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Before building or selecting a property to invest in, it is important to determine what your investment ‘gearing’ strategy is. This is where an understanding of whether your home is positively geared (a cash-flow property strategy) or negatively geared (a capital growth property strategy) becomes significant.
For a better understanding of what these terms actually mean, we have compared the two strategies and outlined the benefits and drawbacks of each. Consider both carefully before purchasing your investment property!
Generally considered the safer, more conservative method, positive gearing occurs when the rental income on your investment property exceeds the cost of maintaining it, including loan repayments, interest, rates and maintenance fees. Positive gearing allows for short-term profit, as the extra cashflow works as an additional income stream. Positive gearing works in areas where rental demand is high (so investors can charge higher rent) and when interest rates are low.
Negative gearing occurs when the property runs at a loss – that is, the rental income is less than the costs of maintaining the home. Investors will need to use their own funds to make up the shortfall. Ideally, a negatively geared investment will grow in value over time, and the increased profit from selling it is expected to outweigh the initial financial losses. Negatively geared homes are often located near capital cities, which generally perform better and increase in value over a longer period.
Hotondo Homes have over 90 home designs, perfect for investors. Find out more at hotondo.com.au
*Hotondo Homes is not an authorised financial adviser so please seek professional advice for your investing enquiries
In simple terms, equity is the difference between what your home is worth, and how much you owe on it. For example, if your home is worth $400,000 and you still owe $250,000, your equity is $150,000.
Within five to ten years of owning a home, you will have built a sizable amount of equity. If you are looking at purchasing another property, banks will generally lend you up to 80% of a home’s value without having to use Lenders Mortgage Insurance, and you may be able to access a portion of your equity to use for the remaining deposit.
For a closer look at using equity, check out RateCity’s guide to using home equity to buy an investment property.
House and land packages are a great way to reinvest your equity and make a return by using it as a rental property.
Packages offer convenience and the homes are specifically matched to suit the land. Building a house and land package will also result in paying less stamp duty. This is because you only have to pay stamp duty on the value of the land as the home hasn’t been built yet.
Potential investors should also consider the benefits of higher quality materials and construction techniques that new homes offer, resulting in little to no maintenance costs, energy efficient technologies and warranties on the home, its fittings and appliances.
Check out all the latest house and land packages by Hotondo Homes here.
When looking to use your equity, the bank will take into account your age, income, family, cost of living and any additional debt you may have incurred. It is also wise not to use every last cent of your equity so you can give yourself a safety buffer in case of emergencies. Before you start building your property portfolio, it is best you speak to your banker or broker.
*Hotondo Homes is not an authorised financial adviser so please seek professional advice for your banking enquiries.
With open-plan living at the height of popularity, the living room – along with the kitchen and dining space – can often become the focal point of the home. Changing just a few small aspects of this space can help breathe new life into a home.
We have listed seven simple ways to makeover your living room easily:
Lighting has the ability to make a HUGE impact on your interior design. It can set the mood, make a space appear larger or smaller and it has an enormous effect on your colour scheme. For this reason alone, updating your fixtures should be priority number one! Whether you are simply swapping out bulbs for LED energy-saving alternatives, adding a floor lamp to a dark corner or trading in lampshades, take the time to give a little love to the often-neglected lighting.
If your living room structure is spot-on, there are still a few things you can do to instantly update the look.
Reupholster an armchair – if your armchair is still in good nick, reupholstering it is an easy and relatively cheap way to makeover your living room. If you don’t have an armchair, check out a few flea markets – as long as the chair’s structure is good, there is no need to worry about worn or ratty upholstery. Choose a new, bold print to stand out and make it a feature of your home!
Rearrange a bookshelf – baskets and containers are the easiest way to hide clutter but keep items in an accessible space. Try clearing your bookshelf of junk, and keep just a few key items and some books on display!
Reorganise the furniture – already love everything in your home but are still looking for an update? Rearrange the furniture! Sometimes simply moving one item to another location can make all the difference.
Interested in the concept of Feng Shui? Read about it here: FENG SHUI YOUR HOME
Including greenery in your home instantly creates an atmosphere bursting with health and well-being. Plants make a boring corner look instantly chic, and small succulents can be used as coffee table or side table décor. Just be sure to choose plants which will thrive indoors!
