How to meet your mortgage repayments during COVID-19

While leading lenders are offering a repayment holiday to borrowers caught in financial strife, one expert shares some alternate avenues to help ease the pressure.

The industry has manoeuvred through a myriad of stages since the onset of COVID-19. As swiftly as the pandemic had enveloped household finances – leaving many borrower’s incomes compromised overnight – leading lenders had introduced relief packages to assist borrowers in sustaining their home loan repayments in their hour of need.

While this comes as a welcome measure by ultimately allowing a borrower to delay their monthly repayment for three months, and in some instances six months, generally, if your loan term isn’t extended also, then your deferred repayments including the interest could impact your total loan balance.

Senior finance consultant at Orium Finance, Luke Heavey, says, “Keep in mind that any pause in repayments will end up being capitalised into the rest of the loan term but this can ease the financial burden of the repayments when you need it [the] most.”

In this case, Heavey advises borrowers to meet with a qualified and professional mortgage broker to explore the options that are available to them and how a repayment holiday would shape their loan.

“With growing economic uncertainty as a result of the coronavirus, many of us may be wondering how we will meet our mortgage repayments should our incomes be affected,” Heavey says.

“The good news is there are avenues in place to minimise or even delay mortgage repayments, which provides a safety net should your income be disrupted.”

Heavey shares three other ways in which you can potentially reduce your repayments and relieve some of the pressure of servicing your home loan during these disrupted times.

1. Check that your loan still has a competitive interest rate

The downward pull of the property market last year saw the slashing of the interest rate to a historic low.

But just as buyers, particularly first-timers, had thought that they were entering a home loan on the most advantageous playfield, the mounting threat of COVID-19 over the industry and the broader economy saw the RBA cut the cash rate even further to 0.25% in March.

“With record low interest rates, there’s a good chance that a better rate is up for grabs,” Heavey notes. “Talk to your mortgage broker about refinancing your mortgage to ensure it is costing you as little as possible.”

A mortgage broker can also direct you in the instance that refinancing your home loan is not a possibility for you at this moment in time; considering that some lenders have started to show signs of tightening their credit policies to minimise the occurrence of borrowers having to default on their loan.

Nevertheless, there’s also the option of seeking advice as to how you can reduce your monthly repayment by re-moulding your current loan term.

“To reduce your repayment amount, extend your loan term to 30 years and move to minimum repayments to reduce your monthly financial burden,” Heavey proposes.

2. Focus on paying down only a portion of your loan

“One way to reduce the monthly financial burden of your mortgage is to move to an interest only loan,” Heavey says.

A mortgage broker will be able to inform you on whether you can qualify for this, even if it’s for a few weeks or months.

Heavey shares, “As an added benefit, if the mortgage is for an investment property you can deduct the interest, making an interest only loan more desirable.”

3. Tap into the available equity in your home

The current situation will require you to re-assess your household budget, but while drawing equity out of your home is usually done for the means of accessing a deposit for your next property purchase, the ‘normal’ applies less in the midst of COVID-19.

Heavey says that having equity within your property may give you “access to a cash buffer” if you are able to refinance.

“Equity is the market value of your property minus what you owe on your existing home loan,” he explains.

Another option is finding out whether you are eligible to redraw from your home loan.

“If your loan has a redraw facility you may be able to access any additional repayments you’ve made on your home loan that are over and above the minimum payments,” Heavey says.

With a number of potential avenues available to borrowers in navigating through these uncertain times, a qualified and professional mortgage broker can structure a mortgage repayment plan that best suits your financial situation and long-term goals, as well as discuss the options that are available with your existing lender.

This article provides general information which is current as at the time of production. The information contained in this communication does not constitute advice and should not be relied upon as such as it does not take into account your personal circumstances or needs. Professional advice should be sought prior to any action being taken in reliance on any of the information.


