Paramount Finance Australia 1/9/25 Paramount Finance Australia 1/9/25

House, apartment or townhouse? The pros and cons of each

There’s much more to property in Australia than just houses or units. And if you’re in the market for a home or investment property, it helps to know your townhouses from terrace homes so that you can choose a place that’s suited to your goals and needs.

Australians are blessed with choice when it comes to buying a family home.

Nationally, Australia has 10.9 million private dwellings.

The sheer scale of properties points to a wide variety of housing types to suit different budgets and lifestyles.

So, it can pay to cast your net wide.

With this in mind, let’s take a look at the main types of housing you can choose from.

Houses – freestanding, semi or terrace?

Houses dominate the property scene in Australia, accounting for a whopping 70% of the nation’s private residences.

But not all houses are the same.

‘Detached’ houses are freestanding, or standalone, residences.

That’s quite different from semi-detached houses, which share a common wall with a neighbouring home – something often seen in rows of terrace houses, typically dating from the 19th and 20th century.

The pros of houses: houses have historically shown a higher rate of capital growth than other types of residential property.

The cons of houses: houses often come with a price premium over apartments.

As a guide, the median price for a house nationally is $879,680, compared to $669,700 for apartments.

Apartments

Apartment living has gained a big following in recent years, with one in six (16%) Australians calling an apartment ‘home’.

And they continue to grow in popularity.

Realestate.com.au says searches for apartments have been trending upwards since mid-2020, accounting for almost 40% of all ‘buy’ searches in late 2024.

The pros of apartments: part of the appeal of apartments is affordability. However, they can also offer the advantage of low-maintenance living (think no lawns to mow each weekend).

The cons of apartments: one thing to watch out for is strata levies. These cover the cost of building maintenance and repairs, and newer developments with more facilities can come with higher strata fees.

Townhouse or villa?

Not keen on an apartment, but looking for something more affordable than a house?

The solution could be a townhouse or villa.

Townhouses make up 13% of dwellings across Australia. They typically have two storeys while a villa is usually a single-storey home.

The pros of townhouses: the small garden or courtyard space associated with townhouses and villas can offer residents more private space.

The cons of townhouses: both townhouses and villas are part of a strata scheme, which makes it worth keeping an eye on strata fees.

Duplexes

Duplexes can tick a bunch of boxes. They’re a modern version of a semi-detached house, often with two adjoining homes constructed on a larger block, connected by a single wall.

While duplexes are less common than houses or apartments, they have the potential to let you buy a home for almost half the price of a regular house.

The pros of duplexes: a duplex can combine the privacy of a house with the affordability and low maintenance of a townhouse or villa.

The cons of duplexes: according to REA Group, owners of both duplex homes must agree to a building insurance policy that covers both sides of a duplex. This is something to look into before buying.

Talk to us to find out what you can afford

The type of property that’s right for you is a very personal decision.

What you are able to buy can be shaped by both personal preference and your borrowing power. And more often than not, trade-offs and compromises occur.

Call us today to know how much you can afford to borrow. It could shape your choice of home.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

Paramount Finance Australia 1/2/25 Paramount Finance Australia 1/2/25

Three financial New Year’s resolutions to tackle 2025 head-on

How are your New Year’s resolutions coming along? If you’re like most people, they’re likely related to health, fitness or abstinence. But why not consider a financial one too? Here are three resolutions worth considering for 2025.

There’s no denying that 2024 was a tough year for many mortgage holders – in no small part due to the hope of rate cuts dangling just out of reach, coupled with inflation.

But by kicking off the year with one or two of the ideas below, you could be in a better position to tackle 2025 head-on, come what may.

1. Call us for a home loan health check

Do you know the interest rate on your home loan?

Don’t stress if you don’t, about 40% mortgage holders can’t recall it.

Not knowing the rate is usually a good sign that it’s time to check if your mortgage is still well-suited to your needs.

An analysis by RateCity shows the average borrower who has not refinanced their home loan in the past 12 months has paid almost $6,000 more interest during that period as a result.

Rest assured we’ll help make the process painless. Simply get the ball rolling by giving us a call today.

2. Cut unnecessary expenses from your budget

When was the last time you had a thorough look at your spending account?

It’s good to get into the habit of conducting regular expense audits.

After all, many of us have been guilty of subscribing to one too many streaming services that we rarely use – let alone takeaway coffees, takeaway meals and other impulse purchases.

Little tweaks here and there can add up.

For example, a daily $5 takeaway coffee habit costs you $1825 per year. Switching to a DIY French press brew can cost just $350-$450 per year.

3. Leverage your equity to achieve other property goals

A home loan doesn’t just have to be a debt.

It can also be a valuable tool that lets you work through a personal bucket list by putting home equity to work.

And you could be starting 2025 with more equity than you realise.

Back in January 2023, the median home value across Australia’s state capitals was $770,374, according to CoreLogic.

Fast forward to now, and the median value has increased to $897,580.

That means that over the past two years the average city homeowner in Australia has gained almost $130,000 more equity in their property, which they could possibly leverage for other investments.

In fact, that $130,000 rise in equity is the equivalent of a 20% deposit for a $600,000-$650000 investment property.

Alternatively, you could use that equity for home renovations to improve your primary place of residence.

Call us today to get a clearer picture of your home’s potential equity – and how you could use it to tick off your wish list in the year ahead.

Paramount Finance Australia 12/24/24 Paramount Finance Australia 12/24/24

Merry Christmas! And thanks for your support in 2024!

With the holiday season upon us, we’d like to express our heartfelt thanks to all our amazing clients for your trust and support throughout 2024.

With the holiday season upon us, we’d like to express our heartfelt thanks to all our amazing clients for your trust and support throughout 2024.

With the hope of rate cuts always dangling just out of reach, coupled with inflation, 2024 was tougher than many families anticipated.

Please know that we’re always here if you ever want to discuss your mortgage – including ways we could potentially help you reduce your monthly repayments.

Looking ahead, 2025 offers plenty of promise (maybe we’ll start getting those highly anticipated RBA rate cuts!), and we’re ready to walk alongside you to tackle your goals and aspirations – whether they be buying your first home, second home, a holiday home or an investment property.

But first, we hope you take a well-deserved break to enjoy the magic of the festive season.

Whether it’s spending quality time with loved ones or simply unwinding with some holiday cheer, this is your moment to relax and recharge.

The next 12 months may bring more surprises, but one thing remains constant – our commitment to being here for you every step of the way.

So, throw on that festive jumper (the uglier, the better!), savour the holiday treats, and celebrate all you’ve accomplished this year.

May your festive season be joyful, your happiness be abundant, and your challenges small. We can’t wait to help you continue your property journey in 2025!

Paramount Finance Australia 12/19/24 Paramount Finance Australia 12/19/24

Have you refinanced recently? It could be time this summer break

If you haven’t looked into refinancing since the start of higher interest rates, it might be time to ask yourself ‘why not?’ New research shows it could be time to try again – especially if you want to start 2025 off on the right foot.

A new report from Canstar shows more than one in five borrowers were able to negotiate a better interest rate from their lender this past year.

