum or dad, who provides additional security for your home loan.

This security usually takes the shape of the guarantor’s home equity. It means guarantors don’t need to hand over any cash, and they can often specify what percentage of your loan they will guarantee.

With a guarantor in place, you may potentially be able to borrow 100% of your home’s value without paying LMI, although lenders still like to see that you have a strong savings record, often with at least a 5% deposit under your belt.

If you have a close family member who is happy to be your guarantor, talk to us about the different home loan options available.

3. Tap into the First Home Guarantee scheme

No guarantor? No worries. If you can save a 5% deposit you could be eligible for a spot in the First Home Guarantee (FHG) scheme.

The FHG sees the federal government guarantee up to 15% of your loan.

While you won’t receive a cash payment, the government guarantee can get you over the line for a loan with just a 5% deposit, and the real sweetener is that you won’t need to pay LMI.

Places in the FHG scheme are limited, and eligibility conditions apply. So talk to us to find out if the scheme offers a pathway for you to buy a place of your own sooner.

4. Using your super account to fast-track savings

The First Home Super Saver Scheme could also be worth a look.

The scheme could boost your savings for a deposit by 30% compared to a regular savings account, according to the federal government.⁣

All you need to do is make voluntary contributions to super – up to $15,000 annually.

Now here’s the good bit: voluntary contributions into your super are taxed at only 15%, which is usually less than your marginal income tax rate.

Plus your super account usually has the potential for higher investment returns compared to the interest paid on a regular savings account.⁣

When you’re ready to buy, you can withdraw the money you’ve voluntarily contributed – up to $50,000 – plus any associated earnings.

Better still, if you’re buying with a partner, together you can withdraw up to $100,000 plus associated earnings.⁣

Why fast-tracking your deposit may be important

Last but not least, it’s important to note that PropTrack’s national average calculation of 5.6 years assumes a deposit equal to 20% of today’s median home prices.

However, it’s more likely than not that national property prices will be even higher by the time you’ve saved up your house deposit – no matter whether that’s in three, five or six years.

Long story short, the longer you take, the higher your deposit might need to be.

So the sooner you act, the better off you could be.

If you’d like help, get in touch with us today. We can run through your situation and let you know which of the strategies above might be a good fit.

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

Could rate cuts mean house prices heat up again?

Thinking of holding off buying until interest rates fall? Wait until you see what could happen to home prices. Here’s why it could make sense to buy sooner rather than later if you’re home loan-ready.

September saw the nation’s official cash rate kept on hold once again. But there is growing consensus that the RBA may cut the cash rate at one of its next few meetings.

Several of the big banks, including Westpac and NAB, are expecting rate cuts in the first half of next year.

Others, such as the Commonwealth Bank, are forecasting a rate cut in time for Christmas.

While lower rates can’t come soon enough for many struggling mortgage holders, there is one issue that has been largely overlooked, and that’s how home prices might respond to a cash rate cut.

Here’s what the experts say may happen.

How home values could respond to rate cuts

First up, it’s worth pointing out that higher rates have been with us since mid-2022.

Yet property values have climbed rather than cooled since then, with the national median value rising from $752,507 in June 2022 to $807,110 today.

With that in mind, if interest rates fall, many pundits believe home values could head even higher.

The question is, how much higher?

Ray White Economics has done the maths based on past property price movements following a long-awaited rate cut.

According to their analysis, home prices nationally could rise by 0.6% within just one month of a rate cut.

REA Group has teased out the numbers further, saying that based on current median values, a 0.6% price rise could add an extra $5,000 to the average cost of a home across Australia.

And that’s for just one rate cut.

​​SQM Research director Louis Christopher says four cuts next year, while still a more remote possibility, could cause a huge rebound in property markets that have recently been weaker – such as Melbourne and Sydney.

The impact in your state capital

Exactly how home prices respond to rate cuts is likely to vary between locations.

Here’s what Ray White Economics and REA Group say could happen in capital cities in the first month after one official rate cut:

– Sydney: values rise 1.4% adding an extra $15,300 to the median property value.
– Melbourne: values rise 1.0%, pushing up the median price by $8,000.
– Brisbane: values climb 0.4%, adding $3,400 to home prices.
– Canberra: values increase 0.5%, pushing up prices by just over $4,000.
– Adelaide: values rise 0.3%, adding $2,300 to property prices.
– Perth and Darwin: no change to values.