Check out our favourite indoor plants here: INDOOR PLANTS FOR YOUR HOME (THAT YOU WILL NOT IMMEDIANTLY KILL)
Like to stay in touch with the current trends? Ensure your larger pieces of furniture like couches and TV cabinets are neutral colours that will go with anything, and instead purchase new cushions, throws, candles and other knick-knacks to achieve the ‘on-trend’ look without a costly financial commitment.
DIY is a unique way to create something nobody else may have. It is your chance to let your true style shine through. Check out Pinterest or other blogs for some amazing inspiration, and get creating!
Have you ever had to makeover your living room? Let us know your tips in the comments!
Working towards a deposit for your home takes time and patience. The best way to approach it is to start with small changes in your life. This doesn’t mean giving up absolutely everything, but rather cutting back on the non-essentials in life. Every little bit counts, and each small contribution can result in big progress.
We have rounded up a list of nine things you can start doing today to help you improve finances and get on track to purchasing a new home in 2017!
Topping almost all financial guides is cancelling subscriptions to magazines or gym memberships you do not use. Another perhaps unnecessary purchase is cable TV. With so many cheaper, alternative streaming options available, it may be worthwhile checking out.
Shop around for your energy, gas, credit card and insurance needs. If you like the company you are with, a simple phone call asking for a reduction will often get you a cheaper price – they want to keep you as a customer! It may be painstaking, but renegotiating your bills could save you some big cash. If you already have a mortgage, it is worth speaking to your bank about an interest rate reduction too!
If you have a high-interest credit card, the first thing you should do is pay it off as fast as possible. Interest-related costs is basically dead money, so working to get rid of the debt should be your priority. Consider transferring the balance to a credit account with a lower or even zero-interest rate to further help your cause and improve finances in the new year!
The Australian Securities & Investments Commission can help you search for unclaimed money from various banks, building societies, credit union, life companies, friendly societies and registered Australian companies. Check out this link to see if you have any unclaimed funds!
Set your bank account to withdraw a portion of your earnings every time you are paid. By doing this straight away, you can never miss the money you never had! If you can transfer it to an online account you cannot touch, or does not have an attached card, even better. Be sure to figure out exactly how much you can afford to save per pay by creating a budget for the week, fortnight or month.
Just like renegotiating your bills, it is worth checking out your phone plan for cheaper alternative options. These days there are so many options including ‘bring your own phone plans’. These plans require you to purchase a phone outright, but the ongoing monthly cost of the phone plan is significantly cheaper than an all-inclusive one, which could work out cheaper in the long run. Carefully consider all your options and work out what is best for you and your lifestyle.
Plan out your meals for the week, write a shopping list and STICK TO IT. How many times have you gone to the supermarket and come home with items you never intended to purchase?
Not only can this be cheaper and healthier than eating out, but you can also cook extra to have for lunch or even dinner the next day, saving you even more cash.
Saving for a new home will require some discipline and cutbacks, but you still want to live and enjoy life while you do it. Don’t feel guilty for indulging every now and then and treating yourself. If you work hard to stick to improve finances for 2017, there is no reason to not go out, enjoy a nice dinner or hit the shops on occasion. Do not let your finances consume you!
Contact your local Hotondo Homes builder today to find out more and help improve finances next year!
*Hotondo Homes is not an authorised financial adviser so please seek professional advice for your banking enquiries.
You may only go through the process a handful of times throughout your life, so knowing all the ins and outs can be difficult. Read our top 6 things you need to know before building to arm yourself with the knowledge to get started!
1. Know all the numbers
Once you have a contract price for your house and land, you can work out how much you will need to borrow from a bank or finance lender, as well as your mortgage repayments. However, just because a bank says you can afford the loan, doesn’t mean you can. You need to consider additional costs such as the initial deposit, stamp duty, transfer duty, conveyancing costs, loan establishment costs and lenders mortgage insurance. There are also living expenses including gas, water, electricity, phone and internet bills, and if this is your first home, you may need to purchase new furniture and appliances. Know ALL the numbers when it comes to living in a new home before you commit.