One in ten successfully switched to a new lender in the last 12 months.

Even so, fewer home loans have been refinanced this year compared to 2023.

With rates looking like they might stay higher for longer, it could be worth taking a fresh look at refinancing over the summer break.

What’s holding borrowers back?

According to Canstar, around 5% of borrowers tried to refinance in 2024 but didn’t have enough home equity.

A further 5% didn’t meet the bank’s requirements.

It’s a situation dubbed ‘mortgage prison’ – where you’re stuck paying more on your home loan because you don’t qualify for a lower rate home loan.

As Canstar notes, a lot of people think they’re in mortgage prison.

But if you haven’t tested the lock recently, now could be the time to try.

Why it could be time to revisit refinancing

Even if you’ve had a go at refinancing in the past, it’s worth talking to us to see if you could qualify for a new loan today.

On the home equity front, home prices increased nationally by 5.5% in 2024. So you could have more equity than you realise.

Also, if you have a solid record of regular repayments, some lenders may be willing to stress-test refinancers using a loan serviceability buffer as low as 1% (below the standard 3%).

The important thing is that you speak with us to get to know your options.

How much could you save by refinancing?

Well, that depends on how big your current home loan is, what your current interest rate is, and how much you reduce that rate by.

But an analysis by RateCity shows the average borrower who has not refinanced their home loan in the past 12 months has paid almost $6,000 more interest during that period as a result.

Is refinancing difficult?

Almost one in five (17%) borrowers surveyed by Canstar said they had no plans to refinance because they believe “it’s too much like hard work”.

Let’s clear the air on that one.

As home loan professionals, we’ll help you with the legwork, track down a home loan that meets your needs, help with the paperwork, and liaise with lenders on your behalf.

The bottom line is that we can streamline the refinancing process for you.

Put us to the test.

Get in touch today to see if your home loan is still suitable for your needs – and if not, we’ll help you find one that is.

Paramount Finance Australia 12/12/24 Paramount Finance Australia 12/12/24

How did property prices go in 2024? And what’s tipped for 2025?

As we head towards the end of 2024, let’s take a look at how property markets performed over the last year – and discover what the experts say may lie in store for home prices in 2025.

As we head towards the end of 2024, let’s take a look at how property markets performed over the last year – and discover what the experts say may lie in store for home prices in 2025.

2024 has been a year of change, with property values and market conditions shifting across many of our state and territory capitals.

In fact, the only constant has been the Reserve Bank of Australia’s cash rate, which has held steady at 4.35% since November 2023.

After a year that saw home values rise nationally by 5.5%, according to CoreLogic, it’s worth looking at what we can expect in the new year.

The Australia-wide picture

November 2024 saw home values rise nationally by a barely perceptible 0.1%.

Technically speaking, it’s the 22nd straight month of growth since January 2023. But realistically, 0.1% hardly qualifies as a cracking pace of growth.

Quite simply, CoreLogic says the market is losing steam, and a downturn is gathering momentum – particularly in Melbourne and Sydney.

That’s good news for buyers who may be able to take advantage of softer price growth in 2025.

However, in a market as large and diverse as Australia, it pays to drill down to local trends.

With this in mind, let’s take a look across our major capital cities.

Queensland

Brisbane home prices have climbed 12.1% over the past year. Can the growth be maintained? Maybe, though perhaps not to the same extent. Domain is predicting price growth ranging from 5-7% for houses, and 7-9% for apartments in 2025.

New South Wales

Sydney is up 3.3% over the past year and likely hit a cycle peak in August. Home values have flattened or fallen ever since, says CoreLogic, with the city’s median home price of $1.2 million proving an affordability challenge. Domain is predicting a 4-6% rise in home values through next year.

Victoria

Melbourne took out the wooden spoon for property price growth in 2024, recording a 2.3% fall in prices over the last 12 months. The new year could bring a change of pace. Domain predicts house values could rise 3-5% in 2025 though apartments are expected to drop by up to 2%.

Australian Capital Territory

Home prices in Canberra have barely budged in 2024, declining by just 0.1% in the past 12 months. Domain is taking an optimistic view, expecting house values to rise by 3-5% next year, while unit values could drop by up to 4%.

Tasmania

Hobart values fell 1% in the year to November, bringing the total falls to 12.1% since the market peaked in March 2022. However, more affordable prices plus generous stamp duty reforms launched in mid-2024 could make 2025 a big year for first home buyers in Tassie.

South Australia

Home values in Adelaide have jumped 14% over the past year. However, CoreLogic says Adelaide’s 2.8% rise in values over the past three months was the lowest since June 2023. Even so, there may be plenty of steam left in the market, with Domain forecasting a 7-9% rise in prices in 2025.

Western Australia

Perth has seen home prices soar 21% over the past 12 months. But with listings up 33% in November, CoreLogic says the pace of price growth is slowing. Domain is expecting prices to rise by a more modest 8-10% next year – still nothing to sneeze at.

Northern Territory

Prices in Darwin have barely budged this year, mustering up just 0.9% growth over the past 12 months. Next year may be better. SQM Research is predicting home values in Darwin could rise anywhere from 3% to 10% in 2025 depending on interest rates and population growth.

Get to know your borrowing power

A cooler market could be the opportunity you’ve been itching for to buy a property next year.

Call us today if buying a first home, investment property or upgrading your current home is on your radar for 2025 – we’ll help give you a clearer idea of your borrowing power.

Paramount Finance Australia 12/5/24 Paramount Finance Australia 12/5/24

Thinking of buying a holiday home? Here’s what to weigh up

The coming weeks will see millions of Aussies enjoy a well-earned getaway, and for some, a memorable holiday will inspire plans to buy a holiday home. But is it a good idea? And can a weekender still stack up financially? We explain what to consider plus tips to fund a vacation property.

It’s that time of year when we lock up our home, load up the car, and hit the highway to unwind with an all-too-brief sea or tree change.

It can add up to a wonderful experience, and some holidaymakers will stretch the vacation buzz a lot further by purchasing a holiday home.

But given the current state of property prices, is a weekender a smart move?

Here’s what to weigh up.

A holiday retreat is a major outlay

No matter whether you’re thinking of a coastal retreat or hinterland hideaway, homes in popular holiday spots can be pricey.

As a guide, an apartment in Coolum on Queensland’s Sunshine Coast, can set you back about $870,000.

If you’re thinking of a house in Byron Bay on the NSW north coast, you’ll likely need a budget of around $3.5 million.

That said, there can still be relatively affordable holiday spots.

A unit in Victoria’s seaside town of Portland, about four hours drive from Melbourne, can cost around $304,000,

And in the wine growing regions of WA’s Margaret River, or Tanunda in South Australia’s Barossa Valley, you may be able to pick up a house priced from around $670,000-$770,000.

Can a weekender still be a smart investment?

Wherever you buy, a holiday home is likely to involve an outlay of several hundred thousand dollars.

That sort of money could pay for a lot of vacations around the nation – and across the world.

So, first and foremost a holiday home should stack up as a good investment.

This is where it’s worth putting down the pina colada and taking off the rose-tinted glasses.

