2 Common Property Scenarios That You Need To Learn About

This week I had two meetings with clients, which each brought up a scenario that I am seeing again and again in my travels as a mortgage broker. I thought in this article that I would unpack each of these scenarios and give you the recommendations I provided for each of my clients to consider.

The first scenario was a couple who bought their family home about 10 years ago, have been chipping away at their mortgage, built up a good chunk of equity and wanted to know what would be the better move – to continue paying down their home loan or to use some of their equity and purchase an investment property.

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Tim Russell
What's a good rate in the current market?

For the longest time I haven’t paid much attention to interest rates as we’ve had something like 20 months in a row of the RBA doing nothing to the cash rate. However the last two months have put the market into a spin.

Not only is the cash rate now the lowest it’s ever been at 1%, we’ve also had APRA remove their restrictions on investment and interest only lending, not to mention favourable changes to the way in which banks assess someone’s income.

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Tim Russell
What does the raft of changes in finance markets mean for borrowers?

Yesterday the RBA reduced the cash rate for the 2nd month in a row, making the new rate 1%, the lowest we’ve seen in recorded history.

Since the announcement yesterday, many lenders have been quick to pass on the full rate reduction and it’s expected that the majority of lenders will be close to passing on the full rate reduction within the next few weeks.

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Tim Russell
The biggest change in finance we've seen in three years

Two weeks ago the regulator of the finance industry (APRA) recommended changes to the current way in which lenders assess serviceability (you’re ability to pay down a loan). For our little industry, it’s big news and one that in my opinion could be big enough to spark property markets or at the very least, allow us to reach a true bottom of the market.

Recapping, the current system in place is that lenders must presume interest rates are at least 7.25% and borrowers income needs to be high enough to be able to comfortably service the home loan repayments after all other liabilities and living expenses have been considered.

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Tim Russell
What's the better move? Buying your office inside or outside of super?

Right now is a great time to be purchasing commercial real estate. With residential property markets in Sydney and Melbourne flailing, investors are looking to commercial as an alternative investment option. Not only are the yields significantly higher in commercial, the asset class has been growing at the same time residential has been diving.

But it’s not just investors getting into commercial real estate. So too are business owners who are looking at the rent they’re paying and are thinking, “Why don’t I just buy an office if my loan repayments are going to be virtually the same as my rent?”

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Tim Russell
Case Study: Successful renovation application but oh what a bumpy ride...

It’s a tough gig to be self-employed.

I know from the outside in people think it would be amazing to choose your own hours, deal with who you want and have control on where you want to take your business strategically. But the reality for most business owners is that money is tough for a long time, you end up working way more hours than when you were employed and you’ve still got to interact with people you don’t want to deal with.

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Tim Russell
The most horrific commercial property experience and lessons learnt

I caught up with my parents last week, who are based in the Hornsby area – shout out to the Asquith Magpies! Talking to them about the residential property market, it was interesting to hear their opinions about of how significantly things have dropped in the area over the past 12 months. Dad reckons it’s been about a 30% dip.

I find it really interesting to compare this against the lower North Shore commercial property market, where I see a lot of transactions as my office is based in North Sydney. Availability is low, rents are significant and values seem to be holding strong, if not increasing.

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Tim Russell
How guarantor loans work, plus an alternative option to consider...

With the Sydney market cooling over the last few months, it seems that entry level prices are now at levels where first home buyers are once again interested in entering the market. Latest data from the ABS has revealed that first home buyers now make up 18.3% of the mortgage market, which is the highest level since 2012.

At Multipart Finance, we’re seeing similar results and are dealing with the most first home buyers we’ve ever seen.

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Tim Russell
My thoughts on the Royal Commission

I love super bowl Monday. It’s my little tradition I have with a few friends where we take the day off and enjoy American wings and beers whilst watching a game we don’t really understand or care about too much!

But this year, my super bowl experience was rudely interrupted by the release of the final report from Commissioner Hayne on the royal commission. What was meant to be a review into misconduct of the financial services sector, particularly in banking, instead turned out to be strategy to shut down the mortgage broker industry.

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Tim Russell
Finance predictions for 2019

Well here we are, another year is upon us and like every year, I am full of optimism and excitement for the year ahead. Now of course, this excitement only has a finite amount of life in it and I’m sure I’ll no doubt turn into my bitter, jaded self in the months ahead!

However, nonetheless, I wish you a belated Happy New Year and hope 2019 will be your best year yet.

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Tim Russell
How commercial lenders look at servicing differently than residential providers

Since APRA imposed sweeping changes to the residential lending market in 2015, home loan approvals have dropped significantly. The ABS recently reported total home loan approvals have fallen by 13.6% year-on-year and within that drop; investment loans have slid 20.5%.

One of the major contributors to this drop in lending has been the policy changes that all APRA regulated banks have imposed. Prior to the changes, most lenders would assess a new loan with an interest rate buffer of 7.5%, but any loans a customer had with other lenders would be assessed based on what the actual repayments were.

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Tim Russell
How to finance multiple investment properties in today’s market

The other week, I came across an article which confirmed a suspicion I’ve had about what many investors may be going through with their home loans right now…

Written by business reporter Stephen Letts for the ABC news site, he referenced mortgage comparison website Mozo who found that, “Mortgage holders who borrowed near their limit in recent years where finding it increasingly difficult to refinance their loans and were “trapped” with their current lender.”

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Tim Russell
Why commercial loans can be a better option than residential?

The past couple of weeks have seen further changes to the major bank’s product lines off the back of increased scrutiny they’ve been exposed to via the royal commission.

Last week CBA confirmed they would be stopping their low doc residential loan product and this week Westpac and St George confirmed they would be calling stumps on their SMSF loans.

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Tim Russell
What should you do? Buy a place to live or purchase an investment property?

It’s a conundrum that many people face right now, particularly with the property boom we’ve seen in Sydney & Melbourne over the past 5 years. That is, the decision to focus on saving for a place to live or perhaps to purchase an investment property instead.

I get asked this question a lot by my clients, so I thought I’d give you my two cents in case this has been something you’ve been thinking about recently.

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Tim Russell
The 3 finance factors that will make or break a development

The May CoreLogic Home Index values came out last week noting the 8th consecutive month-on-month fall in property values nationally since the market peaked in September last year.

So if it wasn’t clear before, I think we can all now agree that we’re well and truly entered a new phase of the property cycle with the market effectively swinging around to be a flat, (I wouldn’t say depressed yet) buyer favoured environment where emotion is no longer much of a factor.

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Tim Russell
Should you own or lease your office space?

Every business goes through natural cycles. The start is the most stressful time where money is flying out the door and there’s not much coming back in!

Eventually though, things start to become more established. Cash flow evens out and in doing so, one of the questions you might have is, “I love our office but why are we spending all this money on the lease when we could own it ourselves?”

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Tim Russell