Refinance to Renovate

  • By Trent Bartels
  • 12 Oct, 2017

How to refinance to renovate?

Refinancing your assets to renovate a property is a significant decision that will hopefully improve your standard of living or add substantial value to your property.

Refinancing isn’t as straightforward as you might expect. The type of renovation proposed goes a long way to dictating the loan required. If the wrong loan is chosen, you could be left with a pile of unexpected debt.

Know your budget

Before considering refinancing, you need to have a clear idea of your budget.

If you underestimate your budget, you run the risk of getting knocked back from your lender.

I know a lot of homeowners who have estimated a budget of say $100,000 to do renovations, only to discover it will cost a lot more. This means you may have to reapply for the loan, which banks generally don’t like.

Be conservative with your projection. If you think you need $100,000, you should speak with your builder to ensure that this is enough and allow for any contingency costs. The key is stick to your budget.

The next step is to speak to your Finance in Sydney to determine which loan will suit your needs and objectives.

Construction loans

Construction loans are suitable for structural work in your home, for example, if you’re adding a new room or making changes to the roof.

Construction loans give homeowners the opportunity to access larger sums of money, with the amount dependent upon the expected value of the property after renovations are completed.

The advantage of a construction loan is that the interest is calculated on the outstanding amount, not the maximum amount borrowed. This means you have more money available in your kitty, but only pay interest on the money you choose to spend. For this reason, the broker may recommend that you apply for just one loan, but leave some leeway in your borrowed kitty.

When applying for a construction loan, council approval and a fixed price-building contract are required.

Your lender will appoint an assessor to value your construction at each stage of the renovation. This will happen before you pay your installment. When construction is complete, speak to Finance in Sydney as we may be able to refinance back to the loan of your choice.

Typically the bank will require an “As is and at completion” valuation over your property.

Broker advice

If you speak to Finance in Sydney, we will be able to determine which loan will give you the options you seek.

It’s vital that you get this piece of the puzzle right the first time as it can be a costly exercise should you get it wrong. Let Finance in Sydney show you the right way to finance your renovations.

Disclaimer: This article is not to be taken as financial advice. Every applicant’s personal situation will vary significantly and we would recommend that you sit down with an expert from Finance in Sydney before making any decisions. All loans are subject to the normal lending criteria.

By Trent Bartels 15 Jan, 2018

Guides to an Investment Property Purchase

When you’re trying to secure finance for an investment property, it’s important to keep a few simple rules in mind to make sure you get the best deal possible and will be able to afford the repayments.

If you’re thinking about purchasing an investment property, it’s important to manage the risks adequately. For example, you shouldn’t rely on rental returns as a guaranteed income to meet loan repayments, as there are times when a property may be vacant or hard to fill immediately and some months the rental return on a property may be diminished by maintenance costs.

A Mortgage Broker from Finance in Sydney will help a borrower find the right product, so that you can afford the repayments. We will take the time to ensure that you can afford the repayments when interest rates rise. This will reduce the risk of you falling into financial hardship and you can still afford the repayments if, or when, mortgage rates go up.

Most investors will already have put some thought into where they would like to purchase and will have an approximate price-range in mind. While a loan repayment calculator is a great resource to start out with, a Mortgage Broker from Finance in Sydney will use their expert knowledge to discuss your plans and what you can realistically afford to borrow based on your current liabilities and personal monthly living expenses.

We have access to property data and trend analyses through Core Logic (Formerly known as RP Data), one of our Mortgage Brokers can pull property reports for you, detailing how the area has performed in the past as an investment, the average median house price or rate of return and how much the property values have increased historically. These reports are meant as a guide only and you shouldn’t use these to predict future trends.

Repayments

Investors have the option of making Principal & Interest, Interest Only or Interest in Advanced Repayments.

-      Principal & Interest Repayments means that you will be paying the principal plus interest off your loan

-      Interest Only Repayments means that you will just be paying interest on your loan and the debt level will not be reducing

-      Interest Only in Advanced Repayments means that you will pay the interest on an annual basis and the interest rate will be fixed for a set period of time (Typically for 1-5 Years)

The interest rate that a lender will provide you will depend on what type of repayment that you choose. Typically, if you decide to make Principal & Interest Payments in the current environment you may receive a more competitive interest rate than an Interest Only or Interest Only in Advanced repayment.

Please note it’s VITAL that you talk with a qualified accountant or tax expert to ensure that the loan matches your personal needs.


Products Professional Packaged Loan & Basic Loans

The main two products that an Investor will take out are as follows:

Professional Packaged Loan

These types of loans are useful to those borrowers that are looking to borrow in excess of $250,000.00. These loans will offer a discount of the Standard Variable Rate (SVR) as well as other benefits that are offered by the lender.