First Home Buyer Numbers Are Above Average Across Every State And Territory

According to ABS housing finance data for August 2019, first home buyers comprised the largest proportion of national owner occupier mortgage activity since early 2012.  The data showed first home buyers comprised 29.8% of the national market for owner occupier home loans; almost five percentage points above the decade average of 25%.  A similar trend can be seen across every state, with first home buyers a larger proportion of the market relative to the decade average.

There are a variety of factors that have provided first time buyers with a leg up into the housing market.  Housing affordability has improved through the recent housing downturn, mortgage rates have come down, home loan servicing rules have been relaxed and some states have provided additional incentives for first home buyers in the form of stamp duty exemptions or discounts as well as existing first home buyer grants which generally apply to the purchase of new dwellings across most states.  

There’s also the fact that first home buyers haven’t had to compete as fiercely with investors, with investor activity generally trending lower since peaking in 2015 at 43% of mortgage demand.  The August update shows investors comprised only 26% of mortgage demand which is well below the decade average of 34%.

First home buyers are the most active across the Northern Territory and Western Australia where this segment of the market comprises 45% and 37% respectively of owner occupier mortgage demand.  These are also the two regions where housing values have fallen the most, providing a substantial improvement to housing affordability.  Dwelling values are down 27% since peaking across the Northern Territory and 23% lower since peaking across Western Australia.  

The regions where first home buyers are the least active are South Australia and Tasmania where first time buyers comprised 22% and 24% of owner occupier mortgage demand in August.  Despite being the lowest of any state, first home buyer participation remains above the decade average in these regions. 

Looking forward it’s likely first home buyer’s will reduce as a proportion of overall market activity.  Housing prices are once again rising across most regions of the country while growth in household incomes remain sluggish, which will create renewed housing affordability pressures in markets where home values are rising faster than incomes. 

Source: The Real Estate Conversation 4th November 2019

This article provides general information which is current as at the time of production. The information contained in this communication does not constitute advice and should not be relied upon as such as it does not take into account your personal circumstances or needs. Professional advice should be sought prior to any action being taken in reliance on any of the information.


A third of first home buyers opting for investment property over first home, report reveals

One-third of first home buyers are choosing to purchase an investment property rather than a first home to move into, new research from the Property Investment Professionals of Australia has revealed.

The 2018 Property Investment Professionals of Australia (PIPA) Investor Sentiment Survey found 36 per cent of first home buyers have chosen to invest in property and continue renting, rather than buying a home to live in over the last 12 months.

PIPA Chairman, Peter Koulizos told WILLIAMS MEDIA the research suggests ‘rentvesting’ as an investment strategy has been a trend for some time.

63 per cent of survey respondents said they would consider ‘rentvesting’ as a property investment strategy.

Related reading: What is rentvesting?

“First-time property buyers generally have probably been more active over recent years than official statistics originally recorded,” he said.

“The Australian Bureau of Statistics (ABS) publicly admitted issues with first home buyer statistics from 2012 to 2016, in part due to some lenders only reporting loans to first home buyers who received a First Home Owner Grant. Of course, most grants were restricted to first-timers buying a new property as their home not as an investment many years ago.”

According to the latest ABS statistics, about 18 per cent of properties financed in Australia in September was to first home buyers.

Mr Koulizos said revisions to the official data meant that first-time investors were now being counted, but issues could reportedly still persist in the statistics according to the ABS.

“There’s no doubt that the softer market conditions are making it easier for first-time buyers when it comes to purchasing prices, however, lending restrictions are conversely making it more difficult for them to secure finance,” he said.

“On top of this, it appears that recent political assertions that first-time buyers are only one in seven purchases – or 14 per cent – is factually incorrect.

“It seems that the dream of property ownership has remained alive and well for some time, with many first-timers opting to improve their financial futures by investing in more affordable locations while renting elsewhere.”

The survey also found the vast majority of first-time buyers had opted to buy an existing property, even with State Government grants available to purchase a new dwelling.

