Prosper Financial Planning

05/04/2022

House prices to increase by as much as 12% in 2022.

After a stellar 12 months where property prices rose 22.1 per cent across the country, the momentum is expected to continue into 2022.

28/03/2022

Demand for office space on the rise.

Demand for office space has increased in every Australian capital city CBD, defying reports of a pandemic downturn. According to the Property Council of Australia’s latest Office Market Report, tenant demand increased by one per cent on average across the country’s CBDs, and 0.

21/03/2022

Are you looking to grow your ? Contact us to discuss your options today.

Most people assume a business loan is only for new businesses that are trying to get off the ground. In reality, business loans are an important way for many well-established businesses to manage cash flow and expand their operations.

15/03/2022

Are you looking to sell a family home or investment property? In this week's article we share: Four ways to sell your property faster.

If you’re looking at upgrading or downgrading and you’re thinking about putting your property on the market, then it’s important to do everything you can to make it appealing to attract as many buyers as you can. The more interest you can get, the quicker the property will likely sell – idea...

08/03/2022

Can't afford to buy a house in your preferred area but don't want to miss out on future property growth? In this week's article we explore the option of rentvesting: renting while investing.

With house prices seeing record gains in 2021, getting into a home can be difficult – especially if you live in a city like Sydney, Melbourne, or Canberra where the median house price is above $1 million. However, if you want to find a way into the property market, for many people rentvesting can ...

28/02/2022

How To Reduce Lenders Mortgage Insurance (LMI)

Lenders Mortgage Insurance can be a great tool to help homebuyers get into a property that they otherwise might not be able to afford. However, it comes with a cost.

LMI is a one-off insurance premium that is put in place to protect the lender in the event the borrower is unable to manage their repayments. For many loans, LMI can add a significant upfront cost.

LMI is normally applicable when a borrower is seeking to get a loan with an LVR of more than 80 per cent.

Using LMI can be a very valuable tool for many homebuyers, as it might allow you to purchase a property years ahead of when you might have otherwise. You’ll be buying a property in today’s dollars and can benefit from any capital growth, instead of being required to pay a higher price at a later point.

If you are required to pay LMI, there are some ways you can potentially reduce the cost.

Lower the LVR

LMI is applied on a sliding scale, meaning that it is not a fixed sum and depends on the value of the property as well as the LVR.

The further from 80 per cent LVR, the more LMI you will be required to pay, as this represents more risk for the lender. If you go over 90 per cent, LMI can increase.

Even a slightly higher deposit can help lower the LMI costs.

Use a Guarantor or the FHLDS

Depending on the type of homebuyer you are you might be able to access a program that helps reduce the LMI burden.

First homebuyers are potentially eligible for the First Home Loan Deposit Scheme. This grant lets homebuyers put down a 5 per cent deposit, with the Federal Government effectively removing the LMI cost.

Otherwise, you could look at a guarantor loan or a family pledge, where a family member puts up equity in their own home to help cover a deposit shortfall.

Leverage Occupation if You Work in Certain Professions

Some lenders allow certain professions to access higher LVR loans without the need to pay LMI.

This is generally available for professionals in speciality industries such as lawyers, doctors, physiotherapists and dentists.

30/07/2021

5 Home Loan Features To Know About

Home loans have come a long way in the past few decades, and now there are a range of features you can access that can really benefit you in the long run. Fortunately, there are a few key features that you need to know about that can make all the difference over the life of the loan.

Offset Account

An offset account is one of the most common features of a standard variable home loan, and it’s also one of the most effective. An offset account is like a transaction account that works in conjunction with your home loan. You effectively save interest on money that you have sitting in your offset account, while still retaining full access to it, as you would with the account you use for everyday purchases or even your savings account. While there are different types of offset accounts, a 100% offset can be the most beneficial for some, as it saves you the same rate of interest that you’re paying on the home loan.

Unlimited Additional Repayments

If your goal is to pay down the balance of your home loan as soon as possible, you’re going to want to be able to make frequent repayments over and above the minimum requirements. Some home loans don’t allow you to do this or have a cap on the additional amount you can repay. Fortunately, there are plenty of products that do offer unlimited additional repayments, and this can save you both fees and interest over the long term.

Split Loans

If you’re unsure as to whether you should be fixing your home loan, the good thing is, it is possible to have the best of both worlds with a split home loan. As the name suggests, this type of loan allows you to split the loan between variable and fixed interest, so there is a degree of certainty around your repayments while still having some level of flexibility that comes with the variable loan.

Redraw Facility

If you’re someone who is likely going to be paying back your loan faster than the term dictates, a redraw facility might be something to consider. In essence, a redraw facility is very similar to an offset account, in that you have access to all the money you repay over and above the minimum. If you don’t need access to those extra funds, but want to have the money there for a rainy day or an emergency, then a redraw facility is a very effective option.

