AuthorI'm the principal of Trace Financial, a CPA and property owner/investor. I'm also a musician so I will try to incorporate a bit of music to my FB posts for a bit of added interest. ArchivesCategories |
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Right Sizing24/5/2022 Are you a first home buyer or trying to get back into the property market? Consider this – right sizing.
It is the concept of buying a property that is the right size for your current lifestyle rather than the one you plan or want to have in the future. Basically, only buying what you need now and not what you desire now. It seems logical enough, doesn’t it? The current attitude with property seems to be bigger is better. The homes that are built are large, often 4 2 2, squeezed onto ever smaller parcels of land with prices to match the number of rooms. A smaller home, adequate for your current needs, could mean a smaller price, a smaller deposit to save and therefore a smaller mortgage. If you are trying to get into the property market and purchase your first home, consider what you need over what you’d like to have, or what property marketers say you need. The floorplan you need may be 2 bedrooms not 4, you most likely don’t need a cinema room, lounge room and family room all in your home if you are single. You own one car so a double garage may not be needed. Whilst everyone wants all the bells and whistles and as many square metres as you can stretch yourself to afford, settling for what is needed now may get you into the property market much sooner and more affordably. With a lower entry price, you will have lower mortgage repayments which will allow you to weather any interest rate rises and have the money to enjoy your life. You will also be able to pay off your loan sooner and when ready move on to the home of your dreams, or the home that is the right size for your next stage of life. So, when you have found your right size right now, we will be available to help you find the right size finance solution to make that purchase a reality. www.tracefinancial.com.au
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Five ways to fund a renovation15/5/2022 Considering transforming your home from ‘blah’ to ‘brilliant’, but lack the funds to support your makeover? Never fear, we’ve rounded up five home renovation finance options that could help turn your dream into reality.
Equity release/top up home loan An equity release/top up loan is probably the most common way people borrow money when they want to renovate. It involves borrowing against the current value of your home before any value-adding renovations and in most cases allows you to obtain the funds upfront. If you own your home outright, you can usually borrow up to 80% of its value.If you have a mortgage on your home, the amount you can borrow is usually the difference between the balance of the loan and 80% of the value of the property. For example, if your home is valued at $500,000 and your loan balance is -$300,000, you could borrow $100,000 – making the total loan amount $400,000 (80% of $500,000). One potential problem is that the cost of your renovations may be higher than the equity you have available. If you run out of funds mid-construction, and if the property is then not in sound, lock up condition, you may have an issue obtaining extra funds down the track. Construction loan If you're planning to completely transform your home and undergo a major makeover, a construction loan may be a good option as you can spread the cost over a long period of time. With a construction loan, the lender will assess the value of your home after the renovation based on the building plans and you can typically borrow against that value. You may be able to borrow up to 90% of the end value of your home and take advantage of mortgage interest rates, which tend to be lower than credit card and personal loan rates. You won’t be given the full loan amount upfront, but usually in staggered amounts over a period of time – these are called ‘progress payments’ and are linked to a fixed price building contract you will have with your builder. Line of credit You can establish a revolving credit line that you can access (up to your approved limit) whenever you want. You only pay interest on the funds you use and, as you pay off your balance, you can re-borrow the unused funds without reapplying if necessary. However, care must be taken not to get in over your head in terms of serviceability. Make sure you can make repayments on the line of credit that will reduce the principle because your minimum repayment only pays the interest – it will not reduce the loan balance. Interest rates on this type of product are typically much higher than a construction loan or equity release loan. Personal loan A personal loan may be a good option if you’re only making minor renovations. Personal loans are usually capped at around $60,000, but interest rates on personal loans are higher than on home equity loans and payments need to be made, usually, over a maximum of seven years. Credit cards Using credit cards to fund renovations should only be considered if you want to undertake really small projects. The interest rates are usually much higher on credit cards than mortgages, but for a very small project that extra interest might actually total less than loan establishment fees. Ensure your renovations are adding value There are very few exceptions to the rule that your renovations should add more value to your home than they will cost to carry out. Think about how the money you spend on a renovation will increase the value of your property. For example, consider making changes that would appeal to the majority of potential buyers to help you sell your house faster and at a higher price. |