“About 83 per cent of first-timers purchased existing property with only 14 per cent buying new or off-the-plan.”

“This is partly due to affordability considerations with established properties generally available for lower prices points than new, plus the majority of all investors always prefer existing properties.”

Mr Koulizos said this was yet another reason why proposals to change negative gearing policy to supposedly increase supply were ill-conceived as most investors buy established property and pay little regard to new property.

“Established property has greater capital growth and any tax benefits associated with new property generally doesn’t make up for comparably poorer price performance over the long-term,” he said.

Source: The Real Estate Coversation Dec 6 2018

This article provides general information which is current as at the time of production. The information contained in this communication does not constitute advice and should not be relied upon as such as it does not take into account your personal circumstances or needs. Professional advice should be sought prior to any action being taken in reliance on any of the information.

Advice For Young Couples Who Invest Together

While it might be easy to just jump in and invest as soon as you have the ability and resources, gaining strong returns from property investment require hard work, proper knowledge, commitment and good timing. Even experts in the field experience hiccups from time to time, so imagine how hard this can be for everyone else, especially younger people who are still in the process of settling down.

In an interview with Bryce Holdaway and Ben Kingsley, authors of a new book entitled Make Money Simple Again, Your Investment Property (YIP) narrowed down the discussion and focused on basic factors that need to be considered particularly by younger couples before they finally decide to pay down home loans to invest.

Holdaway and Kingsley suggested that general rules and basic knowledge must be kept in mind by anyone trying to invest.

First, the authors noted that it is important to organize your expenses, in order to increase their savings.

“Too often [younger couples] are tempted to ‘have now’, rather than ‘sacrificing now to enjoy later.’  If they can organize their money management to trap more surplus savings, they will build a good deposit and get on the property ladder before their friends do.”

It was also pointed out that changes to circumstances will impact cashflow and, ultimately, the ability to maintain the investment loan.

“Property is a long-term investment, not a short term speculation event.  Ensuring you can hold the property both today and tomorrow will give you the best chance of climbing the property ladder,” the authors said.

More importantly, younger couples should acknowledge that not all properties perform the same. Being able to pick the best location, as well as an investment grade asset, rather than an investment stock asset, can make all the difference in the overall investment returns they will take home.

Lastly, Kingsley and Holloway emphasised the importance of conducting proper research about the market.

“Spending time on real estate portals just looking at nice property isn’t going to yield you a great return. Understanding what owner occupier appeal is and how demand and supply influences property values is a far better use of your precious time before making a purchasing decision,” they said.

If these points are successfully grasped by younger couples, Ben and Bryce believed that pleasant possibilities await them.

“There are amazing opportunities all over Australia currently, and in some cases they may not be in their own city.  Investing is about getting a great long term return, so don’t be afraid to be a borderless investor,” they concluded.

Source: Your Investment Property Mag 8th November 2018

This article provides general information which is current as at the time of production. The information contained in this communication does not constitute advice and should not be relied upon as such as it does not take into account your personal circumstances or needs. Professional advice should be sought prior to any action being taken in reliance on any of the information.

Does size matter for Sydney first-home buyers?

First-home buyers in Sydney are facing an unexpected problem as they try to make their inner-city purchases, with banks refusing to finance properties because they are too small.The Daily Telegraph reported that this is a common situation for Sydney first-home buyers, as banks tighten their lending requirements on home sizes.

There are a number of inner-city properties that have recently hit the market with price tags of $650,000 or less. However, these are mostly studio and one-bedroom units.

For instance, a house in Paddington advertised at $410,000, which had just 21 square metres of space, was checked by roughly 80 groups, about half were first-time buyers.

McGrath selling agent Nicholas Wise told The Daily Telegraph that none of the first-home buyers were able to obtain financing for the property because of its size.

Many first-home buyers expected this year to be the perfect time to enter the market given the implementation of stamp duty benefits for properties priced up to $650,000.

