The hardest part of buying your first home isn’t necessarily paying the mortgage – although that can be challenging. Rather, it’s often saving a large enough deposit to qualify for a loan.

What makes the deposit hurdle tricky is that it’s been getting higher. Between March 2020 (when the pandemic started) and August 2024, the national median property price increased 37.8%, according to CoreLogic. For some first-home buyers, prices have been rising faster than their capacity to save.

However, there are steps you can take to not just enter the market, but potentially do so faster than you thought possible.

To begin with, look for opportunities to increase your savings rate. This could be done by increasing your income (which, admittedly, is easier said than done), reducing your expenses or both.

If you’re able to build your savings through tax refunds, parental gifts or inheritances, that would be helpful. Please note, though, that when lenders review your mortgage application, they’ll look not just at how much money you’ve saved but also how much of this money is ‘genuine savings’ (i.e. the result of recurring rather than one-off factors). Lenders want to see a history of genuine savings, because that reassures them you’d have the ability to make mortgage repayments month after month after month.

 

LMI explained

One way to buy your first home sooner is to do so with less than a 20% deposit.

Generally, if your deposit is below this threshold, you will need to pay lenders mortgage insurance (LMI) – an insurance product designed to protect the lender in the event you default on your loan – although exceptions apply. Some professionals, such as doctors, lawyers, engineers and accountants, may be able to put down less than a 20% deposit without paying LMI, because they tend to have larger and more secure incomes, and therefore pose a lower risk for lenders.

No one likes paying LMI. However, in a rising market, paying LMI could potentially save you money in the long run by allowing you to buy a property sooner (i.e. when prices are lower).

 

How to avoid LMI

There are a couple of other ways you could put down less than a 20% deposit and avoid LMI.

One way is to ask eligible family members to guarantee your loan, assuming they own their own home. In that case, you might be able to contribute a deposit of as little as 5% or even 0%; the rest of the 20% deposit would be secured against the equity in your guarantor’s home. After a few years, once you’d built up 20% equity in your property, through a combination of paying down the loan and having the home rise in value, you could refinance and remove your guarantor from the loan. In the meantime, though, your guarantor would be legally liable for your mortgage, so if you failed to make your repayments, the lender could potentially seize their home. That’s why it’s important for all parties to get professional advice before proceeding with a guarantor home loan.

Another way is to take advantage of the federal government’s First Home Guarantee or Regional First Home Buyer Guarantee schemes, which allow you to buy a property with a deposit of as little as 5% without having to pay LMI. However, eligibility criteria apply, including income caps – your income must be under $125,000 if you’re buying on your own or a combined $200,000 if buying as part of a couple. Property price caps also apply – these range from $400,000 in the Christmas Island and Cocos (Keeling) Islands to $900,000 in Sydney.

 

How pre-approvals work

Regardless of how you plan to buy your first home, it’s a good idea to first get a mortgage pre-approval, which is an in-principle (but not legally binding) indication from the lender that they’d be willing to lend you a certain amount of money.

A pre-approval provides peace of mind that you can qualify for a loan. It also lets the vendor know you are a serious bidder.

I can help you secure a pre-approval. I can also provide you expert advice on the entire buying and mortgage process. Contact me to discuss your options.

The vast majority of Australians who sell their home use a real estate agent to represent their interests. However, only a fraction of buyers have their own representative.

A buyer’s agent, also known as a buyer’s advocate, is a real estate professional who is hired by the buyer and who has a responsibility to represent their interests. 

(Many real estate agents provide helpful advice to buyers, and some real estate agencies employ staff specifically to liaise with buyers. However, none of these people are real buyer’s agents, because they ultimately work in the interest of sellers.)

Buyer’s agents are used by both owner-occupiers and investors. They generally charge either a flat fee or a percentage of the purchase price (or a combination of the two).

Buyer’s agents help clients with some or all of these tasks:

The cons of using a buyer’s agent

The biggest drawback to using a buyer’s agent is paying their fee, which is generally between 1%-3% of the property value or a flat fee usually above $10,000. They may also charge extra for auction attendance.

Another potential negative is hiring a poor-quality buyer’s agent. Ensure they are licensed and don’t have conflicts of interest.

The pros of using a buyer’s agent

Buyer’s agents offer three main potential advantages.

First, they have far more knowledge than the average consumer, which means they’re better able to identify a suitable location for the purchase, spot any flaws in shortlisted properties and negotiate successfully with real estate agents.

Second, they have more time than the average consumer: while their client is at work, they can be doing all the tasks mentioned above.

Third, they can use their relationships with real estate agents to secure access to off-market properties, thereby giving their clients access to more properties than the average buyer.

Going solo vs seeking assistance

Depending on a buyer’s budget, schedule and level of property knowledge, they might decide that it’s better to handle the research, due diligence and negotiating themselves, rather than employ a buyer’s agent.