Ideally, you probably want your holiday home to deliver long-term capital growth.

The thing is, vacation properties tend to be located in regional areas where price growth can be very different from our big cities.

That’s not to say regional neighbourhoods don’t tick the box for capital gains.

CoreLogic points to areas such as Mackay, Geraldton and Townsville, which are seeing “exceptional growth” driven by affordability and lifestyle appeal.

However, not all regional markets are booming.

The holiday town of Batemans Bay, on NSW’s south coast, and Victoria’s coastal city of Warrnambool, for example, have both experienced declining values over the past year, according to CoreLogic.

Long story short, be sure to research any area you’re looking at buying into to get a feel for how property values are likely to move in the future.

Can a holiday property pay its way?

Gone are the days when most holiday homes stood empty for most of the year.

Platforms like Airbnb and Stayz offer a chance to put a vacation retreat to work earning short-term rental income.

The catch is that various state governments are limiting the number of nights these properties can be offered for rent each year.

Also, a number of councils such as Hobart City Council, have raised rates for short-term accommodation properties.

These factors need to be accounted for in your holiday home budget.

On the plus side, if your vacation property is rented out or available for rent, you may be able to claim at least some of the ongoing costs as tax deductions each year.

Funding your holiday home

Loans for holiday homes work in much the same way as a regular mortgage, but with a few differences.

Demand for properties in holiday hot spots can be highly seasonal. This increases the risk for lenders, who may ask you to stump up a bigger deposit compared to an owner-occupied home loan.

Your vacation retreat could also be seen as an investment property, meaning you could be asked to pay a higher investment loan rate.

The big plus is that if you are a home owner, you may be able to use your existing home equity in lieu of a cash deposit on a holiday property.

Get in touch

Call us today to find out more about loans to buy a holiday home.

It could turn a vacation pipedream into a fun-filled, financially rewarding reality for your family.

Paramount Finance Australia 11/28/24 Paramount Finance Australia 11/28/24

Thinking of installing a swimming pool for summer?

There are few better ways to beat the summer heat than floating in your very own pool. With a range of price points to choose from, a pool can be affordable, but will it add value to your property? And how will you pay for your backyard oasis?

Fun fact: more than 3 million Aussies have a backyard swimming pool or spa.

That’s about one-in-eight Australians, or as many as one-in-four in areas like the Gold Coast.

This popularity isn’t surprising.

Pools offer plenty of fun, with perks that go beyond staying cool in summer.

A pool can help you stay fit, encourage your kids to develop water confidence, and when it comes to home entertaining, a swimming pool can do lots of heavy lifting.

How much does a pool cost?

Before pencilling in dates for poolside barbecues, it’s important to set a budget for your swimming pool.

At the more affordable end of the scale, an above-ground pool can cost around $3,500 to $12,000.

If you’re keen on an inground pool expect to pay a lot more, with your budget likely needing to start at about $35,000 and can go as high as $100,000.

Bear in mind, a pool usually needs a few extras including a filter to keep the water clean. You’re required by law to install childproof fencing, and some basic landscaping will help keep your pool clean and inviting.

All these extras should be included in your budget.

Don’t forget to allow for ongoing expenses too.

The additional power and water consumption plus pool supplies such as chlorine can all add up.

Depending on the size of your pool, regular maintenance can cost between $65 and $165 each month.

Can a pool add value to your place?

Pools are super popular when it comes to real estate.

In 2023, “pool” was the most-searched term among home buyers across Australia.

Even so, the jury is out on how much value a pool will add to your home.

Real estate group Ray White says your property’s value is expected to rise by at least the cost of installing a swimming pool.

So if you spend, say $50,000 on a pool, you could hope that the value of your place rises by a minimum of $50,000.

Still, a pool doesn’t always increase the number of interested buyers at sale time. The cost and effort of maintaining a pool has the potential to turn some buyers away.

A quick call to a local real estate agent can shed light on whether pools are a sought-after feature in your area.

Ways to fund your swimming pool

The next step is to decide how to pay for your pool.

Dipping into savings means avoiding interest charges though it can be a good idea to have sufficient spare cash available to manage unplanned bills or expenses.

Using a personal loan could keep savings intact, and the fixed term provides a clear end date when the slate will be cleared.

Or, you may want to tap into home equity and add the cost of a pool to your home loan – which can come with the opportunity to review your current loan to check that it’s still a good match for your needs.

Ready to dive in?

You’ll want your new pool to last for many years – but perhaps not the loan that pays for it.

That’s why it’s important to talk to us about financing your swimming pool.

We’ll dive into the market to track down the option that’s suited to your needs, leaving you free to straighten up your backstroke, dust off the pool noodles and focus on the fun times ahead in your backyard paradise.

Paramount Finance Australia 11/21/24 Paramount Finance Australia 11/21/24

Buying land to build on later: what you need to know

You’ve seen the perfect piece of land but you’re not quite ready to build. No problem – a land loan can be a handy finance solution. However, it can work a bit differently from a regular home loan. Here’s what you need to know.

Not everyone wants to buy an established home or even a house and land package.

Sometimes you just want to buy a vacant block, pay it down and give yourself a breather before paying for the cost of building a home.

Or maybe you’ve seen an exceptional block listed for sale that ticks all the boxes for your ideal future home site – and it just seems too good an opportunity to miss.

Whatever the case, it could be possible to take out a loan for land only. Here’s how it works.

What is a land loan?

Land loans, also known as vacant land loans, are dedicated to financing the purchase of a vacant block.

In some respects, these loans work along the same lines as a traditional mortgage in that you pay a deposit, borrow a set amount and then select fixed versus variable rate options.

There may even be the opportunity to add an offset account or make interest-only payments rather than principal plus interest repayments.

But it pays to read the fine print. Depending on the lender and product you choose, land loans can come with unique conditions that you need to be aware of.

You may need a bigger deposit

Vacant land can potentially take longer to sell than an established house and land.

This raises risk for a lender, should you default on your repayments and (after other possible avenues are exhausted) the bank has to repossess and sell your property.

Banks may manage this risk by asking borrowers for a bigger deposit – one that goes beyond the standard 20% down payment.

The bigger the block, the bigger the deposit you may be required to have, particularly if you’re buying vacant acreage.

You could pay a higher rate

As lenders may see vacant land as higher risk, you may be asked to pay a higher interest rate compared to a regular home loan.

This highlights the importance of talking to us before you commit to buying.

By doing so, you can be more confident that you can manage the loan repayments – and are paying a competitive interest rate.

You may be required to build within a set timeframe

In general, lenders often like to see that a borrower has plans to build on vacant land within a few years of buying the block.

Your lender may even require you to construct a home within a set time period. Not always, but sometimes.

This is another factor you should talk to us about.

A requirement to build by a specific deadline has the potential to reshape your plans, including what you can afford to build and how you’ll finance it (potentially a construction loan).

Talk to us before you buy

Buying vacant land now and building later can seem like a cost-effective way to get your dream home in your ideal location.

But there are plenty of other factors that lenders will also want to consider before approving an application, including access to the site, the shape and make-up of the land, and what service utilities you’ll be able to tap into.

