How to know if you’re paying a fair price

We all love the idea of nabbing a bargain property, but for most home buyers the real issue is whether they’re overvaluing a place – and paying too much in the process.

Buying a home is an exciting prospect, but it’s perfectly natural to have a big dose of nerves given that you’re likely committing to spending hundreds of thousands of dollars (or millions!).

But with a bit of research, and some other handy tips below, you can help protect yourself when the bidding or negotiations begin.

Why it’s important to pay a fair price

Paying above the odds for a home can have serious financial impacts.

The more you pay, the more you may need to borrow to fund the purchase. That can mean paying higher loan repayments, potentially leaving your budget thinly stretched, especially if interest rates rise again.

Worst case scenario, you could get caught out by a bank valuation that comes in lower than the purchase price – leaving you facing a funding shortfall.

The question is, how do you know if the asking price for a home is in line with the market, or if it’s completely over the top?

Research helps you nail the market

One way to hone in on what a home is worth is to have a pre-purchase valuation.

This involves a professional valuer examining the property and arriving at a value based on factors such as the location and size/condition of the home.

The catch is that a valuation can cost between $200 to $600.

It also takes time to organise, and in a fast-moving market the delay could see you miss out on a property.

A cheaper option is to do plenty of your own research.

Websites like realestate.com.au or domain.com.au can show the median house and apartment values for individual suburbs.

This gives you a good starting point, though as each home is different you’ll need to drill down further.

Factors that can impact market value

Some factors can see broadly similar properties have very different market values. Things to watch for include:

– The lot size a house sits on.
– The number of bedrooms and bathrooms.
– The condition of a home.
– Availability of parking (off-street parking is a plus!)
– Orientation. North-facing homes receive more natural daylight, and so often require less artificial lighting or heating.
– Energy efficiency. PropTrack found three out of five (59%) buyers say eco-features such as solar panels are important to help save on power bills.
– The street. Be wary of streets that become a commuter parking lot on weekdays.
– Views and outlook.
– Zoning and planned developments.

Bearing all these features in mind, check out recently sold properties similar to the one you’re planning to buy.

Pay particular attention to the final sale price – not the asking price. It is the selling price that sets the market.

Don’t be afraid to negotiate

If you have done your homework, you should have a reasonable idea if the asking price of a place is close to the mark or wishful thinking.

Remember, you may also have scope to pay less by negotiating on price. Bear in mind though that the longer negotiations take, the greater the danger of someone else jumping in and snatching the property from under you.

Get in touch with us about pre-approval

Last but not least, give us a call to discuss some of the benefits of home loan pre-approval.

It can help you act quickly when you see a home you’re interested in buying, and it sets a buying limit so you can negotiate with confidence.

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.

Can you remember your home loan interest rate?

Where you put your car keys, who won the footy premiership three years back, the new prime minister of New Zealand’s name – all very much socially acceptable things to forget. Your home loan rate shouldn’t be on that list.

It’s a fair bet that your home loan repayments are one of your biggest household expenses.

Yet it’s surprising how many borrowers haven’t kept up with what their home loan rate currently is.

In fact, a new report by Mozo shows that 42% of mortgage holders have no idea what interest rate they’re paying on their home loan.

And it’s an oversight that can cost home owners dearly.

How does your loan rate shape up?

It’s not just that large numbers of borrowers can’t pinpoint their loan rate.

Mozo also found one-in-five home owners have never compared rates since taking out their loan.

Your home loan may have had a competitive rate back in the day, but in a rapidly changing mortgage market, that may no longer be the case. And with the cash rate at its highest since late 2011, there’s little room for complacency.

For a quick check of how your home loan rate stacks up, head to your latest loan statement to find out what it is. It should show the rate you’re paying. Or call us, and we’ll let you know.

By way of comparison, the average home loan interest rate for owner-occupiers is currently 6.4%, and 6.3% for new home loans, according to the Reserve Bank of Australia.

Why it pays to regularly review your home loan

Staying on top of your loan isn’t just about the rate you pay.

Your loan might have been the right choice for you a few years ago. But our lives evolve, and your mortgage may not have the features you need for your current lifestyle and budget.

That’s why it’s worth taking a close look at your loan at least annually, or whenever you experience a major life change such as starting a family.

