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With the Liberal government winning the recent Federal election in May, many Australians have been asking what the result means for the housing market. The Labor party was vowing to introduce restrictions for investors, which now won’t happen, and the Reserve Bank of Australia also cut interest rates to a record low in June, which has a big impact on mortgages. How does this affect you? We’ve got a breakdown of what all these factors mean.
Before the election, investors were being cautious. With Labor’s election promise to reduce negative gearing and increase capital gains taxes, less properties were being purchased, which had a knock-on effect of lowering house prices. Sydney and Melbourne alone have seen a decrease in house prices of 14.5 per cent and 10.9 per cent respectively in the last eighteen months as people held off on purchasing investment properties. Now that investors can purchase with the confidence that their portfolios can be negatively geared and continue to reap all the tax benefits they’ve previously enjoyed, industry experts predict house prices will begin to rise in the coming months as investors re-enter the market.
While the decrease in capital gains tax and stability of negative gearing won’t impact first home buyers, the effect this has on housing prices will to some degree. With investors holding off on purchasing property before the election because many predicted a Labor party win, the decrease in house prices meant it was a good time for first home buyers to enter the property market. Now that investors can still reap the benefits of negative gearing on multiple properties, house prices are set to rise as people start to purchase investment properties again, meaning first home buyers are competing against investors with more borrowing power when trying to purchase their first home.
Those wanting to invest in property are the big winners of the election. The ability to negatively gear property portfolios means investors can continue to purchase homes with the confidence that they can increase their capital growth over a long period of time. This is because they’re now able to buy in a stable housing market during a time when prices haven’t increased dramatically. This also has tax benefits because investors can claim any expenses incurred, reducing their taxable income and creating an investment that will benefit them in their retirement years.
Just a few weeks after the May election, the RBA cut interest rates to a record low of 1.25 percent, with many banks and credit unions passing on rate cuts of their own. This is a win for existing home owners, and investors alike as people see their existing mortgage repayments decrease slightly thanks to the rate reduction. For first home buyers, it’s a great time to get finance pre-approval and lock in a low interest rate on their first mortgage when they’re ready to purchase their first home. For investors and home owners, these rate cuts are also the perfect opportunity to get in touch with a mortgage broker to shop around for the best interest rate possible – often loan exit fees are outweighed by the benefit of moving a mortgage to a new lender with lower interest rates.
Our network of builders can help you find the right home solution, whether you’re looking for your first home, hoping to upsize for your growing family, or find an investment property to create a nest egg for your family’s future. Visit the Hotondo Homes website to find a builder local to you and start your home building journey today.
Hotondo Homes is not an authorised financial institution and we recommend home buyers always seek the advice of a registered financial professional before purchasing property.
Once you’ve saved up a deposit for a home, it’s tempting to go straight to looking at properties and house and land packages to find your dream first home! But before you do, you need to ensure you have approval in place for a mortgage. Without a mortgage, it’s unlikely you’ll be able to jump straight in to owning a home. We spoke to our friends at The Australian Lending & Investment Centre (ALIC) who gave us a summary on what a mortgage is, and how you go about obtaining one so you can become a home owner.
A mortgage is a legal agreement where a bank or financial institution lends money to an individual at interest so they can purchase a residential dwelling. The condition of the loan is that the individual’s title on the property becomes void if repayments are not made on the debt at regular intervals as set by the financial institution.
Working with a mortgage broker to gain mortgage pre-approval is the next step once you’ve saved up a home deposit and you’re ready to look for a property to purchase. Pre-approval is a valuable qualification for buyers , as it’s a guarantee from the lender that you’ve been approved for a specific loan amount for a set period of time. Your mortgage broker will request information from you such your salary amount, and documentation about any existing loans and assets you may already have. They’ll use this information to calculate how much money the bank will allow you to borrow. Part of their job is also to provide advice on what is realistic for borrowers and their lifestyle, particularly when it comes to working out what your monthly mortgage repayment will be.
Mortgage brokers are accredited with a number of different lenders, which enables them to compare interest rates and provide the best home loan option for buyers. Once you’ve found your dream home and you’ve made an offer of purchase that’s been accepted, brokers do the hard work for you by following the loan application from start to finish. They act on your behalf during the application process to ensure things move forward efficiently and know who to speak to if any issues arise. They also have a sound knowledge of penalties and hidden fees, and thanks to the Australian Securities and Investments Commission regulations, provide peace of mind for borrowers that they will not receive a loan they cannot afford.
Once you’re ready to finalise your mortgage, your broker will research and recommend the best home loan for you. There are a number of different options available in the market, including basic loans and package loans. Just as the name suggests, basic loans just include a ‘no frills’ loan from the lender. Package loans involve combining your home loan and other commonly-used financial products into one bundle. It can allow you to gain benefits such as access to fee waivers, offset accounts, a credit card with the annual fee waived, or discounts on insurance.
When working with your broker, it’s important to consider a number of things, including:
Your answers to these questions will determine whether your mortgage broker sets you up with a package loan or a basic loan.
Whether you’re a first home owner ready to purchase property for the first time, or an existing home owner ready for the next stage of life, your mortgage is what allows you to make changes to your property portfolio. Working with a mortgage broker to determine what you can afford to borrow is the first step towards making your purchase.
Hotondo Homes is not an authorised financial institution and we recommend home buyers always seek the advice of a registered financial professional before purchasing a home.