So if you’ve been eyeing off a vacant block, give us a call first to find out what land loan options might be available.

Paramount Finance Australia 11/14/24 Paramount Finance Australia 11/14/24

Do you really need a building inspection?

Your home is possibly the most valuable asset you will ever own. So it’s worth taking precautions to help ensure you buy a place that has a clean bill of health, free from budget-busting hidden nasties.

Even the most attractive homes can hide unwanted surprises, and it’s not always easy to spot a problem property.

Arranging a pre-purchase pest and building inspection gets a professional on the case to possibly reveal any dodgy or deteriorating building work or hard-to-spot pest infestations.

It can help you avoid unplanned repair bills and/or provide a red flag that you’re looking at a property with the potential to turn your home-buying dream into a costly nightmare.

What does a pest and building inspection involve?

A pre-purchase building inspection involves a qualified person, often a licensed builder, physically inspecting a property to check for serious defects such as faulty footings or rising damp, which can be expensive to fix.

You can organise a building inspection in isolation, or for a small extra cost you can often add in a pest inspection. This can help alert you to whether or not you’ll be sharing the home with a variety of destructive creepy crawlies such as borers or termites.

Experts say common faults and defects picked up by pest and building reports include active termite infestations, construction faults and the need for plumbing and wiring to be replaced due to safety concerns.

These sorts of issues can leave a buyer facing substantial – and often unplanned for – expenses once they take ownership of the property.

How much does a pest and building inspection cost?

Buying a home often brings a raft of upfront costs, and it can be tempting to cut back where possible.

But a pre-purchase pest and building inspection is one expense you probably don’t want to sidestep.

Exactly how much you pay will depend on the service you use and the size of the home.

As a guide, HiPages says a building inspection fee on average can range from about $200-$300 for a smaller property to $400-$500 for an average-sized house.

Add in a pest inspection, and you could be looking at around $100-$150 extra.

What if the property gets a bad pest/building report?

If a home gets the thumbs down after a pest/building inspection, it’s not necessarily the end of the world – especially if the property ticks plenty of other boxes for you.

You can use a pest and building report to try and negotiate a lower price.

The key is to be confident that any offer you make takes into account the cost of fixing any faults noted in the pre-purchase inspection. That can mean gathering quotes from builders and/or pest exterminators before you make a formal offer.

Alternatively, you may decide it’s not worth the risk, and start your home hunt afresh.

Talk to us for more information on the pre-purchase checks worth making before committing to buy a home. It could be the difference between buying a quality property versus a bricks and mortar lemon.

Paramount Finance Australia 11/7/24 Paramount Finance Australia 11/7/24

Can we expect the RBA to cut back rates this summer?

With just one RBA rate decision left for 2024, homeowners may be holding onto hopes of a summer cut. We look at when rates may start falling – and how you could possibly give yourself a rate cut before Christmas.

“Are we there yet?” It’s the catch cry of kids on long summer road trips, and it could just as easily apply to homeowners waiting for much-anticipated rate cuts.

The good news is that we appear to be getting closer – with many banks forecasting a possible RBA rate cut by the end of summer.

Rates on hold for November …

The Reserve Bank of Australia (RBA) kept rates on hold in November, despite inflation falling to 2.8%, which is well within the RBA’s preferred 2-3% inflation range.

So, what’s holding up rate cuts? And why does it seem like the goalposts keep shifting?

It turns out the RBA is concerned that part of the decline in inflation “reflects temporary cost of living relief” (think the $300 power bill credit).

Basically, the RBA is worried that inflation remains too high and the outlook is still a little too uncertain to make any rate cuts right now.

Banks expect rates to fall in early 2025

What the RBA is aiming for, is “sustainably returning inflation to target” (that’s the 2-3% band). And it cautioned this could still be a way off.

That makes the chances of a festive season rate cut at the RBA’s next meeting (December 10) unlikely.

For the record, RBA Governor Michele Bullock didn’t give any hint on the direction of interest rates – either up or down.

The banks, however, are a lot more open – and optimistic – about their interest rate expectations.

The Commonwealth Bank, which had previously tipped a December rate cut, is now pencilling in the following meeting (February 18) for the first of what could be a string of rate cuts.

Westpac, ANZ and AMP also all anticipate the RBA to cut the cash rate as early as February, while NAB is forecasting a rate cut as early as March 2025.

Why wait? Variable rates are already falling

While all this may make for a happy new year, February may seem a long way off – especially if you’re sweating on a rate cut (and remember, there are no guarantees).

But you may not have to wait around for the economy or the RBA to shift in your favour.

It could be possible to give yourself a rate cut in time for Christmas.

According to Mozo, growing expectations of future rate cuts have seen a number of lenders take the knife to their variable rates, with some cutting their variable rates below the 6% mark.

This may be helping to drive a 2.1% uptick in the volume of home loans being refinanced over the past month.

Talk to us today

Waiting is never much fun. Refinancing now could help free up your household budget and contribute to a little extra Christmas cheer.

If that sounds good to you, contact us for a review of your home loan. We can run through your situation and let you know if there are ways to save on your current home loan interest rate.

Paramount Finance Australia 10/31/24 Paramount Finance Australia 10/31/24

How much does LMI really add to a home’s cost?

Saving for a 20% house deposit is like house training a wilful Labrador. It requires plenty of patience and persistence. Not your thing? You could take out lenders mortgage insurance (LMI). But how much extra does that cost? And can you avoid paying for it? (for the LMI, not the dog…)

LMI is a type of insurance that protects the lender (not you or any guarantors) if you can’t keep up with your home loan repayments.

It’s typically applied to home loans when your deposit is less than 20%. And right now, that’s the case for many home buyers.

A recent Mozo study found 84% of Australians saving a deposit can’t currently afford the full 20% deposit needed to avoid LMI – in no small part due to increasing property prices.

In fact, the national median property price is now $973,300, up from $949,400 in December last year and $649,300 in June 2019

So, let’s shed a light on how much LMI can cost – plus ways to make the expense more manageable or possibly disappear altogether.

How much LMI could I pay?

LMI typically works out to about 1% to 2% of your loan value, depending on the size of your deposit and the size of your loan.

The more you can stump up as a deposit, the lower the LMI premium can be.

We’ll use this handy LMI estimator to show how it works (feel free to give it a go yourself).

Let’s say you’re buying an apartment costing $500,000. If you have a 10% deposit of $50,000, LMI will likely cost around $8,680.

It all depends on the price of the property you’re buying and your deposit amount. For example, the LMI premium can be as high as $36,480 if you have a $150,000 deposit for a $1,500,000 home.

The good news is that there are ways to manage – and potentially even bypass – LMI. Here are three ideas to consider:

1. Talk to us

Unlike other types of insurance, you can’t shop around for the cheapest LMI provider. Your bank will organise cover and let you know how much you’re up for.

However, different lenders use different LMI insurers. So the premium can vary depending on the lender you choose.

That’s why it’s important to talk to us.

We can explain what the LMI premium is likely to be for each lender you’re considering. This could see you potentially save on LMI.

