Faqs

Refinancing can be done for various reasons, such as reducing your interest rate, lowering monthly payments, switching from a variable to a fixed rate loan, accessing equity in your home, or consolidating debt.

Refinancing can be an effective way to save money or improve your financial situation, but it also involves additional costs and risks, such as fees, valuations, and potential penalties for breaking your current loan contract. It is important to weigh the pros and cons and compare offers from different lenders before deciding to refinance your home loan.

Refinancing Process

We will analyse your current home loan offering and your financial situation to determine if there is an benefit in potential refinancing your home loan to another lender and if you in fact qualify for refinancing.

We compares different lenders based on interest rates, fees, and repayment terms to find the best deal for you.

Once you've selected a lender, we assist you in filling out the application and submitting it to the lender.

Once the lender approves your refinancing, you will complete new documentation for the new lender and sign discharge documents, pay any associated fees or closing costs with the outgoing lender. It is important to remember that there are usually costs associated with changing lenders, these can include charges from the land titles office and a discharge/exit fee from the outgoing lender.

Once the new loan is funded, and the old loan is paid off, if applicable, you will move any existing offset monies across to your new facilities and close down any of the older accounts at the outgoing lender

We will follow up with you and monitoring the process to ensure everything proceeds smoothly, and you are satisfied with your refinancing.

When it comes to investment properties there is a lot of jargon that is used by the industry or participants on the industry that can often cause more confusion than anything else. Here are some explanations or a little more information regarding some of the terminology you may come across when delving into the world of investment property.

What is negative gearing?

The technical definition of negative gearing is that it is a form of financial leverage where the cost of borrowings and ongoing expenses of an asset are greater than the income that the asset produces, i.e. that investment is negatively geared.

More commonly in Australia, negative gearing is a term often associated with investment properties. The primary reason for that being that the ATO currently allows you to deduct any interest and operating costs related to an investment asset or property from the income generated.

In a normal situation, any income generated by an asset, such as rental income, would need to be included onto your taxable income at tax time and you would be taxed at your marginal tax rate on that additional income. With the current ATO approach, the net rental income amount is what is applied to your tax return and if that happens to be a negative number, i.e. the interest costs of your investment property loan and the allowable expenses related to owning and maintaining that property, exceed any rental income earned, that amount is deducted for the rest of your taxable income and hence your tax obligation may be reduced.

How to calculate rental yield

Rental yield is the fancy word for working out what return you are getting on your property investment – similar to the amount of interest you would earn from a deposit in a bank account. Determining and knowing what the rental yield is a very useful way of comparing the returns of one investment property versus another and then of course comparing the return from an investment property against other interest bearing investments, such as a deposit or any other income generating investments.

Rental yield is typically calculated and communicated as a gross rental yield, however it can also be calculated as a net rental yield amount.

Gross rental yield is purely a calculation whereby you divide the annual amount of gross rent earned by the value of the property. For example - $550 per week in rent = $28,600 rent per annum. If the value of the property is $750,000 – your gross rental yield is $28,600/$750,000 = 3.81%.

Calculating a net rental yield would entail deducting any rental associated costs from the rental income, to come up with a net rental income amount which can then be divided by the value of the property.

Using “dormant” Equity

Practically speaking the difference between the value of your house and your current mortgage is often referred to dormant equity. Dormant equity is created when you pay down your mortgage or the value of your property increases. That amount of value that sits there is often referred to as dormant equity. Dormant because it is not really being utilised for anything.

Where dormant equity becomes valuable is often when investors decide to purchase a second property, they may not have accumulated the typical 20% deposit that banks require so that they don’t charge lenders mortgage insurance when you want to borrow money from them for the new purchase. A way in which you can generate the required 20%, is to access the “dormant” equity that is sitting in your current property. This would be done by increasing your current loan amount up to an 80% loan to value ratio of the property or up to the required amount, whichever the lower.

Factors to consider when buying investment property

Buying an investment property is a complex decision, with many different factors to consider. Depending on you and what you are looking to achieve, some factors may be more influential than others. Some specific things to consider could include:

• Time horizon – buying a property entails incurring cost, primarily stamp duty, if you aren’t going to or aren’t able to hold the property for long enough time for the value to increase to ensure that you recoup all your purchase costs, it’s most probably not the right investment decision.
• As a general rule, buy a property that you would live in – someone is going to live in it and as a general rule, if you aren’t going to deliver a property to the market that you would live in, it’s quite difficult to expect someone to pay you a decent amount of rent to live there.
• If possible, choose properties that have a number of attractive features - good transport links, good school areas, bathrooms with baths have larger potential tenant bases. Small factors can make a big difference when it comes to finding a wide range of potential tenants.
• Beware of the hidden ongoing costs – what are the levies for the property and building, any potential issues with the building, any upcoming maintenance or renovations required, what is the size of the sinking fund and why?
• And lastly, what is the rental yield and long term capital growth prospects of the property?  If they aren’t attractive, then what are the other reasons for buying the property?