READ MORE: SAVE MONEY ON YOUR BILLS IN 5 SIMPLE WAYS
2. Reputation of your builder
Do your research and find a builder with a good reputation. Better yet, if you have family or friends who have built a home you love, ask them for a recommendation. Always speak to your builder about what you want in a home, what your expectations are and how they can help accommodate this. If required, get them to run through the entire build process so you know what to anticipate. Get to really know your builder, and find someone you can trust – this is a huge commitment!
3. Know your land
Aside from the obvious including the price of your land and its proximity to essential amenities, schools and family, there are a few other points to consider when looking at your land. If your land is in a bushfire zone, there can be additional costs associated when building your home to adhere to the appropriate regulations. If your land has a significant slope, retaining walls or excavation may be required, again, which again can cost you more. You may also find the estate you have bought in has certain requirements when it comes to landscaping, façade choices and even letterbox options! Speak to your land agent or builder to find out if any of these are applicable to you.
4. Build to resell
No matter how much you love the house you are building, you need to consider a time when you may need to sell or possibly rent it out. In particular, if you are a first home buyer it is ill-advised to make too many upgrades to the home, especially if it puts your home in a price bracket above that of your neighbourhood’s. It may not actually increase the value of your home. You should also be careful on your colour selections – ask yourself if what you are choosing will be appealing to others.
5. Green your home
Take the opportunity to upgrade any appliances you have to a higher star rating. This can include washing machines, dishwashers, fridges, taps and light globes. Any step you can take to reduce your carbon footprint and your energy bills is a positive one.
6. Passive design elements
You can also consider building materials and other passive design elements to reduce the cost of your bills. Ensuring your main living areas are orientated north allows the sun to naturally heat your home in winter and cool it in summer, as well as provide natural light. Installing eaves, good insulation, glazed windows and other such devices will all contribute to a better home.
Do you have any other things you think you need to know before building? Let us know in the comments!
An offset account works in the same manner as your everyday banking account with one crucial difference – the balance is offset daily against money you owe on your loan, which reduces the amount of interest you pay.
A reduction in interest means you can pay off your loan quicker. For example, if you have $10,000 in an offset account and you have a $300,000 home loan, you will only pay interest on $290,000. Using this calculator you can see if the interest rate is at 5%, you could save $18,357.69 in interest and cut 1 year and 8 months off the length of a 30 year loan.
Because the money in your account is offset daily against your loan balance, the longer you have money in your account, the more you will save on interest.
There are a few questions that are often asked in relation to offset accounts.
Why not save the money in a high interest account instead?
In almost every case, you will never earn more interest in a savings account than what you are paying in interest on your home loan. Interest earned in a savings account also needs to be declared to the tax office, and tax must be paid on it. Your money will be working much harder for you in an offset account.
Why not put the money straight on the mortgage?
There are benefits to keeping money in your offset account rather than putting it straight on the mortgage. Funds in an offset account can be used like your everyday account. If you have an emergency, or you may be saving for a holiday, it is easy to withdraw funds as necessary. If you put it all on the mortgage, then find you need the money down the track, you may be hit with redraw fees or minimum redraw amounts.
Having a decent amount of savings in your offset account can cut years and thousands of dollars from your home loan. It also offers comfort in the knowledge that you can access these funds at any time, with no issue.
Always beware of extra transaction charges that may surround offset accounts though. It is best you do your research and speak directly to your bank regarding these accounts being used to pay your mortgage faster.
*Hotondo Homes are not financial experts. You should always seek independent legal advice when looking to reduce the amount of your mortgage with an offset account.
Your home loan is most likely the biggest commitment – and largest amount of debt – you will take on in your entire life.
Paying it off as fast as possible is something many people aim for to help save thousands of dollars in interest and relieve stress associated with debt. For those who wish to tackle their debt head on, we have a few simple tips to start reducing your mortgage now! (more…)
The keys are in your hand. You are ready to step into your brand new home. All those costs associated with it are finally paid, and now all you have left is the hefty mortgage you don’t want to think about – or so you think.
Unfortunately, new home owners can forget the cost of maintaining and living in a home. Water, electricity and gas bills, council rates and even home repairs for older homes can all have a significant and possibly unforeseen impact on your carefully devised budget.
Never fear though, we have put together a quick guide on ways to save money on your bills and help with the overall cost of your new home.
Install LED light bulbs and in the long-run you will save money on your electricity bill. A standard halogen light turns up to 90% of electricity used into heat, and only 10% into light. An LED light however only uses 15% of the energy a halogen uses, and provides up to 85% of the light output. LED lighting also has a longer lifespan, making them well worth the investment.