2. Pay LMI off gradually

Instead of paying LMI in a lump sum, your lender may agree to add the cost to your loan balance.

This way you can pay LMI off gradually as part of your normal home loan repayments, but the downside is you’ll likely be paying interest on that LMI amount over the life of your home loan.

Remember that example we used earlier of a $500,000 apartment with a $50,000 deposit?

Adding the LMI premium to your home loan in that scenario could result in your monthly repayments increasing by about $45-65 per month over the life of a 30-year home loan, depending on the interest rate at the time.

Alternatively, some LMI insurers can allow you to pay your LMI premium in monthly instalments until you’ve got a suitable amount of equity built up in the property that your lender is satisfied with.

3. Have LMI waived altogether

Like the sound of sidestepping LMI completely?

Here are a few strategies that could scratch the cost of LMI from your buying budget:

– Use your job: some lenders waive LMI for workers in certain professions such as doctors, lawyers, accountants, vets, engineers and pharmacists.

– Tap into the Home Guarantee Scheme: this scheme sees the Australian government guarantee your loan, allowing first home buyers to buy with just a 5% deposit, or as little as 2% if you are a single parent – and no LMI to pay.

– Ask a family member to guarantee your loan: a guarantor can provide additional security, such as the equity in their own home, to raise the security on your loan up to the equivalent of a 20% deposit.

Next step? Contact us

If you’re having trouble saving up for a 20% deposit, contact us today.

We can help give you a clearer idea of what you could be up for in LMI, and help you discover any steps you may be able to take to keep a lid on the cost.

Paramount Finance Australia 10/24/24 Paramount Finance Australia 10/24/24

How to nail a home loan if you’re self-employed

It’s the great Australian dream for many: giving the 9-to-5 grind the flick and running your own show. But when it comes to taking out a home loan, being your own boss can dish up some unexpected hammer blows.

Rightly or wrongly, lenders tend to see self-employed borrowers as a higher risk compared to employees. That’s largely because, by and large, their income isn’t as guaranteed.

In addition, it’s likely their earnings won’t be the same each pay day – they may differ, sometimes substantially, from one month to the next.

In a lender’s eyes this has the potential to impact their ability to make regular loan repayments.

So if you own one of Australia’s 2.6 million small businesses, or you’re one of the nation’s one million independent contractors, here are some tips on how to convince a lender to back you.

Show you’ve been in business for a while

Banks often feel more comfortable if you have been self-employed for a while.

That can mean showing you’ve held your Australian Business Number (ABN) for at least a year or two. It demonstrates the business has got legs and possibly generates a reasonable income for you.

Gather proof of income

While employees can simply stump up a couple of pay slips as proof of income, if you’re self-employed you’ll likely need to pull together several pieces of paperwork as evidence of income.

The requirements vary between lenders.

You may be asked to provide your last two years of financial statements, including business and personal tax returns (a good incentive to stay up-to-date with your tax!).

Or the bank may just want to see several recent business activity statements.

In some cases, you may be asked for an income statement signed by you and your accountant that confirms your financial position and that you can afford the loan repayments.

With so much variation, it’s important to speak with us to know what different lenders look for.

Showcase your other assets

It’s not a bad idea to gather evidence of personal savings and investments.

A healthy track record of regular saving, in particular, can go a long way towards convincing a lender that you can handle home loan repayments.

Don’t hide your income or exaggerate expenses

The Australian Tax Office (ATO) estimates that about 10% of small businesses under-report income (aka cash-in-hand jobs) or exaggerate/overclaim expenses.

Not only can this get you in hot water with the ATO, but it can also impact your borrowing capacity.

That’s because generally speaking, the lower your income, the lower the repayments a lender may expect you’ll be able to afford each month.

Low-doc loans for self-employed home buyers

You may have heard about low-doc home loans.

These are purpose-built loans designed for self-employed borrowers who don’t have sufficient documents to apply for a regular home loan, hence the name “low doc”.

The beauty of low-doc loans is that they can provide a pathway into the property market.

The downside is that with less proof of income, the bank may see you as higher risk. And that can mean paying a higher interest rate.

The good news is that the higher rate may not apply for the life of the loan.

If you build up a record of reliable loan repayments, the bank may let you convert your mortgage to a full doc loan at a later stage, potentially providing the savings of a lower rate.

Not every lender offers low-doc loans. Talk to us to know which, if any, low-doc loans are suitable for your circumstances.

Get the ball rolling

Borrowing to buy a home may involve a little extra effort when you’re self-employed but it can be done.

And if you’ve created a successful business with a strong track record of generating a profit and income for yourself, the process can be straightforward and result in you landing a regular ol’ home loan.

The catch is that running your own show is likely to mean you’re stretched for time to put the application together.

If that sounds like you, give us a call. We’ll help take care of your home loan while you’re taking care of business.

Paramount Finance Australia 10/17/24 Paramount Finance Australia 10/17/24

What’s going on with negative gearing?

Negative gearing is in the headlines again. But what is it all about, and could it affect you? We explain how negative gearing works, why it’s so popular among investors, and why it’s attracting fresh attention.

Australians love property. So much so that more than one-in-ten adults (2,268,161 Australians) own an investment property.

So why is property such a popular investment?

Well, landlords can earn regular, consistent rental income. That’s extra cash to pay off the investment loan.

Additionally, over the past 100 years, national property prices have risen 10.9% per year on average, according to AMP insights.

This kind of return can provide a decent capital gain when the owner sells – which may also be eligible for a 50% capital gains tax (CGT) discount.

But there’s a third factor that can make property such an attractive investment, and that’s the potential tax savings of negative gearing.

How negative gearing works

‘Gearing’ simply means borrowing to invest.

‘Negative gearing’ is where the costs of owning the property, such as loan interest, council rates, insurance and so on, exceed the rental income the property generates.

The investor then claims a loss on the property via their tax return (this loss can be claimed even though the property’s value, aka capital gains, might have increased during that period).

The advantage of negative gearing is that this loss can be offset against other income, including your regular wage or salary.

The end result is the potential to save on your tax bill.

The tax savings can stack up

A simple example here will help.

Let’s say Deb’s annual salary is $125,000. At 2024-2025 tax rates, she pays tax plus Medicare levy totalling $28,288.

Deb recently bought an investment property. It generates $25,000 in annual rent, and the ongoing costs (including, but not limited to, strata levies, landlord insurance and loan interest) add up to $35,000 each year.

This leaves her with a loss of $10,000.

Deb now claims that loss on her tax return.

This will push her taxable income down to $115,000 ($125,000 salary less $10,000 property loss).

At this point, Deb’s tax (plus Medicare levy) is cut to $25,288, giving Deb an annual tax saving of $3,000.

This tax saving is more just than a sweetener.

It’s extra cash that can go towards repaying the investment home loan.

One of the controversies surrounding negative gearing is that many investors are unlikely to really be making a loss on their investment property because the value of their property usually increases each year.

The counter-argument to that however is that those capital gains are already subject to capital gains tax (albeit, usually discounted at 50%).

Why is negative gearing back in the news?