Package Deals

If you have a range of different loans, such as car, personal and home loans, then it is possible to package them all together. By doing this, you will likely be able to get lower interest rates and also save on the fees you would pay should you elect to take them out separately. The main catch with a package deal is that you are a little more tied to that one lender than you might be otherwise. It’s always a good idea to review your loans regularly with your mortgage broker.

23/07/2021

How to Buy in a Rising Market

House prices across Australia are continuing to see a sharp rise, and that can make it very tricky for buyers. Clearly, most states are in the grip of a seller’s market, so it’s important to both adjust your expectations and know how to buy when prices are rising.

Have finance organised

Arguably, the most important element of buying a property during any market is to make sure you have your finance organised. However, when markets are rising, you not only need to know how much you can spend, but you need the confidence to be able to act quickly. As prices move higher, we also see the time it takes to sell a property, fall dramatically. As a buyer, if you have a preapproval in place, you’ll be able to make an offer early and have the confidence that your finance won’t be an issue.

Look at all options

Most Australian’s like to browse the real estate portals and then attend open homes on the weekend. Unfortunately, when markets are hot, you need more options, or you’ll be stuck fighting over the few properties that are actually listed for sale. One of the most effective things you can do is get on the email list of the leading agents in the suburb or suburbs in which you are wanting to buy. Sales agents often let people know about upcoming listings, and if you are confident and prepared, you might be able to make an offer before the listing ever sees the light of day.

Do your research

When markets are moving, it seems as if every property is selling well above its asking price. It is incumbent upon you, the buyer, to understand where the market is at in your area of interest, and the best way to do that is to track recent sales. By understanding what’s selling, you will know what a fair price is and also how long you have to act. Talk to all the sales agents in your area if you want even more insight as they are the ones who are always on the pulse of the market.

Manage your expectations

When markets are moving, it's unlikely that you’re going to get a significant discount on a property that has multiple interested parties. If a market is rising by 5% each quarter, it's conceivable that from the time you began your search to when you go to put in an offer, some property might have appreciated sharply in value. Again, you will need to know your market and put in an offer that is competitive. There’s no point fighting over a few thousand dollars and missing out when houses are rising by double digits on an annual basis.

16/07/2021

Upgrading Your Home in a Strong Market

While it’s nice to be selling when markets are strong, this can also cause a number of issues for those who are needing to sell their home before trying to buy another.

We would see this commonly with upgraders and down graders, who might be at the time in their lives when they need more space for the family or, on the flip side, would like a smaller home that requires less maintenance as they get older.

Both sets of potential buyers will likely need to sell their own property before making an offer on another one. This can be a tricky situation to navigate, and it’s important to consider a number of factors when trying to sell.

Appraise Your Current Home

The first thing you need to get a clear understanding of, is just how much your current home is worth. In a seller’s market, prices can move quickly, so even in the space of three months, your property might have gained significant value. It’s always good to get multiple opinions from the leading sales agents in your area as they are on the pulse of what is selling. They can also give you a very clear idea of how fast your home might sell and also whether the property type is what buyers in that area are looking for.

Look to Auction

There’s no doubt that if you want to get the most you can for your property, auction is the best option in a hot market. Auctions are most effective when there are multiple interested parties who are prepared to bid against one another. However, if you need more flexibility around the terms, such as settlement, then it might be worth considering selling by private treaty. That could come at the cost of extracting the very best price.

Longer Settlements

If you need time to buy a home after selling, then it’s well worth pushing for a longer settlement period on your own property. It’s possible to get four-month settlement periods, and you will likely need that time to go through the buying process.

Bridging Loans

If you are looking to sell, but really want to buy a certain property, there are options to consider, such as a bridging loan. These loans often come with higher interest rates but can be a useful way to get the best of both worlds. Given that the property market is strong, the odds of selling your home go up; you just don’t have that certainty when you have already sold your property.

Pre-approval

What you can do is start talking to a mortgage broker about what your finance options are like, and in some cases, it will be possible to get a pre-approval together. A pre-approval in conjunction with a good appraisal of your current property will give you a clear idea of how much you can afford to spend in the future. Even if you’re starting out the selling process, it is well worth getting a good understanding of how much you can potentially spend and start monitoring the market.

09/07/2021

Ways to Increase Your Borrowing Capacity

With house prices rising in all states and territories, we are again looking at falling levels of affordability.

When the time comes to purchase a property, often the most important element is just how much a bank is going to lend you. This is known as your borrowing capacity, and the good news is that there are things you can do to increase it.

Know your credit score

The first thing a lender will do when assessing your application is to look at your credit score. If you’ve got a history of unpaid bills or late payments, they will likely perceive you as being higher risk and may lend less to you, than a borrower with a higher credit score. You can start improving your credit-worthiness by paying your bills on time and preferably early, as well as getting a copy of your credit report and making sure there are no errors.