A construction loan in Australia is a type of loan offered by banks and other financial institutions to individuals or companies looking to finance the construction of a new property. This type of loan is secured against the property being built and the new lending is usually based off the future completed value of the property (including the work being done). Funds are generally released in stages as the construction progresses. They may be some additional costs such as valuation fees, progress payment fees, and drawdown fees. Depending on the amount being requested, borrowers may request that you provide council approved plans, specifications, and quotes from licensed builders to qualify for a construction loan. Overall, a construction loan is designed to give borrowers the funds they need to complete their building project, whether it's a new home, a renovation, or a commercial property.

Reverse mortgages are a type of loan available to pensioners in Australia who own their own home. This type of loan is designed to allow pensioners to access the equity in their home without having to sell their property or make regular repayments on the loan.

How does a reverse mortgage work?

A reverse mortgage allows a homeowner to borrow against the equity in their home. Unlike a traditional mortgage, the homeowner does not have to make regular repayments on the loan. Instead, the loan is paid back when the homeowner either sells their home, passes away, or moves into aged care.

The amount that a homeowner can borrow will depend on their age, the value of their home, and the type of reverse mortgage they choose. The homeowner can choose to receive the loan as a lump sum, a regular income stream, a line of credit, or a combination of these options.

Advantages of a reverse mortgage

There are several advantages to taking out a reverse mortgage in Australia. Firstly, it can provide pensioners with a source of income in retirement. This can be particularly beneficial for those who do not have sufficient savings or investments to fund their retirement.

Secondly, a reverse mortgage allows pensioners to access the equity in their home without having to sell it. This means that they can continue to live in their home for as long as they wish.

Thirdly, a reverse mortgage can provide pensioners with greater financial flexibility. They can choose to receive the loan as a lump sum, a regular income stream, or a line of credit, depending on their individual needs.

Disadvantages of a reverse mortgage

Despite the advantages, there are also several disadvantages to taking out a reverse mortgage. Firstly, the interest rates on reverse mortgages are generally higher than those on traditional mortgages. This means that the amount owed can increase quickly over time, reducing the equity in the home.

Secondly, a reverse mortgage can affect the inheritance that a homeowner leaves to their heirs. As the loan is paid back when the homeowner passes away, the amount owed can reduce the value of the estate.

Finally, a reverse mortgage may not be suitable for everyone. Homeowners who plan to sell their home in the near future or who have significant other assets may not benefit from a reverse mortgage.

Self-managed super fund loans in Australia are a type of loan that allows the trustee of a self-managed super fund (SMSF) to borrow money to invest in assets such as property or shares. These loans are regulated by the Australian Taxation Office (ATO) and there are specific rules around how they can be structured.

Some key features of SMSF loans include:

- The SMSF must have a corporate trustee
- The asset being purchased must be held in a Bare Trust structure
- The loan must be a limited recourse loan, meaning that if the SMSF defaults on the loan, the lender can only seize the asset being purchased and not other assets held within the SMSF
- The SMSF cannot use the loan funds for anything other than the purchase of the asset

There are also restrictions on who can lend money to an SMSF, with banks and some non-bank lenders being the primary options.

SMSF loans can be a useful tool for investors looking to build wealth within their superannuation fund, but they do come with additional risks and complexities compared to other types of borrowing. It is important to seek professional advice before considering an SMSF loan. 

There are many rules and regulations regarding SMSF loans that must be followed to avoid any penalty. For example, the funds must be used for investment purposes only, and the property must meet strict rules of investment properties, such as commercial properties or residential investment properties.

The loan's repayments must be made by the SMSF, which means it's crucial to ensure that your SMSF has enough cash flow to meet the repayments. The bank or lender will also require you to provide more security than a normal home loan to offset the risk of lending to a self-managed super fund.

Lastly, it is highly recommended to get professional financial advice when considering an SMSF loan. Please keep in mind that laws and regulations around SMSF are highly complex and frequently changing.