The latest kerfuffle around negative gearing arose because Federal Treasurer Jim Chalmers let slip that he had asked the Treasury for modelling around negative gearing and its impact on housing supply.

Prime Minister Anthony Albanese had stated “We have no plans to touch or change negative gearing.”

But of course, nothing is set in stone when it comes to politics.

That said, it would take a brave government to scrap negative gearing.

After all, those 2.2 million property investors are also voters – about half of whom negatively gear their properties.

Keen to buy an investment property?

It always makes sense to talk to a tax professional to know whether you could benefit from negative gearing.

As mentioned above, about half of property investors employ the strategy – it’s not the right fit for everyone.

Either way, if you’re keen to become a property investor and want to explore finance options that could help make that a reality, get in touch with us today.

We can help you assess your borrowing capacity and give some insights into how you could leverage the equity in your current property to make it happen.

Paramount Finance Australia 10/10/24 Paramount Finance Australia 10/10/24

How long it takes to save a deposit (and how to fast-track it)

Planning to buy your first home? It takes (on average) about five to six years to save a deposit at present. But who’s got the patience to save for six years? Today we’ll look at four ways you could fast-track home ownership.

They say patience is a virtue. But the narrator/protagonist of the poem that coined that famous phrase was an idle vagabond – not exactly an inspiration for eager homeowners in a competitive market.

So today we’ll throw patience out the window and walk you through some ways you could beat the national average of 5.6 years when it comes to saving a house deposit (all while keeping your virtue!).

1. Buy with less than a 20% deposit

It is possible to buy a home with a deposit of less than 20%. Some lenders will take a 10% deposit. Others may accept a deposit as low as 5%.

The downside is that with anything less than 20%, you will usually be asked to pay lenders mortgage insurance (LMI), unless you tap into the scheme in number 3 below.

LMI protects the lender (not you) if you can’t keep up the loan repayments.

The downside is that the one-off LMI premium can be pricey, potentially adding more than $10,000 to the upfront cost of buying a home.

You may be able to add the cost of LMI onto your home loan and pay it off over time, although this will increase your repayments and you’ll end up paying interest on the insurance premium.

That said, paying LMI offers a way to get into the market sooner, before property values potentially rise higher.

It’s a solution that can work for some first-home buyers, and we can explain if it could work for you too.

2. Have a guarantor in place

A guarantor is a person, usually a close relative such as mum or dad, who provides additional security for your home loan.

This security usually takes the shape of the guarantor’s home equity. It means guarantors don’t need to hand over any cash, and they can often specify what percentage of your loan they will guarantee.

With a guarantor in place, you may potentially be able to borrow 100% of your home’s value without paying LMI, although lenders still like to see that you have a strong savings record, often with at least a 5% deposit under your belt.

If you have a close family member who is happy to be your guarantor, talk to us about the different home loan options available.

3. Tap into the First Home Guarantee scheme

No guarantor? No worries. If you can save a 5% deposit you could be eligible for a spot in the First Home Guarantee (FHG) scheme.

The FHG sees the federal government guarantee up to 15% of your loan.

While you won’t receive a cash payment, the government guarantee can get you over the line for a loan with just a 5% deposit, and the real sweetener is that you won’t need to pay LMI.

Places in the FHG scheme are limited, and eligibility conditions apply. So talk to us to find out if the scheme offers a pathway for you to buy a place of your own sooner.

4. Using your super account to fast-track savings

The First Home Super Saver Scheme could also be worth a look.

The scheme could boost your savings for a deposit by 30% compared to a regular savings account, according to the federal government.⁣

All you need to do is make voluntary contributions to super – up to $15,000 annually.

Now here’s the good bit: voluntary contributions into your super are taxed at only 15%, which is usually less than your marginal income tax rate.

Plus your super account usually has the potential for higher investment returns compared to the interest paid on a regular savings account.⁣

When you’re ready to buy, you can withdraw the money you’ve voluntarily contributed – up to $50,000 – plus any associated earnings.

Better still, if you’re buying with a partner, together you can withdraw up to $100,000 plus associated earnings.⁣

Why fast-tracking your deposit may be important

Last but not least, it’s important to note that PropTrack’s national average calculation of 5.6 years assumes a deposit equal to 20% of today’s median home prices.

However, it’s more likely than not that national property prices will be even higher by the time you’ve saved up your house deposit – no matter whether that’s in three, five or six years.

Long story short, the longer you take, the higher your deposit might need to be.

So the sooner you act, the better off you could be.

If you’d like help, get in touch with us today. We can run through your situation and let you know which of the strategies above might be a good fit.

Paramount Finance Australia 10/3/24 Paramount Finance Australia 10/3/24

Could rate cuts mean house prices heat up again?

Thinking of holding off buying until interest rates fall? Wait until you see what could happen to home prices. Here’s why it could make sense to buy sooner rather than later if you’re home loan-ready.

September saw the nation’s official cash rate kept on hold once again. But there is growing consensus that the RBA may cut the cash rate at one of its next few meetings.

Several of the big banks, including Westpac and NAB, are expecting rate cuts in the first half of next year.

Others, such as the Commonwealth Bank, are forecasting a rate cut in time for Christmas.

While lower rates can’t come soon enough for many struggling mortgage holders, there is one issue that has been largely overlooked, and that’s how home prices might respond to a cash rate cut.

Here’s what the experts say may happen.

How home values could respond to rate cuts

First up, it’s worth pointing out that higher rates have been with us since mid-2022.

Yet property values have climbed rather than cooled since then, with the national median value rising from $752,507 in June 2022 to $807,110 today.

With that in mind, if interest rates fall, many pundits believe home values could head even higher.

The question is, how much higher?

Ray White Economics has done the maths based on past property price movements following a long-awaited rate cut.

According to their analysis, home prices nationally could rise by 0.6% within just one month of a rate cut.

REA Group has teased out the numbers further, saying that based on current median values, a 0.6% price rise could add an extra $5,000 to the average cost of a home across Australia.

And that’s for just one rate cut.

SQM Research director Louis Christopher says four cuts next year, while still a more remote possibility, could cause a huge rebound in property markets that have recently been weaker – such as Melbourne and Sydney.

The impact in your state capital

Exactly how home prices respond to rate cuts is likely to vary between locations.

Here’s what Ray White Economics and REA Group say could happen in capital cities in the first month after one official rate cut:

– Sydney: values rise 1.4% adding an extra $15,300 to the median property value.
– Melbourne: values rise 1.0%, pushing up the median price by $8,000.
– Brisbane: values climb 0.4%, adding $3,400 to home prices.
– Canberra: values increase 0.5%, pushing up prices by just over $4,000.
– Adelaide: values rise 0.3%, adding $2,300 to property prices.
– Perth and Darwin: no change to values.

It’s worth stressing that these numbers reflect how the market has responded to rate cuts in the past. Things could be very different in the future.

Perth, for example, currently has one of the nation’s strongest property markets, and Ray White Economics suggests that home values there could rise further following a cut to the cash rate.

Should I buy now?

Holding out for interest rate cuts may seem to make sense. After all, lower rates can boost your borrowing power.