Ceiling fans are a low-cost, low-energy way to keep the air circulating in your home. If used in conjunction with an air conditioner, you can actually lower the temperature by a degree or two of the air con. This can lead to some surprising savings! While using a ceiling fan in summer is common practice, many people are unaware you can actually utilise them during winter too. Switch your fan into reverse, and hot air trapped near your ceiling will be redistributed to the floor. Remember to keep it on a low setting!
Plant deciduous trees – ones that lose their leaves in autumn/winter – on the west and east sides of your home. These trees will naturally cool your home is summer and allow sunshine through during winter. Be careful to plant them a safe distance from your home and power lines.
Everyone knows that a clothes dryer will eat up your power bill. If you are willing to give up the convenience, hang a line in your laundry and use it for at least some items. Even better would be hanging it outside where a natural breeze will do all the work. A load here or there will still save money!
We have mentioned the benefits of energy efficient appliances several times on this blog, however it doesn’t make it any less true. While they may be a more expensive upfront cost, energy efficient appliances will save you money in the long run and will help keep your hip-pocket happy.
Empty Nest: Your children have all moved out, and the once noisy halls of your home are suddenly silent. With so many rooms now empty, it may be time to capitalise on your home and downsize to a smaller model.
Money: Finances may be tight and a smaller home will generally equal a smaller mortgage. This is also true of the suburb or part of town you choose to live in. Energy bills will also become cheaper in a house that is smaller.
Travel: If you travel a lot, especially for work, you may find maintaining a larger home you are never around to enjoy pointless. Downsize your home now, save on your mortgage, and then when the time comes to settle down you can look for a larger home once more.
Maintenance: Sweeping, mopping, vacuuming and dusting a large home can be a tedious chore that many people dislike. If you don’t need the space and hate cleaning, why not downsize to a more suitable home? On top of this you have actual maintenance costs such as the yard or mechanical aspects like heating or cooling which will be significantly more in a larger home.
Family: A growing family will need more living space as children get older, which offers the perfect opportunity to upsize your home. The same goes for any grandparents who may be moving back into the family home.
The ‘Dream Home’: Your dream home will probably have some luxurious features that are often found in larger designs. If you come into some money or finally receive that job promotion, having a beautiful home may rate very highly on your list!
Investment: Purchasing a larger home could bring you a greater return for your money.
For more information on whether to upsize or downsize your home, contact Hotondo Homes here.
Christmas time can be an expensive time of year due to parties, buying gifts for friends and family, the cost of food and alcohol and going on holidays.
It’s often a time when people find themselves under financial pressure, sometimes resulting in debt carrying over to the New Year.
While Christmas can be expensive, there are definitely some easy ways to save during this busy and often stressful time of year.
Buying presents for friends and family is often the most expensive part of Christmas, therefore it’s worth thinking outside the box and coming up with some ways to cut back on costs.
Don’t be afraid to sit down with family and friends and discuss the issue of presents. Decide with some friends not to buy each other gifts this year or set a reasonable price to spend that both of you can afford.
When it comes to extended family, consider organising a Kris Kringle or Secret Santa. Not only is this a fun and exciting way to give gifts, but it will save you having to buy numerous gifts for your entire family.
In the spirit of embracing a season of simplicity, you can also consider making handmade gifts for friends and family. This is an inexpensive and sentimental way of giving gifts at Christmas.
Food & alcohol
Buying food and alcohol for Christmas day can be extremely expensive, especially if you have a large family.
Start planning early and write yourself a list of everything you need to buy. Keep an eye out for special promotions and discounts. Be sure to shop around and consider buying your groceries from discount supermarkets such as Aldi. Check out some of their Christmas offerings here.
It’s easy to buy and cook too much food on Christmas day. To avoid this, plan ahead and know exactly how many people you have to cater for. Also look into purchasing your alcohol online prior to Christmas. This will give you the opportunity to take advantage of special online offers.
If you want to earn some extra money over the holiday period consider getting a holiday job.
Another way of earning some extra money before Christmas is to clear out old goods and sell them at the local market. You can make a few hundred dollars (or more) by selling old clothes, toys, video games and gadgets.