It’s worth stressing that these numbers reflect how the market has responded to rate cuts in the past. Things could be very different in the future.

Perth, for example, currently has one of the nation’s strongest property markets, and Ray White Economics suggests that home values there could rise further following a cut to the cash rate.

Should I buy now?

Holding out for interest rate cuts may seem to make sense. After all, lower rates can boost your borrowing power.

But as we have seen, it could also work against you.

Lower rates may push up home prices, and potentially fuel increased competition among buyers.

That’s why we believe the “right” time to buy is when you are ready.

And today’s spring market comes with the added advantage of more choice for buyers.

According to CoreLogic, the flow of freshly-advertised housing stock hasn’t been this high at this time of the year since 2021.

So if you’re interested in buying your first or next home (with the potential benefit of getting one or several rate cuts soon after your purchase), get in touch with us today.

We’ll help you assess your borrowing power in the current market, and if you find the right house, we’ll help you find the right loan for it.

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

Why 9 out of 10 first-home buyers use a mortgage broker

Remember the first time you stepped into a gym? It’s unlikely you swaggered your way over to the free weights rack and started busting out squats. Well, it turns out buying your first home can be just as daunting, with 91% of first-home buyers turning to a mortgage broker for guidance.

When it comes to financial decisions, they don’t come much bigger than buying a home.

So it’s no wonder that plenty of first-home buyers feel a mix of nerves and excitement.

It’s also understandable that more than one-in-two first-home buyers feel the need for support throughout the home-buying process.

And for nine out of ten first-home buyers, that valuable support comes from a mortgage broker, according to a recent report by lenders’ mortgage insurance (LMI) provider, Helia.

How a mortgage broker helps

Finding a home you like is just part of the home-buying equation.

Identifying a home loan that is right for your needs, with a competitive rate, completes the picture.

But without skilled help this can be easier said than done.

The Helia survey found close to half (45%) of first-home buyers find it difficult to research which loans are right for them. More than one-in-two (52%) anticipate challenges in obtaining the loan they need.

This is where mortgage brokers can help.

We spend time getting to know you and your financial needs. This allows us to narrow down the choice of home loans that may be a good match for your needs.

We also know what lenders look for when they approve a home loan.

We can explain whether you’re home loan ready right now, or discuss the steps you can take to help pave the way for home loan approval in the future.

Better yet, we’ll stay in touch to offer tips and encouragement along the way.

We’re about more than a home loan

The benefits of a mortgage broker go beyond helping you land a home loan.

According to Helia’s study, first-home buyers say mortgage brokers:

– help home buyers understand their financial situation and borrowing power
– provide valuable support, guidance and expertise throughout the complex buying journey
– help save you time and effort.

We can also tap into our wealth of experience to suggest strategies and schemes you may not have considered, such as rentvesting, having a close relative act as a guarantor for your home loan, or the federal government’s 5% deposit First Home Guarantee scheme.

After all, there are multiple pathways to home ownership, and options such as rentvesting can open up new suburbs for you to buy in, while letting you live in the location of your choice.

Get in touch with us today to find out more.

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

TikTok vs talking to your broker? It’s no contest

TikTok and Instagram reels are fun, fast and free – but it’s important to be picky about whose content you’re viewing, especially if you’re in the market for a home loan.

Chances are, if you’re reading this blog via a social media site, then you’ve also watched a TikTok or Instagram video before, too.

In fact, more than 8.5 million Australians are active on TikTok and almost 14 million on Instagram – making both platforms key players in Australia’s social media landscape.

Social media platforms certainly helped us while away the hours during COVID lockdowns, and they’re still keeping us entertained as we check out what Korean office workers eat for lunch, short clips of our favourite comedians, or discover what a family of 10 has for breakfast.

But while many of the videos seem like harmless fun, there are some pitfalls you might want to avoid in the financial services landscape.

69 million views for #Mortgage

Interestingly, almost one-in-three Australians (30%) say they turn to social media for money guidance.

And Finder research shows people act on what they see, especially younger subscribers.

Almost one-in-two Gen Zs (48%) have taken action on their finances following guidance from a content creator, compared to 17% of Gen X.

That’s no real surprise. After all, the hashtag #TikTokmademebuyit has gained 31.8 billion lifetime views and counting.

What is surprising, is how many Australians head to TikTok or Instagram looking for home loan tips.

