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What insurance do you need when buying a property?

despina · Apr 22, 2022 ·

As we have seen with the recent east coast floods, unforeseen disasters can strike at any time. That’s why it’s so important to protect yourself and your family financially – with the right kind of insurance for when something unexpected happens.

Sure, insurance may not be all that flashy and many people downright begrudge having to pay for it. But it gives you something that’s invaluable: peace of mind that your financial plans are protected, no matter what.

Here are the types of insurance you should think about when buying a property.

Income protection

Say you get sick or have a bad accident and cannot work. Income protection is your financial safety net.

Income protection insurance pays part of your lost income for a set time if you’re unable to work due to partial or total disability, caused by sickness or injury. It takes the financial pressure off you while you get back on your feet and enables you to cover your mortgage repayments and other expenses.

It’s a good idea to check whether you have income protection insurance through your super fund, but if not, we can line you up with a reputable provider. Premiums for this type of insurance outside of super are usually tax deductable.

You may also like to consider trauma insurance, total and permanent disability insurance and life insurance to protect you and your family’s financial future.

Mortgage protection

Mortgage protection insurance covers the cost of your mortgage repayments if you die or become seriously ill. It should be noted that it is only meant to cover your mortgage repayments and not any other expenses for you or your family.

Mortgage protection insurance may be a wise choice if you already have some other kind of life insurance – say with your super plan.

Landlord insurance

If you own an investment property, be sure to look into landlord insurance. This type of insurance can cover you against the risks landlords often face. Examples include tenant damage, theft, vandalism, fire, storms and other natural disasters.

It may also protect you if the tenant stops paying rent, as well as against other legal liabilities.

As with any insurance choice, it’s important to read the Product Disclosure Statement (PDS) to check what exactly is covered.

Building & Contents

Building or home insurance protects against the cost of rebuilding or repairing your property from things that are outside your control, like fire or natural disasters. You can opt for total replacement cover (to rebuild your home as it was prior to the event), or sum-insured cover (coverage up to a certain amount).

When you buy a property, your mortgage broker will most likely recommend that you insure the property before settlement day. When choosing your policy, make sure you have the right amount of coverage, as well as the right type of insurance for your actual needs.

Contents insurance protects your belongings, including carpets, rugs and curtains, in events such as fires, storms or theft. Often it will be bundled together with home insurance.

How we can help

Planning a property purchase? Working with us takes the burden out of finding the right home loan for your needs and the right type of insurance.

We can access some of Australia’s most respected insurance providers and offer you a competitive price.

Let us do the hard yards for you. Get in touch today.

How to make a pre-auction offer

despina · Apr 22, 2022 ·

With auction clearance rates soaring above 80% in many markets in recent weeks, the competition amongst buyers for properties is often fierce.

One tactic some buyers use is to make a pre-auction offer before the property goes under the hammer. The idea is that if you make your offer enticing enough, the vendor may ditch the auction altogether and sell to you.

The benefits of making a pre-auction offer include:

Avoiding the stress of bidding at auction
Potentially knocking out the competition
Sticking to your budget
Flexibility to negotiate the terms of the contract (unlike at auction, where the contract is unconditional and there’s no cooling-off period or other special conditions like ‘subject to building and pest’ or ‘subject to finance’).

So, how does making a pre-auction offer work?

The first step is to check with the vendor’s agent whether they are open to accepting pre-auction offers. If the answer is ‘yes’, you can put in a written offer prior to the auction. The negotiation process will be the same as buying by private sale.

If your intentions change, you can usually withdraw your pre-auction offer, so long as no contracts have been signed.

It’s a good idea to seek legal advice and check the rules that may affect your pre-auction offer. For example, in Victoria, if your offer is accepted less than three clear business days before the auction date, you do not get a cooling-off period (time to change your mind).

How to make an effective pre-auction offer

Do your research

Research is key to paying the right price for a property. The listing agent may have provided an estimate of the sale price likely achievable at auction, but you’ll want to do some more digging to understand the property’s market value before you make a pre-auction offer.

Check out recent comparable sales of similar properties in the area to get an idea of how much the property is worth. We can line you up with free property reports to make this task easier.

It may also be worthwhile attending a few inspections and auctions to get a feel for how many other buyers are in the market in the area and what properties are selling for.

The goal is to make a competitive offer that’s too good for the vendor to refuse, without overpaying.

Discover the vendor’s motivation

Ask the real estate agent why the vendor is selling and use the information to your advantage. For example, if they have already put down their deposit on their next property, the vendor may need to settle fast.

This intel could prove useful during negotiations.

Be prepared

If your offer is accepted, you’ll want to have your finance in order.

Make sure your deposit is ready and your home loan is pre-approved. That way, you’ll have a clear understanding of your upper spending limit. Having pre-approval in place also gives you an edge over the competition because the vendor knows the deal is likely to go smoothly.

You may need to be ready to exchange contracts quickly, so be sure to have your conveyancer or solicitor on standby.