Reduce debts

Your borrowing capacity is effectively the spare money between how much you earn and how much you spend. Things like debts are fixed expenses that will weigh down your ability to borrow. You might be able to consolidate some of your higher-interest debts (eg, credit cards) into something like a personal loan to put you in a more favourable financial position. However, the best thing to do if you’re serious about buying a property is holding off on accruing that debt in the first place, which potentially means not using credit for things like trips or even an expensive car.

Cutting credit cards

One of the easiest ways of increasing your borrowing capacity is by cutting down on your credit cards. While credit card debt isn’t necessarily a bad thing, what is now commonly known is that lenders assess your credit card limit as if it is entirely maxed out. A $10,000 credit card limit could be the difference between your being able to afford a house or missing out. If you don’t need a credit card or can get away with a lower limit, it’s something you should consider arranging before applying for a home loan.

Reduce your expenses

It’s not just about your income when applying for a home loan. Lenders go over a person’s expenses in great detail. Expenses include everything from fixed costs, such as rent and utilities, to other things like eating out and entertainment. Most lenders will assess your last 3-6 months of bank statements to get an idea of what you actually spend your money on. If you need a home loan, cutting back on the luxuries for a while will not only help you build good money habits, but could also boost your borrowing capacity.

02/07/2021

Is a Rate Lock Worth It?

With interest rates at record low levels, homeowners are starting to think a lot more about fixing their home loans.

The RBA has made it known that interest rates are likely to stay low for a while yet; however, there is increasing evidence to suggest that they will need to rise sooner rather than later.

For homeowners who want some security around their monthly repayments, a good idea is to look at a fixed-rate home loan.

As the name suggests, a fixed-rate home loan will allow you to lock in your interest rate for a period of time, which is normally around 2-5 years, after which, the loan will generally revert to a variable rate.

One of the things that can catch homeowners out, is the fact that the actual rate you receive on your fixed-rate home loan doesn’t begin until the loan is settled. That means the rate you see when you apply for a fixed-rate home loan can be very different from what you actually get.

In an environment in which interest rates are likely to rise, this is something that you need to be aware of.

Rate Lock

One of the things you can do to protect yourself in the event interest rates look as though they are going to rise is to secure a rate lock.

As the name suggests, a rate lock will ‘lock in’ the interest rate on your fixed-rate home loan at the time of application or, perhaps, when you pay the rate lock fee.

This means that even if rates move higher between the time you apply and the time the loan is settled, you will still receive the same agreed-upon interest rate.

Generally, lenders charge either a fixed fee or a percentage of the home loan, which is normally up to 0.2%, to access a rate lock.

The rate lock will last anywhere from 60 to 90 days and varies between different lenders.

As interest rates come into focus and more and more borrowers consider either taking out a fixed-rate loan or at least fixing a portion of their mortgage, it might be worth considering whether to look at a rate lock.

A rate lock is most effective in a period when rates will potentially rise. It is also most suited to borrowers who will likely need a bit of time to find and secure a property.

01/07/2021

Home Loans for Single Parents

Getting onto the property ladder has long been a challenge for single-parent households, and in particular, saving the money for a deposit can make the barrier to entry very high.

Fortunately, single-parent households look set to benefit under a new program recently announced as part of the 2021 Federal Budget.

Over the next four years, the Family Home Guarantee will enable up to 10,000 households to purchase a home with as little as a 2% deposit.

Traditionally, when homebuyers look to take out a loan with less than a 20% deposit, they are normally required to pay lenders mortgage insurance (LMI), which is an additional expense on top of their deposit and other closing costs. Oftentimes, LMI can cost tens of thousands of dollars, making it difficult to get back onto the property ladder.

With the Family Home Guarantee, the Federal Government will effectively act as the guarantor on the deposit shortfall up to that 20% level, in the same way as the First Home Loan Deposit Scheme does.

The other significant benefit of this program, for single-family households, is that it is not purely for first home buyers. It’s open to anyone who meets the criteria and opens the door for many households who might have thought it impossible to get back into property ownership after a separation or divorce.

To be eligible, you need to be a single parent with a dependent child and have an annual table income of less than $125,000. The scheme is open to anyone looking to build a new property or buy an established dwelling and intending to live in it as an owner-occupier.

To apply for the program, you must do so through the National Housing Finance and Investment Corporation (NHFIC), and find out who you might be eligible to borrow from, of the range of approved lenders.

It’s important to note that borrowers will still need to be able to service the loan based on standard serviceability requirements, like anyone applying for a traditional loan.

If you are borrowing with a 98% LVR, there are some risks associated with that. It’s important that you are able to make your repayments based on your current income, expenses and any debts that you might have.

As we’ve seen over the last few years, the First Home Loan Deposit Scheme has been very popular and has helped thousands of first home buyers enter the marketplace. It is anticipated that the Family Home Guarantee will be no different. This initiative will begin on 1 July 2021.