But as we have seen, it could also work against you.

Lower rates may push up home prices, and potentially fuel increased competition among buyers.

That’s why we believe the “right” time to buy is when you are ready.

And today’s spring market comes with the added advantage of more choice for buyers.

According to CoreLogic, the flow of freshly-advertised housing stock hasn’t been this high at this time of the year since 2021.

So if you’re interested in buying your first or next home (with the potential benefit of getting one or several rate cuts soon after your purchase), get in touch with us today.

We’ll help you assess your borrowing power in the current market, and if you find the right house, we’ll help you find the right loan for it.

Paramount Finance Australia 10/3/24 Paramount Finance Australia 10/3/24

Why 9 out of 10 first-home buyers use a mortgage broker

Remember the first time you stepped into a gym? It’s unlikely you swaggered your way over to the free weights rack and started busting out squats. Well, it turns out buying your first home can be just as daunting, with 91% of first-home buyers turning to a mortgage broker for guidance.

When it comes to financial decisions, they don’t come much bigger than buying a home.

So it’s no wonder that plenty of first-home buyers feel a mix of nerves and excitement.

It’s also understandable that more than one-in-two first-home buyers feel the need for support throughout the home-buying process.

And for nine out of ten first-home buyers, that valuable support comes from a mortgage broker, according to a recent report by lenders’ mortgage insurance (LMI) provider, Helia.

How a mortgage broker helps

Finding a home you like is just part of the home-buying equation.

Identifying a home loan that is right for your needs, with a competitive rate, completes the picture.

But without skilled help this can be easier said than done.

The Helia survey found close to half (45%) of first-home buyers find it difficult to research which loans are right for them. More than one-in-two (52%) anticipate challenges in obtaining the loan they need.

This is where mortgage brokers can help.

We spend time getting to know you and your financial needs. This allows us to narrow down the choice of home loans that may be a good match for your needs.

We also know what lenders look for when they approve a home loan.

We can explain whether you’re home loan ready right now, or discuss the steps you can take to help pave the way for home loan approval in the future.

Better yet, we’ll stay in touch to offer tips and encouragement along the way.

We’re about more than a home loan

The benefits of a mortgage broker go beyond helping you land a home loan.

According to Helia’s study, first-home buyers say mortgage brokers:

– help home buyers understand their financial situation and borrowing power
– provide valuable support, guidance and expertise throughout the complex buying journey
– help save you time and effort.

We can also tap into our wealth of experience to suggest strategies and schemes you may not have considered, such as rentvesting, having a close relative act as a guarantor for your home loan, or the federal government’s 5% deposit First Home Guarantee scheme.

After all, there are multiple pathways to home ownership, and options such as rentvesting can open up new suburbs for you to buy in, while letting you live in the location of your choice.

Get in touch with us today to find out more.

Paramount Finance Australia 9/21/24 Paramount Finance Australia 9/21/24

Fixed rates tumble: a sign of things to come?

When will interest rates fall? It’s the question everyone is asking right now, and while speculation swirls about future rate cuts, the latest moves in fixed rates suggest we may not have to wait too much longer for variable interest rates to head south.

While about 4-in-5 Australian households are currently on a variable-rate mortgage, fixed-rate home loans shouldn’t be overlooked.

Locking into a fixed rate can offer several advantages, including certainty of repayments – which may make budgeting easier – as well as protection from possible rate hikes during the fixed term.

Right now, the direction of fixed rates is attracting plenty of attention.

Many lenders are cutting their fixed rates

A growing number of lenders, including several major banks, are starting to cut fixed rates across all terms, according to Mozo’s latest banking round-up.

Macquarie Bank, Commonwealth Bank, HSBC, Bank of Queensland, Westpac and its stable of brands – St.George, BankSA and Bank of Melbourne – have all recently cut some of their fixed rates.

They were joined by smaller lenders such as Hume Bank, MOVE Bank and Great Southern Bank, which also dialled down their fixed rates.

What’s especially exciting is that a number of these rate cuts were surprisingly large, in some cases worth half a percent or more for 2- to 3-year fixed rate terms.

Why are fixed rates falling?

Home loan interest rates – both variable and fixed – are shaped by a variety of factors.

When it comes to fixed rates, a key driver can be lenders’ forecasts of where they believe interest rates are headed.

In this way, fixed rates can be a bellwether for the direction of future interest rates.

Among the major banks, Commonwealth Bank expects a 0.25% RBA rate cut in late 2024.

ANZ is anticipating the RBA to cut rates from about February next year.

NAB has pencilled in a rate cut by mid-2025, and Westpac is expecting several rate cuts starting in March 2025.

The good news is that none of the big four banks seem to be anticipating rate hikes any time soon, and that’s great for those with a home loan.

What could this mean for you?

The trend to lower fixed rates suggests variable rate cuts may not be too far away either.

Right now though, fixed rates can be lower than variable rates depending on your choice of lender, fixed term and the size of your deposit.

If you’re currently struggling with your home loan repayments, locking in a fixed rate for the next 1, 2 or 3 years might help give you some certainty and home loan repayment relief.

But you’ve got to weigh that up against the potential of any variable rate cuts that you could miss out on in that same time period.

Bear in mind, predictions of rate cuts are exactly that – forecasts, not guarantees of lower rates.

Another option to consider is splitting your home loan between fixed and variable rates, which can allow you to get the best of both worlds: the certainty of a fixed rate plus the savings of a variable rate if interest rates start to head south.

Call us today to understand if fixing or splitting your loan rate could help you save.

Paramount Finance Australia 9/19/24 Paramount Finance Australia 9/19/24

TikTok vs talking to your broker? It’s no contest

TikTok and Instagram reels are fun, fast and free – but it’s important to be picky about whose content you’re viewing, especially if you’re in the market for a home loan.

TikTok and Instagram reels are fun, fast and free – but it’s important to be picky about whose content you’re viewing, especially if you’re in the market for a home loan.

Chances are, if you’re reading this blog via a social media site, then you’ve also watched a TikTok or Instagram video before, too.

In fact, more than 8.5 million Australians are active on TikTok and almost 14 million on Instagram – making both platforms key players in Australia’s social media landscape.

Social media platforms certainly helped us while away the hours during COVID lockdowns, and they’re still keeping us entertained as we check out what Korean office workers eat for lunch, short clips of our favourite comedians, or discover what a family of 10 has for breakfast.

But while many of the videos seem like harmless fun, there are some pitfalls you might want to avoid in the financial services landscape.

69 million views for #Mortgage

Interestingly, almost one-in-three Australians (30%) say they turn to social media for money guidance.

And Finder research shows people act on what they see, especially younger subscribers.

Almost one-in-two Gen Zs (48%) have taken action on their finances following guidance from a content creator, compared to 17% of Gen X.

That’s no real surprise. After all, the hashtag #TikTokmademebuyit has gained 31.8 billion lifetime views and counting.

What is surprising, is how many Australians head to TikTok or Instagram looking for home loan tips.

For example, #Mortgage content has racked up 69 million views on TikTok alone in the past 12 months.

Knowing who you can trust on TikTok

On one hand, it’s great that social media is breaking down money taboos.