Understanding how your loan is performing for both rate and features is easy. Speak to us about a home loan review.

As part of our review, we can let you know:

– the rate you are paying;
– if your loan offers the features you want; and
– whether you could save by refinancing.

Is refinancing right for you?

If you’ve been wondering if you could do better on your home loan, give us a call today to discuss your refinancing options.

We’ll help you work out if refinancing is the right step for you and how much you could save by switching to a new loan and/or lender.

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.

Plot twist: Millennials are Australia’s most active property investors

When it comes to buying investment properties, younger Australians are punching above their weight, with Millennials taking the title as the nation’s most active generation for property investment.

Investors are continuing to flock to the property market, with the Australian Bureau of Statistics saying the volume of new investor loans in February was 21.5% higher compared to a year ago.

Investment loans now make up over half of the growth in new loans over the past year.

But in an unexpected twist, it isn’t older generations of Aussies who are leading the charge to buy rental properties.

Younger investors flex their muscles

New data from the Commonwealth Bank shows Millennials (those born between 1981 and 1996) accounted for almost half (46%) of the bank’s new property investors in 2023.

And almost one in three of those buyers purchased an investment property on their own, without the help of a partner.

Gen Xers (1965 – 1980) are also snapping up rental properties, accounting for 37% of CommBank’s new investment property loans throughout 2023.

Rentvesting – get into the market sooner

Rentvesting is buying property where you can afford, possibly a smaller property in a lower-cost area, and then renting where you want to live.

The CommBank data shows plenty of investors are taking this approach and it makes sense: the average investment loan size is just over $528,000 compared to $624,000 for owner occupiers.

And remember, if you purchase the right property, as an investor you could expect to earn rental income. That’s extra cash for loan repayments.

In this way, rentvesting could be an opportunity to get started on the property ladder sooner rather than later, without having to make too many lifestyle sacrifices. As the investment property grows in value over time, it can become the stepping stone to buy an owner-occupied home.

The market seems attractive for investors right now

The property market offers plenty of appeal to investors right now.

Rental vacancy rates are at a record low of just 0.7% nationally. Property listings have increased in most cities, giving buyers more choice, and the past 12 months have seen rents skyrocket 11.4% across our state capitals.

Add in growing expectations that interest rates will start to fall later this year, and CoreLogic says it’s likely that property values will continue to rise, giving those who buy today the potential to notch up handy capital gains.

Are you ready to become a property investor?

Talk to us today to find out how much you could borrow, and your likely loan repayments. It could help you become a property investor sooner!

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.

Homeowners now an extra $71,000 richer (on average!)

You may not feel richer, but if you’re a homeowner, there’s a decent chance your personal wealth has surged over the past 12 months thanks to soaring property values. And it could open up a world of exciting possibilities.

Sometimes you’ve just got to shake your head in disbelief at the resilience of the property market.

Despite a cost of living crunch and higher interest rates, national home prices have somehow ploughed on over the last year and a bit.

CoreLogic says home values nationally are up $71,832 since January 2023 – a jump of 10.2% in just 14 months – which averages out to an increase of $5,130 per month.

To put that into perspective, last financial year the average full-time Australian worker earned $6,565 per month after tax.

The thing is, higher values can give homeowners much more than a warm inner glow.

Rising property prices can also provide opportunities to boost your wealth further – without having to hammer in a For Sale sign out the front.

Let’s take a closer look.

Your home equity can unlock further wealth

An uptick in your home’s value can drive an increase in home equity – assuming your mortgage hasn’t increased.

Home equity is the difference between the market value of your home and the balance of your home loan.

So if your home is valued at $1,000,000, for example, and you have $500,000 left on your home loan, your home equity is $500,000.

The exciting thing about home equity is that it’s not just a number on a page. It can be a valuable resource that helps you forge ahead financially.

Three ways to make home equity work harder

Plenty of banks let you use home equity as security for additional borrowing or to refinance your current home loan – all without having to sell your home.

Here are three ways you could make your newly enlarged home equity work harder:

1. Refinance to save on interest

Your home loan is probably one of your biggest household expenses.

Refinancing to a new loan or lender can help you save with a more competitive rate, or by taking advantage of loan features that help you pay off the mortgage sooner (such as an offset account).

And the more home equity you have, the easier it can be to refinance.