Don’t show your hand

Be mindful about giving away too much information to the vendor’s agent. After all, they’re working for the seller, not you.

Never reveal your budget, and always imply you’re interested in several other properties. If they think you’re too keen on the property they’re selling, they may be less flexible during negotiations.

Time your offer well

Timing is crucial when you make an offer. Some experts suggest that you go in hard and early, as vendors may be more inclined to accept your offer because of the convenience factor. This may also be a good tactic in a softening market.

Others recommend waiting until right before the deadline to make the offer in case the real estate agent plans to shop your offer around to other prospective buyers.

Another tactic is to stipulate a time limit – for example, tell them the offer is only on the table for 48 hours.

Ready to jump in?

Of course, there can be potential disadvantages with making a pre-auction offer. You might end up going in with an offer that’s too high or you might end up laying all your cards on the table and having the seller go to auction anyway.

At the end of the day, making a winning pre-auction offer comes down to being well-informed and using strategic negotiation tactics.

We can help you prepare with local market insights and detailed property reports. Get in touch to find out more.

Property Market Update – April 2022

despina · Apr 22, 2022 ·

Many aspiring homeowners are focussing on securing a property during the busy Autumn-buying season.

If you’ve been struggling to break into the property market, it’s worth looking into the government’s proposed $8.6 million expansion of the Home Guarantee Scheme, which if elected, aims to get people into the housing market sooner.

As announced in the federal budget by the Liberal Government, here’s what’s on offer:

Under the First Home Guarantee, from July 1, 2022, eligible first homebuyers can purchase a new or existing home with as little as 5% deposit.
A new Regional Home Guarantee would give eligible homebuyers, including non-first home buyers and permanent residents, the opportunity to purchase or construct a new home in regional areas with a deposit as low as 5% (subject to the passage of enabling legislation).
The Family Home Guarantee will be expanded from July 1, 2022 to help single parents with children to buy their first home, or to re-enter the housing market, with a deposit of as little as 2%.

The schemes can only be used on homes under a certain price guide outlined by each state and territory government. To find out more about whether you could be eligible, speak to us.

The Labor government have confirmed they’ll also have the regional buying policy with only 5% needed if elected but have not yet stated what they’ll do for metro areas.

We’ll continue to provide updates on the latest information that comes from both political parties on the issues that affect your business as we get closer to the Election.

Meanwhile, property prices in Sydney and Melbourne fell last month, despite a modest national uptick in the monthly growth rate. Let’s take a look at what’s been happening in the property world.

Interest rate news

At its April meeting, the Reserve Bank of Australia (RBA) kept the cash rate on hold at 0.10%, as it continues to monitor how various factors affecting inflation evolve.

Many economists believe there will be an increase later this year, with some expecting it to come as early as June. The Government’s large-scale cost of living packages announced in the federal budget added further fuel to the fire that interest rates could rise.

Interest rates have been on the move recently, with some lenders slashing variable interest rates and some increasing their fixed-rate loans. Check with us to see how your lender compares to others.

Home value movements

National housing values crept up 0.7% in March, a small increase on the 0.6% rise in values recorded in February.

In Sydney and Melbourne, prices fell by 0.2% and 0.1% respectively and their growth rates were slower in the March quarter than other capital cities.

Brisbane (2%) and Adelaide (1.9%) saw the strongest growth in dwelling values in March, while property values increased by 1% in both Canberra and Perth.

CoreLogic’s research director, Tim Lawless, said while the monthly rate of growth was up among some cities and regions, there was mounting evidence that housing growth rates were losing momentum.

“Virtually every capital city and major rest of state region has moved through a peak in the trend rate of growth some time last year or earlier this year,” Mr Lawless said.

“The sharpest slowdown has been in Sydney, where housing prices are the most unaffordable, advertised supply is trending higher and sales activity is down over the year.”

“There are a few exceptions to the slowdown, with regional South Australia recording a new cyclical high over the March quarter and some momentum is returning to the Perth market where the rate of growth is once again trending higher since WA re-opened its borders.” Meanwhile, housing values across the combined regional areas rose at more than three times the pace of the combined capital cities through the March quarter.

All dwellings	Auctions	Clearance Rate	Private Sale	Monthly home values change
VIC	823	87%	1384	▼ -0.1%
NSW	577	88%	1635	▼ -0.2%
ACT	79	94%	70	▲ 1.0%
QLD	98	72%	1281	▲ 2.0%
WA	2	– %	777	▲ 1.0%
NT	3	67%	42	▲ 0.8%
TAS	1	– %	203	▲ 0.3%
SA	78	95%	401	▲ 1.9%

^{* Monthly Home Values figures as of 31 March 2022
* Australian auction results, clearance rates and recent sales for the week ending 3 April 2022
* The clearance rate is preliminary and current as of 11.57am AEST, 4 April 2022}

Why not make Autumn extra special with a property purchase you’ll always remember? Get in touch to organise pre-approval on your finance today.