Alternatively, the buyer might decide that the value of a buyer’s agent exceeds their cost.

When someone takes out a car loan, they may be given the option of repaying the loan through two different structures – one with a balloon payment and one without.

For borrowers who take out a car loan without a balloon structure, they repay the loan through a series of regular monthly payments. Once they’ve paid the final monthly instalment, the loan is cleared.

For borrowers whose car loan has a balloon structure, they need to make their regular monthly repayments – and then, at the end, make the balloon payment (a one-off lump sum). Only then is their loan cleared. This can lower the repayments.

Regular car loan vs balloon car loan

Both options have pros and cons:

Which option is best?

There’s no one ‘best’ option, because it depends on the borrower’s unique circumstances.

For someone who believes they’d be able to make higher monthly repayments from the beginning to end of their loan, a regular structure might be more suitable, because they’d pay less over the life of the loan.

For someone who’d prefer to make lower monthly repayments – perhaps because they’re short on funds or would prefer to deploy the extra money elsewhere – a balloon structure might be more suitable, assuming they’d be able to cover the balloon payment at the end of the loan.

As a basic rule, mortgage interest is calculated each day, based on the amount of money (or principal) still owing on your loan. As the principal declines, so does the borrower’s interest bill.

For example, if someone took out a $500,000 principal-and-interest loan, interest would be charged initially on $500,000; but if, say, a year later, they’d repaid $15,000 of their loan, interest would be charged on $485,000.

It’s important to note that, with a principal-and-interest loan, the principal does not decline in a linear way. That’s because, in the early days of the mortgage, most of each monthly payment is allocated towards paying interest rather than reducing the principal. 

If the borrower’s $500,000 loan had a 30-year term, your principal would decline something like this:

Interest-only loans

The situation is different with an interest-only loan.

Let’s say the above loan was interest-only for the first five years of the 30-year term, before reverting to principal-and-interest for the final 25 years. In that case, during the first five years, the borrower would be paying nothing but interest – which means their monthly repayments would be lower during that period, but their principal would still be as large at the end of that period. As a result, their principal would decline something like this:

Additional repayments and offset accounts

Given that mortgage interest is charged each day on the borrower’s outstanding loan amount, the faster they can reduce the principal, the less interest they’ll pay over the life of the loan.

This can be done in two ways.

The first is to literally reduce the principal, by making extra repayments (assuming the loan allows for that).

The second is to ‘virtually’ reduce the principal, by transferring extra money into an offset account (assuming the loan has one). The borrower will then be charged interest not on the remaining principal, but on the principal minus your offset balance. So if they had $470,000 remaining on their loan and $10,000 in their offset account, they’d be charged interest on only $460,000.

Please note, though, that if they then withdrew this $10,000 – perhaps to pay for a holiday – they would be left with $0 in their offset account and would be charged interest on the full $470,000.

Property investors continue to enjoy increases in their rental income, but the rate of growth appears to be slowing, judging by the latest Domain data.

The median house rent in the combined capital cities rose 11.1% in the year to June 2024, compared to 11.5% in the year to June 2023. Capital city unit rents rose 8.6% in the year to June 2024, compared to 26.1% in the year to June 2023.

The rate of growth also slowed between the March and June quarters.

Capital city house rents recorded quarter-on-quarter growth of 3.2% in June; down from 5.0% in March. Capital city unit rents climbed 1.6% in June; down from 3.3% in March.

 

Why rental growth has been slowing

While the rental market typically eases during winter, that only partly explains this current slowdown, according to Domain.

“Rental growth is slowing in line with a gradual increase in rental availability, driven by a rebalancing of supply and demand pressures,” Domain said.

“Rental demand is easing, as the number of prospective tenants per rental listing has consistently fallen throughout 2024. This aligns with overseas migration passing a peak and being expected to decline further in the year ahead, continuing to ease demand with the federal government-introduced migration strategy that will slow population growth.

“Investors have made a slow comeback, accounting for nearly 36% of new home loans – the highest proportion since 2018. Home ownership is also at the forefront, with incentives in place (such as Queensland doubling the first-home buyer grant, the federal government’s Help to Buy shared equity scheme and changes to stamp duty concessions in the ACT, South Australia, Western Australia and Queensland) that will help transition some to being owners or fast-track others to a more affordable purchase.”

 

Investors might need to adjust their expectations

The bottom line for investors is that while many parts of Australia remain a landlord’s market – with vacancy rates low and rents increasing – the days of astronomical rental growth might be over.

If so, that means we might be transitioning to a more ‘normal’ rental market, where investors can still do well but can no longer assume they’ll enjoy annual rent growth of more than 10% per year.

Property has been a fantastic long-term investment for many Australians over the years. If you’d like to buy an investment property, please contact me to talk through your goals and find the right loan. 