2. Use your home’s equity to fund an investment property

Your home equity may be used as a deposit on an investment property in lieu of cash savings.

By becoming a landlord, you could benefit from regular rental income, potential tax savings, and an increase in the value of your rental property over time.

Not to mention having a nice little nest egg that could help fund your retirement or – if you’re feeling particularly generous – pass on to your children.

3. Put home equity to work funding renovations

One of the beauties of home ownership is that you can add value to your property – regardless of what the market is doing – with a few well-planned renovations.

But how do you fund those renovations if you’re tight for cash?

Well, one way is to tap into your home equity to fund the renovations.

So how does ‘cashing out equity’ work?

It might sound complicated – but we promise it’s not.

Let’s say you bought an $800,000 house three years ago that, partly due to last year’s property price surge, is now worth $1 million.

And let’s also say you originally took out a $600,000 loan for that house, which you’ve managed to pay down to $500,000 (you little beauty!).

By refinancing that $500,000 loan into a $700,000 loan (70% of your property’s new market value), you can unlock $200,000 in equity to help fund your renovations or as a deposit to buy an investment property.

It’s also worth noting that banks typically let you borrow up to 80% of a property’s market value.

Which means if you upped the ante and refinanced to an $800,000 loan, you might be able to unlock $300,000 in equity.

So if you’d like to make your home equity work harder, call us today for a clearer picture on how much equity you have – and how you can tap into it to potentially grow your wealth.

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.

FOMO, FOBO and FOOP – how they can hold you back

Nobody likes missing out on a good thing. But then again, who likes overpaying? So how do you strike the right balance when both fears can work against one another?

The property market rarely stands still. Interest rate movements, the number of homes listed for sale, and even the time of year can all drive shifts in the market.

And change plus commitment isn’t something we’re all comfortable with.

It can even see us put mental traps in place that mean we panic about missing out on a good buy, or alternatively, we convince ourselves it’s better to sit things out on the sidelines.

Let’s take a look at three mind games that can work against home buyers – and how you could beat them.

Fear of missing out – uh oh, FOMO

FOMO can be a real thing for home buyers, and it’s possibly starting to have an impact on the property market once more.

According to REA Group, today’s buyers are being gripped by a sense of urgency to make their move into the market.

The reason?

Growing expectations of interest rate cuts are sparking concerns that property values may soon skyrocket again.

Already, research firm CoreLogic says market data points to further growth in home prices.

The result is that autumn is shaping up as a particularly busy season as buyers look to race in before values head higher.

So should you sprint into the market too?

Well, before racing in to buy a home, have a chat with us and we can let you know if you’re home loan ready today.

Fear of better options – let go of FOBO

Some buyers never quite get into the market because of nagging doubts that an even better property could come along.

The thing is, no home is perfect. Buyers often find a bit of compromise is what gets them into the market.

To avoid FOBO, jot down the essential features you’re looking for in a home. Then back it up with a list of nice-but-not-necessary features.

If you can find a property that ticks the boxes for all, or most, of the must-haves you can be confident you’re buying a place that will suit the majority of your needs.

Fear of over-paying – forge a path past FOOP!

It’s possible that humans have wrestled with the question “am I paying too much?” for centuries.

No one wants to pay over the odds for their home.

However, this shouldn’t freeze you into taking no action at all.

Two simple steps could help dispel concerns about whether you’re paying too much for a property.

First, do plenty of research and check out comparable home values in the area you plan to buy in. It can help you identify if the asking price for a place is reasonable or over-the-top.

Remember, you can always attempt to negotiate on price – especially if you have home loan pre-approval, which shows sellers you’re a serious buyer.

Second, and perhaps more importantly, remember that property values typically rise over time.

For example, data from SQM Research shows that back in 2009 the average asking price for a house in Sydney was about $755,000. Fast forward to March 2024, and that figure has jumped to more than $1.9 million.

Hence the saying: “time in” the market generally beats “timing” the market.

Because if you plan to hold your home or investment for the long term, chances are you’ll look back at what you paid, and be glad you purchased when you did.

But … to help make sure you don’t purchase a house that’s beyond your means, get in touch with us today and we can help you work out your borrowing power.

In turn, you’ll be able to work out what your home buying budget is, and what your monthly home loan repayments will likely be.

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.