For example, #Mortgage content has racked up 69 million views on TikTok alone in the past 12 months.

Knowing who you can trust on TikTok

On one hand, it’s great that social media is breaking down money taboos.

And there’s no doubt that TikTok, Instagram, Facebook and LinkedIn can be handy sources of information for home buyers.

The catch is that almost anyone can post on social media, and when we’re talking about mortgages, which is the largest financial decision most people will ever make, the last thing home buyers need is dodgy advice.

So it pays to check who is behind the video.

Australia is one of the few countries globally where influencers on social media have to be suitably licensed before they can offer advice on financial products.

Mortgage brokers also have to follow strict industry rules when it comes to marketing and advertising. And many brokers are supported by their aggregator’s compliance team who double-check content for accuracy and other legalities.

However, TikTok and Instagram don’t just show videos created by Australians.

The platforms’ algorithms are designed to deliver more of the same sort of content you’ve shown an interest in.

So, it’s likely that if you start watching posts on financial strategies around home loans, debt recycling, debt consolidation or property investment strategies, you could come across content created by people based outside Australia, in countries where the rules are far less rigid, different, or non-existent at all.

The bottom line

No matter whether you’re just starting your home buying journey, or you’re ready for the next step on the property ladder, social media can be an entertaining and accessible source of information.

Just be sure to check that any content you’re viewing on home loans or investment property loans comes from a licensed mortgage broker based in Australia.

Better still, pick up the phone and give us a call.

Sure, we’d (probably) lose in a dance-off against your average TikTok creator.

But we can provide you with home loan information tailored to your situation. And that can give you a lot more value – potentially in a lot less time – than trawling through thousands of #homeloan videos and posts.

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

Fixed rates tumble: a sign of things to come?

When will interest rates fall? It’s the question everyone is asking right now, and while speculation swirls about future rate cuts, the latest moves in fixed rates suggest we may not have to wait too much longer for variable interest rates to head south.

While about 4-in-5 Australian households are currently on a variable-rate mortgage, fixed-rate home loans shouldn’t be overlooked.

Locking into a fixed rate can offer several advantages, including certainty of repayments – which may make budgeting easier – as well as protection from possible rate hikes during the fixed term.

Right now, the direction of fixed rates is attracting plenty of attention.

Many lenders are cutting their fixed rates

A growing number of lenders, including several major banks, are starting to cut fixed rates across all terms, according to Mozo’s latest banking round-up.

Macquarie Bank, Commonwealth Bank, HSBC, Bank of Queensland, Westpac and its stable of brands – St.George, BankSA and Bank of Melbourne – have all recently cut some of their fixed rates.

They were joined by smaller lenders such as Hume Bank, MOVE Bank and Great Southern Bank, which also dialled down their fixed rates.

What’s especially exciting is that a number of these rate cuts were surprisingly large, in some cases worth half a percent or more for 2- to 3-year fixed rate terms.

Why are fixed rates falling?

Home loan interest rates – both variable and fixed – are shaped by a variety of factors.

When it comes to fixed rates, a key driver can be lenders’ forecasts of where they believe interest rates are headed.

In this way, fixed rates can be a bellwether for the direction of future interest rates.

Among the major banks, Commonwealth Bank expects a 0.25% RBA rate cut in late 2024.

ANZ is anticipating the RBA to cut rates from about February next year.

NAB has pencilled in a rate cut by mid-2025, and Westpac is expecting several rate cuts starting in March 2025.

The good news is that none of the big four banks seem to be anticipating rate hikes any time soon, and that’s great for those with a home loan.

What could this mean for you?

The trend to lower fixed rates suggests variable rate cuts may not be too far away either.

Right now though, fixed rates can be lower than variable rates depending on your choice of lender, fixed term and the size of your deposit.

If you’re currently struggling with your home loan repayments, locking in a fixed rate for the next 1, 2 or 3 years might help give you some certainty and home loan repayment relief.

But you’ve got to weigh that up against the potential of any variable rate cuts that you could miss out on in that same time period.

Bear in mind, predictions of rate cuts are exactly that – forecasts, not guarantees of lower rates.

Another option to consider is splitting your home loan between fixed and variable rates, which can allow you to get the best of both worlds: the certainty of a fixed rate plus the savings of a variable rate if interest rates start to head south.

Call us today to understand if fixing or splitting your loan rate could help you save.

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