 

Good news for car buyers: waiting times have fallen dramatically in the past 12 months.

The average waiting time for a new car in Australia was 65 days in June 2024, according to Price My Car. That compares to 109 days in June 2023 and 155 days in June 2022.

The models with the shortest waiting times in June were:

Conversely, the models with the longest waiting times were:

 

Purchases of new vehicles up 8.7%

Meanwhile, Australians are snapping up new cars in record numbers.

Motorists bought 632,412 new vehicles during the first six months of 2024, according to the Federal Chamber of Automotive Industries (FCAI). That was 8.7% more than the first half of 2023 and 4.4% more than the previous record half-year in 2018.

FCAI Chief Executive Tony Weber said these numbers were particularly notable given the current economic challenges.

“The end of the financial year has traditionally been strong for vehicle sales and achieving 632,412 sales in just six months is a testament to the resilience of the market,” he said.

 

Loan first, car second

If you’re thinking about buying a new set of wheels, it is a good idea to organise your finance before you find your dream car, not after.

I can compare the market on your behalf and help you get pre-approval for a loan that is right for you, so you’re well-prepared to start car shopping.

I have a panel of over 20 lenders to compare to find a competitive rate and the right structure for your circumstances.

If you’re unsure how the car loan process works, contact me and I’ll be happy to explain.

If you want your property purchase to be as stress-free and successful as possible, it’s important to follow a methodical process that begins even before you start looking at online listings.

The first thing you should do is reduce your spending and increase your savings rate at least three months before you apply for a home loan pre-approval. That can help make you look more creditworthy in the eyes of lenders.

Second, be wary about changing your employment situation. If you reduce your hours, move to a new company or quit your job to start a business, that could raise doubts about the reliability of your income. That, in turn, will make lenders question your capacity to repay a loan, which might make it harder for you to qualify for finance.

Third, order a copy of your credit report – you’re entitled to a free copy every three months from the main credit bureaus, Equifax, Experian and Illion. If you discover your credit report contains incorrect negative listings – which does happen from time to time – you can apply to have them removed. (Correct negative listings can’t be removed.) Removing them could increase your credit score, which would improve your chances of qualifying for a loan, and on more favourable terms.

The fourth step in the process is to visit a mortgage broker. Your broker will calculate your borrowing capacity, compare loans and apply for a pre-approval on your behalf. Also, your broker will be able to advise you on how much of a deposit you need, whether you’re eligible for government incentives or if you have equity to help towards your deposit.

Fifth, find a conveyancer or solicitor. Their job will be to review the contract of sale and oversee the legal transfer of the property from the seller to you. While you won’t need their help until later in the process, it’s better to search for a conveyancer / solicitor well in advance, so you have time to compare. It is also helpful knowing you can send any potential contracts for checking as soon as you receive them for a fast turnaround.

Sixth, consider whether you would like a buyer’s agent to manage the entire buying process (research, due diligence and negotiating) for you.

The seventh step is to research suitable locations for your home or investment property purchase. This will be informed by your borrowing capacity, which you will know if you’ve already secured a pre-approval.

For the eighth step, attend open homes. This will not only give you the chance to identify positives and negatives in a particular property but will also give you a chance to better understand the local market and level of buyer competition. 

Ninth, when you find a property you want to make an offer on, organise building and pest inspections, which should identify any hidden flaws. If you find any structural defects or pest infestations, you can either walk away from the property, ask the vendor to fix them or use them to negotiate a lower price.

 

Please get in touch if you’re thinking about buying a property in 2024. I’ll calculate your borrowing capacity, compare loans and apply for a pre-approval on your behalf. Also, I’ll advise you on how much of a deposit you need and whether you’re eligible for government housing incentives.

When it comes to buying a car, it’s vital to analyse the total cost of ownership, rather than focusing on the sticker price alone. That way, you’ll be able to make an informed decision about the best way to proceed. 

1. New vs used

An important decision is whether to buy new or used. A new vehicle is likely to be more reliable and fuel-efficient than a used vehicle, but will also have a significantly higher upfront price and will experience significant depreciation in the early years of ownership. Conversely, a used vehicle will be significantly cheaper and less affected by depreciation, but is more likely to incur higher maintenance and fuel costs.

2. Make and model

Another key choice involves the vehicle’s make and model: opting for more features, reliability, safety, comfort and prestige is also likely to mean accepting a higher price. Timing is also important: a vehicle may be discounted if the model is about to be discontinued (perhaps because it’s being replaced by an updated version). Assuming it will still be easy to access spare parts, buying this kind of car might be a smart move.

3. Maintenance

One criteria that often gets overlooked by car buyers is ongoing maintenance costs. Everyone knows that you have to pay for ongoing servicing; but what few people realise is that the cost can vary markedly from manufacturer to manufacturer. That’s because some car makers produce vehicles with more accessible spare parts than others or less-intensive work required. This could be the difference between visiting a standard mechanic or specialist or spending more to replace parts.