You have the option to take out the following loan type:

  1.      100% Variable
  2.      100% Fixed
  3.      Part Variable & Part Fixed

Basic Loans

These types of loans are useful to those borrowers that are looking to take out a loan below $250,000.00. They typically have no ongoing fees and charges, however they have very few features attached to these loans.

Like the Professional Packaged Loan you have the option to take out the following loan types:

  1.      100% Variable
  2.      100% Fixed
  3.      Part Variable & Part Fixed

Again; please note it’s VITAL that you talk with a qualified accountant or tax expert to ensure that the loan matches your personal needs.

This is not meant as tax advice.


Disclaimer: This article is not to be taken as financial advice. Every applicant’s personal situation will vary significantly and we would recommend that you sit down with an expert from Finance in Sydney before making any decisions. All loans are subject to the normal lending criteria.

 

 

By Trent Bartels 15 Jan, 2018

There are many reasons to refinance your existing Home or Investment Loan.

It could be as simple as getting a better interest rate

It’s always a good idea to have a home / investment loan health check every 2-3 years; as the interest rate that was provided to you by your current lender when you first applied for a loan may have been the most competitive for your needs at that time. The lending environment is constantly changing and evolving and in the current environment there could be more competitive products and interest rates that suit your needs.

Your needs and requirements have changed

The type of product you took up when you first applied for a loan may not be the best for you now. You may have had a change in employment, had a pay increase, had a child or looking at retirement. All these changes provide an opportunity for you to review your existing facility to see if it is suitable based on your current needs and requirements.

Looking at renovating VS moving

Renovating your home may be great solution for you as you may like the location, your neighbours, the local schools & shopping areas rather than selling your home and moving to a different location.

Many people look at upgrading their home for a number of reasons; it could be based on a growing family, needing an extra bedroom, a parents / teenager’s retreat, another bathroom or a new  kitchen as the existing one have seen better days or are too small.

It can be a costly exercise selling your existing home and buying a new one. Some of the cost of moving could include Real Estate Fees, Revivalist, Solicitor Fees and the added stress of moving and finding a new property to purchase. Not to forget when your purchase a new home you will also attract Stamp Duty, Solicitor Fees, Building / Pest Inspection / Strata Inspection and other incidentals costs on your new property purchase.

Equity release

You may be at that stage in your life where you have paid off your home loan and are thinking of wealth creation. You have a great asset in your home which may be used as security to assist you in purchasing an investment property or other wealth creation strategies.

Debt consolidation

You may have accumulated a number of debts such as credit card, car loan or store account debts, which may severely impact your ability to meet your monthly repayments. Consolidating these debts into your home loan may be a solution to ease your short-term cash flow issues; however consolidating debts will turn a short-term debt (Credit Card, Car Loans etc) into a long-term debt (Home Loan) which could incur additional interest being charged over the term of your Home Loan.

Another way to work around this is to split your Home Loan into 2 facilities, one being the home loan debt and the other split being the debt consolidation.

You can then align the debt consolidation (Short-Term Debt) over a 5 Year Loan Term so that you are not paying your short-term debt over a 25-year period. This short-term debt level may attract a reduced interest rate than what your presently paying due to the type of security that is being offered.

It’s important to remember that when you finance a purchase you should always align the loan term to the life of the product that you have purchased.

-        For example, if you purchase a new car you should take out a loan over a 5 year period NOT a 30 year period as it’s extremely unlikely that you will still own this car in 30 years.

Whatever the reason it is in your best interest to talk to a Finance in Sydney Mortgage Broker too discuss your personal situation.


Disclaimer: This article is not to be taken as financial advice. Every applicant’s personal situation will vary significantly and we would recommend that you sit down with an expert from Finance in Sydney before making any decisions. All loans are subject to the normal lending criteria.


By Trent Bartels 15 Jan, 2018

If you are looking to purchase your new or used vehicle Finance in Sydney is able to assist you with financing this purchase. There are some key points that you need to consider when purchasing your next car:

Consider your Budget:

Working out your budget before you begin shopping for your new car is an important step in the process. You need to consider the following:

  1.   How much are you prepared to spend on your next vehicle.
  2.   Will it suit your needs not only now but in 5 years time
  3.   How much can you afford to pay on a weekly, fortnightly or monthly basis
  4.  What are the vehicles running costs; such as how many km you will get out of a tank of fuel, repairs & maintenance.
  5.  Registration
  6.  Insurance

Finding the vehicle that is right for you:

You may be considering purchasing a vehicle from a dealership or privately (if you are purchasing a used vehicle.)

Shopping around is a key part of the process to ensure that you are getting the right deal when you purchase a car. There are some key times of the year when car dealers are trying to sell their stock. Often a good time is prior to the end of the financial year (30th June) as car dealerships are trying to sell their stock prior to the end of the financial year. You will often see end of year run out sales etc.