And there’s no doubt that TikTok, Instagram, Facebook and LinkedIn can be handy sources of information for home buyers.

The catch is that almost anyone can post on social media, and when we’re talking about mortgages, which is the largest financial decision most people will ever make, the last thing home buyers need is dodgy advice.

So it pays to check who is behind the video.

Australia is one of the few countries globally where influencers on social media have to be suitably licensed before they can offer advice on financial products.

Mortgage brokers also have to follow strict industry rules when it comes to marketing and advertising. And many brokers are supported by their aggregator’s compliance team who double-check content for accuracy and other legalities.

However, TikTok and Instagram don’t just show videos created by Australians.

The platforms’ algorithms are designed to deliver more of the same sort of content you’ve shown an interest in.

So, it’s likely that if you start watching posts on financial strategies around home loans, debt recycling, debt consolidation or property investment strategies, you could come across content created by people based outside Australia, in countries where the rules are far less rigid, different, or non-existent at all.

The bottom line

No matter whether you’re just starting your home buying journey, or you’re ready for the next step on the property ladder, social media can be an entertaining and accessible source of information.

Just be sure to check that any content you’re viewing on home loans or investment property loans comes from a licensed mortgage broker based in Australia.

Better still, pick up the phone and give us a call.

Sure, we’d (probably) lose in a dance-off against your average TikTok creator.

But we can provide you with home loan information tailored to your situation. And that can give you a lot more value – potentially in a lot less time – than trawling through thousands of #homeloan videos and posts.

Paramount Finance Australia 9/6/24 Paramount Finance Australia 9/6/24

The home loan feature 70% of new borrowers are hooked on

When it comes to home loan features we’re spoiled for choice. Even basic loans can come with a fisherman’s basket full of options. But one feature in particular is being targeted by seven out of 10 home buyers.

Faced with high interest rates and a cost of living crunch, home owners in droves are using home loan offset accounts to their advantage.

One of the nation’s biggest banks, NAB, reports that almost 70% of new home loan customers are opting for an offset account, up from 50% just two years ago. And it can help them save on interest.

How do offset accounts work?

An offset account is typically an everyday account (or multiple accounts) linked to your home loan.

You won’t earn interest on the money stored in the offset account/s. Instead, the balance is deducted from, or ‘offset’ against, the balance of your home loan when loan interest is calculated.

Say for instance you have a home loan of $400,000 and $20,000 in the linked offset account. You’ll only pay interest on $380,000 ($400,000 less $20,000).

This can reduce your monthly interest costs. And as your monthly repayment amount stays the same, more of each regular repayment goes towards paying off the loan balance. That is: more of your repayment amount goes to paying down the principal component of your principal + interest loan.

This in turn further reduces next month’s interest cost, too.

In fact, Macquarie Bank calculates that based on the above scenario with $20,000 in your offset account over the life of a 30-year loan (with an interest rate of 6%), you can save more than $87,000 in interest, and shave more than three years off your loan.

Even better, money in the offset is usually available to withdraw if needed – so the cash can be made available for unexpected bills.

How to use an offset account to your advantage

The bigger the balance of your offset account, the more you’ll likely save on loan interest.

According to NAB, one way to grow the value of your offset account is with a ‘three Cs’ strategy: crediting, consolidating and cutting back where you can.

Asking your employer to ‘credit’ your salary directly into the offset account could help maintain a higher balance.

If you have cash stored in a savings account, you could consider ‘consolidating’ it into your offset account. You may be able to earn interest of up to 5% on a savings account but if your mortgage rate begins with 6%, chances are you’ll save more with an offset account than you’ll earn on a savings account. Plus, interest savings in an offset aren’t taxed.

Meanwhile, ‘cutting’ back household spending where possible can help you boost the balance of your offset account to improve interest savings.

It’s an approach being used to great effect by plenty of home owners. NAB reports a 55% increase in the value of its offset accounts since the pandemic – rising from $29 billion in 2020 to more than $45 billion today.

Is a home loan offset account right for you?

Despite the popularity of offsets, they may not be a suitable choice for everyone.

An offset home loan can sometimes come with a higher rate than a more basic loan, and unless you consistently have a reasonable balance in the linked offset account, you could end up paying more than you save in interest.

Also, the money you store in an offset account could be used elsewhere as an investment – so it’s worth weighing up whether to prioritise reducing your home loan now or investing for the future.

If you’re not sure where to begin, contact us today to find out if a home loan offset could help you get ahead with your mortgage and save on interest.

Paramount Finance Australia 8/29/24 Paramount Finance Australia 8/29/24

How much has your home’s value risen by?

We’ve all heard the rule of thumb about property being a long-term investment. Well, get this: many home owners have seen the value of their property quintuple within the timeframe of a typical 30-year mortgage.

Ask any long-term home owner what they originally paid for their property, and chances are they’ll respond with an eye-wateringly low figure.

Plenty of Australians look back on the price they paid for their home and marvel at how low it seems relative to current values – often while breathing a sigh of relief that they bought when they did.

This is not a recent trend.

Property has a strong track record for growth

Fun fact: over the last 100 years, residential property values in Australia have risen by an average of 10.9% annually.

Sure, there can be short term dips and periods when values plateau, but the broader trend has been upwards.

In dollar terms, this price growth can be mind-boggling.

Take Sydney, for instance, where the median house price back in mid-1992 was $221,770. Thirty years later, in 2022, the median value was $1,124,421. Today, it is $1,473,038.

It’s a similar story across all our major cities.

But what if you purchased more recently? What sort of increase in value has your home seen?

How much have home values increased since you purchased?

CoreLogic delved into the history books to see how national property values have risen since the year of purchase, starting with the mid-90s.

Looking at the results below, it’s pretty clear that the longer you’ve owned your home (or investment property), the bigger the potential rise in value.

Buyers who purchased about 30 years ago in 1995 could find their property is now worth more than five times what they originally paid thanks to a 437% increase in value.

If you purchased about 20 years ago back in 2005, your home may have jumped in value by 148% (2.5 times more than you bought it for).

Closer to the present, homes purchased in 2020 may have seen a 34% rise in value.

And even if you purchased your home last year, you may have already notched up capital growth of 4%.

Increase in national home values since year of purchase

1995: 437%
2000: 308%
2005: 148%
2010: 94%
2015: 57%
2020: 34%
2023: 4%

Source: CoreLogic article. Direct link to graph here.

Why a rise in your home’s value matters

A rise in your home’s value is worth much more than bragging rights at your next barbecue.

Increasing property values are a key source of household wealth in Australia.

Better still, a rise in your home’s value can make it easier to refinance to a more competitively-priced home loan, or provide the equity to invest in a rental property or achieve other personal goals such as funding your kids’ education.

Talk to us to start your property journey

The upshot is that when you buy a home – either as a first home buyer or upgrader – it’s worth keeping one eye on the future.

With the passage of time, the price you paid today can start to look like a better deal than it felt at the time, and you could be grateful you purchased when you did.

Call us today to find the home loan that helps you get started on your property journey, or to unlock equity in your current property.