4. Insurance

Insurance is another ongoing cost. More expensive cars generally incur higher insurance premiums than less expensive ones. Safer and more reliable cars also tend to be cheaper to insure.

5. Fuel-efficiency

You should also consider the fuel-efficiency of different vehicles, because this can vary significantly from model to model. A less efficient car might cost you hundreds of dollars more per year to run. You can also consider if an electric vehicle or hybrid could work for you.

6. Depreciation

Similarly, for people who buy a new vehicle, the rate of depreciation can vary significantly from model to model. If you believe you might re-sell the car at some point in the future, think ahead to what its resale value would be likely to be in five or 10 years.

7. Car loan

Finally, the way you finance your car purchase will also have a big impact on the total cost of ownership. A broker can compare loans from a range of providers to find a competitive deal that is suited to your situation. Only speaking to one lender or a dealership for finance limits your options and could mean you end up paying more than you need to.

 

Thinking about buying a car? I can compare the market for you and help you get pre-approval for a loan. That way, you’ll know your budget and will be able to shop accordingly.

If you find yourself owing money to the Australian Taxation Office (ATO), and you weren’t prepared for it, there are options available to you.

What happens if you fail to make your tax payments on time?

According to the Australian Taxation Office (ATO), they will first contact you. From there, the ATO will apply the general interest charge (which is currently 11.36% per annum) on your unpaid amounts. Finally, the ATO will take firmer action if you’re unwilling to work with them to repay your debt or you repeatedly default on agreed payment plans. 

That firmer action may include the garnishing of wages, legal action or bankruptcy proceedings.

So you might be wondering: what are your options if you’re unable to pay your tax debts straight away?

Option 1: depending on your circumstances, might be to consolidate your tax debts into your home loan. Here’s how it works:

The advantage of tax debt consolidation is that you’ll get to clear your tax debt.

The disadvantage is that you’ll have to pay interest on the loan you take out to repay the tax debt. Also, there are costs associated with refinancing your home loan (although you may save money in the long run if you’re able to switch to a lower interest rate).

You will also require equity – meaning your property has increased in value since you took out the loan – that your lender is willing for you to access. 

Please speak to a mortgage broker first, to get a full understanding of how a tax debt refinance works and the costs involved. It might also be a good idea to speak to a financial adviser.

Option 2: could be to take out a personal loan to cover the debt. A broker can compare loans to find one that suits your needs and offers a competitive rate. This usually carries a higher interest rate than a home loan, but could be right depending on your circumstances.

 

Get in touch if you have tax debt and are thinking of consolidating it into your home loan or a personal loan. I’ll explain your options to you, so you can make an informed decision about how to proceed.

One of the hardest parts of buying a property can be saving the deposit. A guarantor home loan could give buyers the chance to enter the market years ahead of schedule by using a guarantor (generally a parent or close relative) to cover some or all of the deposit. As a result, buyers could potentially qualify for a home loan with cash savings equivalent to just 5% of the purchase price or even 0%.

Guarantors contribute to the deposit not by paying cash but by using the equity in their property as security. So, potentially, the buyer might make a 5% cash contribution and the guarantor a 15% equity contribution, for a combined 20% deposit; or in some cases the buyer might make a 0% cash contribution and the guarantor a 20% equity contribution. As a result, the buyer would be able to qualify for a home loan and would also avoid paying lenders mortgage insurance (which is generally charged when a borrower has less than a 20% deposit).

Requirements for the guarantor

For someone to act as a guarantor, they need to own a property and that property needs to have sufficient equity. So, as part of the process, the lender will conduct a valuation of the guarantor’s property.

The guarantor also needs to accept legal responsibility for the repayment of the loan. In other words, if the buyer fails to keep up with their mortgage repayments, the lender may chase the guarantor for payment; it’s even possible the lender may seize and sell the guarantor’s property to recoup its debt.

But that doesn’t mean the guarantor needs to be tied to the mortgage for the entire loan term. After a few years, once the buyer has built 20% equity in the property (potentially through a combination of paying down some of the mortgage and having the home rise in value), the buyer can refinance and remove the guarantor from the loan contract.

Guarantors should proceed with caution

Acting as a guarantor, therefore, involves risk, which is why guarantors should get legal advice before proceeding. It’s important that both parties – buyer and guarantor – have a clear understanding of their responsibilities under the arrangement, to avoid a breakdown in the relationship.

Guarantors should also understand that their borrowing power will be reduced for as long as they’re tied to the mortgage, because lenders will have to factor in the possibility that the guarantor may be forced to cover the buyer’s mortgage repayments.

As you can see, guarantor home loans can be a wonderful finance solution, but are not suitable for everyone. Reach out to discuss your circumstances in a free, no-obligation chat.