“If the banks were only a bit more flexible with the smaller apartments, we’d have lots of happy first homebuyers,” said Laing and Simmons-Potts Point director Nuri Shik.

Some banks have strict size requirements for financings: the National Australia Bank requires homes with a size of at least 50 square metres while ANZ, Westpac, and St. George only approve financings of homes bigger than 40 square meters. Additionally, first-home buyers face longer pre-approval periods.

“They’re close to the city, they’ll rent well, there are lots of single people around but banks make it so hard,” Shik said.


This article provides general information which is current as at the time of production. The information contained in this communication does not constitute advice and should not be relied upon as such as it does not take into account your personal circumstances or needs. Professional advice should be sought prior to any action being taken in reliance on any of the information.

first home

Young Australians Choosing Property Investment over First Home

The number of first-time property buyers purchasing an investment property instead of a first home is increasing, according to two new sets of data.

Both NAB’s Residential Property survey and ING Direct’s Financial Wellbeing Index show an increase in the number of young, first-time property buyers purchasing a property investment instead of a home.

The NAB Residential Property survey for the third quarter found first-home investors made up 12.2 per cent of all new property sales in the third quarter of 2016, up from 11.1 per cent in the second quarter, according to the survey.

The survey also found that first home investors represented 10.6 per cent of all established property sales, an increase from 9.7 per cent in the second quarter.

Peter Mastrioanni, of, said the results were a sign that young people still want to invest in property, but in more flexible ways.

“First-time investors are now taking every opportunity to invest in real estate in a way that allows them to invest for reasons such as comfort instead of security, lifestyle instead of retirement, and versatility instead of restriction,” he said.

Mastrioanni said Generation Y in particular were choosing to become “rentvesters” instead of giving up on their dream of property ownership.

Rentvesting involves investing in property in more affordable locations, including interstate if necessary, while continuing to rent in the inner-city suburbs.

“This way, they’re having their property cake and eating it, too,” said Mastrioanni.

The result is backed up by ING Direct’s latest Financial Wellbeing Index, which shows a growing numbers of young buyers in the 18 to 34 age bracket are becoming property investors.

The index showed that 22 per cent of Generation Y own at least one investment property, followed by 20 per cent of Generation X and 19 per cent of Baby Boomers.

Mark Woolnough, ING Direct Head of Third Party Distribution, said concerns about housing affordability are not preventing young people from buying an investment property.

“What’s interesting is that while there are continued questions around affordability and the challenges for younger generations in getting onto the property ladder, it’s actually Gen Y that is leading the property investment pack,” he said.


a repair and an improvement

What’s The Difference Between a Repair and an Improvement

What’s the difference between a repair and an improvement

Deductions for repairs, maintenance and improvements are areas the Australian Taxation Office pay particular attention to on annual tax returns. For this reason it is important that investors understand the difference between repair and improvement.

Repairs are considered work completed to fix damage or deterioration of a property, for example replacing part of a damaged fence.

Maintenance is considered work completed to prevent deterioration to a property, for example oiling a deck.

Any costs incurred to repair or maintain a rental property can be claimed as an immediate 100 per cent deduction in the year of the expense.

capital improvement occurs when the condition or value of an item is enhanced beyond its original state at the time of purchase. This must then be classified as either a capital works deduction and depreciated over time or as plant and equipment depreciation. An example of a capital works deductions could be replacing the kitchen cupboards. If any plant and equipment items are removed and replaced, for example an air conditioner, this will also be considered a capital improvement.

Investors considering completing any work to their property should contact a specialist Quantity Surveyor for advice before they start work.

To discover what can be claimed for any investment property, simply request a quote online or speak with the expert team at BMT on 1300 728 726.

Article provided by BMT Tax Depreciation.

Bradley Beer (B. Con. Mgt, AAIQS, MRICS, AVAA) is the Chief Executive Officer of BMT Tax Depreciation. 
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