Additional sources

CoreLogic RP Data Daily Home Value Index: Monthly Values

How redraw facilities and offset accounts can save you money

despina · Mar 18, 2022 ·

Redraw facilities and offset accounts work in a similar way – they both effectively allow you to reduce the balance of your home loan, which reduces the amount of interest you pay.

So, how do you know which is right for you, or whether you should choose a home loan with both a redraw facility and offset account built-in? To help you decide, here we explain some of the pros and cons of both.

Redraw facilities

With a redraw facility, you can deposit spare funds into your home loan account, but still draw the money back if needed. You can either make extra repayments above the minimum requirement or throw in a lump sum every now and then.

The pros:

Make extra repayments to reduce the total balance of your loan and potentially pay it off sooner.
Use it to save money without locking up your funds.

The cons:

There may be restrictions on how much money can be withdrawn and when. There may not be same-day withdrawal, for example.
Additional fees may be applicable.

Offset accounts

An offset account is a transaction account that’s linked to your home loan, but pretty much functions as a regular everyday account. Usually, you can deposit money into an offset, make withdrawals and buy things using a debit card linked to it as required.

The main perk of an offset account is that deposited funds are offset against your loan balance, saving you in interest.

Here’s an example of how an offset account works. Let’s say you have a $100,000 loan and $10,000 in your 100 per cent offset account. Instead of paying interest on your $100,000 loan, you will only pay interest on $90,000.

In some instances, lenders may offer a partial offset option, meaning only some of the balance of your offset account is taken into consideration.

The pros:

Reduces the interest you pay (based on the balance of the account), while still giving you access to your money.
Your money is working harder for you in an offset account by cutting down your interest.

The cons

There may be additional charges for an offset account. However, the fees may be worth the interest savings and the added flexibility compared to redraw facilities.

Like to know more?

Deciding between a redraw facility and an offset account largely depends on how accessible you need your extra money to be and your personal circumstances.

In some cases, a combination of both may work – that is, the option to keep your spending money in an offset account and tuck funds you’re unlikely to need into a redraw facility. Speak to us to explore your options.

How to compare home loans and features

despina · Mar 18, 2022 ·

Which home loan is right for you? How can you tell when there are so many different lenders, loan types and features available?

It can be confusing, particularly if you are a first-time buyer. Fortunately, we’re here to help explain things, so let’s dive in.

Interest rates versus comparison rates

Interest rates are one of the factors that determine the cost of your mortgage and repayments. Even a small difference in interest rates can have a huge impact on how much interest you’ll pay over the course of the loan.

However, rather than just going with the lowest interest rate, it’s important to consider the comparison rate when comparing loans.

The comparison rate is an indication of the true cost of a loan once the interest rate and fees are included. It’s usually expressed as a percentage, making it easier for you to compare the real cost of different loan products.

Loan types

Principal and interest

With a principal and interest loan, you’ll be paying off both the principal (the amount you borrowed) and the interest.

People buying their own home usually opt for this type of loan, as it helps you pay down your mortgage until you eventually own the property.

Interest-only

An interest-only loan allows you to pay the interest you owe on the loan for a fixed period – usually one to five years.

At the end of the fixed period, the loan usually reverts to a principal and interest loan. Some people choose to refinance to another interest-only period at that point.

People buying an investment property often start off with an interest-only loan because the interest is tax deductable. However, interest rates on these types of loans are usually higher. And because you’re not paying down the principal during the fixed period, you will likely end up paying more interest over the term of the loan.

Variable home loan

With a variable home loan, your interest rate will fluctuate. If rates go down, your repayments will decrease, but if they go up, so too may your repayments.

One positive is that often with these types of loans you can make extra repayments, thereby saving on interest and potentially paying off your loan sooner.

Fixed home loan

A fixed rate loan is where you lock in your interest rate for a period (usually one to five years). The key benefit is that you’ll know exactly how much your repayments will be and can budget accordingly.

However, there may be restrictions on maying extra repayments and if you want to end the fixed rate period early (if you sell, for example), you may be up for exit fees.

Split home loan

Want the best of both worlds? With a split loan, you can fix a portion of your loan and keep the rest variable.

This option allows you to budget for the fixed portion and lock in a competitive interest rate, while enjoying any interest rate drops on the variable component and being able to make extra repayments.

Loan features

There are all sorts of loan features that can potentially save you money in interest and shave time off your loan term.

An offset account, for example, allows you to offset any savings in a transaction account against the balance of your home loan. Say you owe $300,000 and there’s $50,000 in your offset, you’ll only pay interest on $250,000.

A redraw facility gives you the flexibility to make extra repayments on your home loan and potentially save on interest, but still gives you access to the funds.

Deciding what’s right for you

The bottom line is there’s no one-size-fits all loan for everyone. The right home loan for you depends on your specific financial circumstances and goals.

Talk to us and we’ll line you up with a competitive home loan that meets your needs.