October 2018 e-newsletter
Keep updated, informed and entertained with commentary on industry news, interesting lifestyle pieces, testimonials and engaging factual information in the areas we specialise in.
'Rentvesting' - Entering the property market without sacrificing your current lifestyle
After a number of years of property price growth, purchasing in a centrally-located or sought-after area is very much out of reach for the average working millennial. Instead, many are opting to rent rather than buy as it means not having to compromise lifestyle. But for those who are still eager to enter the market, there is a way to get the best of both worlds.
‘Rentvesting’ is the term coined for when you purchase a property for investment purposes in an affordable location and continue to live and rent in the area of your choice. An example of how the market is evolving, it is a wealth creation strategy that is popular due to the flexibility it offers in comparison to being an owner-occupier. It’s a tactic that overcomes financial hurdles and exorbitant property prices, because you can buy in a location that fits your budget rather than stretching yourself with loan repayments that restrict quality of life in the area you most enjoy.
Millennials are less interested in purchasing property in the outer suburbs having to either commute into the city hub or live in a less desirable area. Rentvesting works because even though you’re renting, the property you buy is an asset that’s growing in value and being paid off by your tenant (assuming you choose a smart location and interest rates remain relatively low). Not only that, but you’re gaining equity that can launch you into other property purchases down the track, including a home to call your own.
For Rentvesting to be further beneficial, If you are an efficient saver and your tenant is paying down your loan, you can invest your savings alongside the investment property and use what accumulates over the years for your future benefit.
In the past, the great Australian dream was to buy a home on a quarter acre block and then do everything you can to pay that down as fast as possible in the hope of living debt-free. Rentvesting is quite the opposite. It says we’re okay with good debt as long as we stick to our budget and keep using the money to invest further. You’ve got to have an open mind and be comfortable with debt. But while this strategy may appear ideal to many, it’s not suited to everybody and does come with some pitfalls they will need to be weighed up. Capital Gains Tax, not having the security of owning your own home, and risk the housing market doesn’t perform are a few.
To ensure you have the means to make ‘rentvesting’ work for you, for advice on good debt and other strategies that will allow you to maintain your current lifestyle get in touch with the team at The Wealth Connection.
As expected, the Reserve Bank of Australia (RBA) decided to leave the official cash rate on hold at 1.5 per cent at their July meeting on Tuesday.
This month, it’s all good news for home-owners and those in the market for a new loan!
Next month (August) will bring us to a record breaking two-year period since the RBA moved on interest rates. Many Aussies are using this period to pay down their home loans.
Most local economists are still predicting the RBA will leave rates unchanged for the remainder of 2018. Some are even predicting there will be no RBA rate movements until 2020!
At the end of May, the average variable interest rate on home loans for owner occupiers remained at its lowest rate since 1965 (averaging 5.2 per cent comparison rate).
There are excellent deals currently available for those looking to refinance - and renovation season is here, so there’s no time like the present.
Even though the property market usually slows down during winter, there’s still plenty of housing stock up for auction this year. If you’re in the market for a new home or property investment please give us a call, as we’re ready to assist with a competitive deal to help you snap up a bargain!
When it comes to saving on your mortgage, some of you may not have to look further than your job. If yours is a profession that classifies you as a ‘low risk’ borrower in the eyes of lenders, then you may be entitled to special discounts.
The lucky ones
Accountants, lawyers and teachers are commonly eligible for home loan discounts, or particular loan types without fees, based on their professions. “The benefits differ depending on specific professions, it depends on what industry the lenders decide to target as it’s a constantly changing situation, so what’s here today may not be around tomorrow.
Doctors take the cake
Lenders have their own target lists of professions, but doctors are the big winners. They'll get waived Lender’s Mortgage Insurance, lower interest rates and, in many cases, banks will even go outside of their normal policy to get their loans approved. Some banks will also consider vets, dentists as well as physio therapists so best to confirm.
How the perks work
Simply being in a certain profession won’t automatically save you on your home loan. To qualify you must apply with a lender that offers your profession a special discount and meet that lender’s criteria. You’ll often need to provide evidence of membership of a certain industry body such as the Australian Medical Association. Waived LMI is usually approved without any problems if you meet the criteria, however you’ll need to negotiate to get a better interest rate as well.
Because lenders don’t publish these better interest rates, to benefit from the discounts it’s best to have your broker by your side. Not only will they know which lenders to apply to, they will also assist you with pricing requests and negotiating the best possible interest rate.
Get in touch to see if we can help.