It’s important to get a road worthy check completed on a used vehicle as you don’t want to be purchasing a car that has issues with it which will become your issues once you take delivery of the vehicle.

A REVS check is vital when purchasing a used vehicle as it will advise you if there is a financial encumbrance on this vehicle (Is there money owing on this vehicle)

Financing the vehicle:

The usual term of a car loan is 60 months (5 years) where you make 60 principal & interest payments and at the end of the 60 months you will own your car.

What some finance companies do is place a residual / balloon on the car payment. This lowers your repayments, however at the end of the loan term being 60 months you will still have a debt on the car. This debt will need to pay in a lump some payment or you may need to finance this resulting in a longer loan term and additional interest.

Be CAREFUL about falling into the trap of a finance company offering you finance with a residual / balloon payment.

-      By taking a residual / balloon payment, it will lower your payments over 60 months however you will be left with a debt at the end of the 60 months

A residual / balloon payment is not necessarily a bad thing you just need to be aware of the pros & cons of having a residual / balloon payment.

Lastly the interest rate is an important component of your car loan. However, comparing what your repayment will be is the most important part; as some finance companies have hidden fees and charges included in their financing package. Their interest rate may appear to be lower though they have hidden fees included, hence their repayments will be higher.

A team member from Finance in Sydney can assist you with making the right decision when it comes to the financing that you require.

Disclaimer: This article is not to be taken as financial advice. Every applicant’s personal situation will vary significantly and we would recommend that you sit down with an expert from Finance in Sydney before making any decisions. All loans are subject to the normal lending criteria.


By Trent Bartels 12 Oct, 2017

How to refinance to renovate?

Refinancing your assets to renovate a property is a significant decision that will hopefully improve your standard of living or add substantial value to your property.

Refinancing isn’t as straightforward as you might expect. The type of renovation proposed goes a long way to dictating the loan required. If the wrong loan is chosen, you could be left with a pile of unexpected debt.

Know your budget

Before considering refinancing, you need to have a clear idea of your budget.

If you underestimate your budget, you run the risk of getting knocked back from your lender.

I know a lot of homeowners who have estimated a budget of say $100,000 to do renovations, only to discover it will cost a lot more. This means you may have to reapply for the loan, which banks generally don’t like.

Be conservative with your projection. If you think you need $100,000, you should speak with your builder to ensure that this is enough and allow for any contingency costs. The key is stick to your budget.

The next step is to speak to your Finance in Sydney to determine which loan will suit your needs and objectives.

Construction loans

Construction loans are suitable for structural work in your home, for example, if you’re adding a new room or making changes to the roof.

Construction loans give homeowners the opportunity to access larger sums of money, with the amount dependent upon the expected value of the property after renovations are completed.

The advantage of a construction loan is that the interest is calculated on the outstanding amount, not the maximum amount borrowed. This means you have more money available in your kitty, but only pay interest on the money you choose to spend. For this reason, the broker may recommend that you apply for just one loan, but leave some leeway in your borrowed kitty.

When applying for a construction loan, council approval and a fixed price-building contract are required.

Your lender will appoint an assessor to value your construction at each stage of the renovation. This will happen before you pay your installment. When construction is complete, speak to Finance in Sydney as we may be able to refinance back to the loan of your choice.

Typically the bank will require an “As is and at completion” valuation over your property.

Broker advice

If you speak to Finance in Sydney, we will be able to determine which loan will give you the options you seek.

It’s vital that you get this piece of the puzzle right the first time as it can be a costly exercise should you get it wrong. Let Finance in Sydney show you the right way to finance your renovations.

Disclaimer: This article is not to be taken as financial advice. Every applicant’s personal situation will vary significantly and we would recommend that you sit down with an expert from Finance in Sydney before making any decisions. All loans are subject to the normal lending criteria.

By Trent Bartels 11 Oct, 2017

Consolidating your credit card debt, car loan or personal loan into your mortgage can be an effective way to reduce your repayments - provided that you restructure your debts the right way.

Generally, the main reason you may choose to consolidate your debts is to reduce the amount of interest their paying.

A lot of borrowers make the mistake of restructuring their new debt the wrong way,  and as a result, they can end up paying more  interest in the long run.

“When homebuyers are looking to purchase a property, they’ll often finance their home loan over 30 Years. A common mistake we see when clients want to restructure their debt for their credit cards, car loans or personal loans is that they also finance it over 30 years,” 

“Generally when you decide to finance something, it’s a good idea to structure the length of the loan to match the life cycle of the item. For example, if you purchase a car you might structure the financing over five years, because at the end of the five years you may consider selling the car.”

A good rule of thumb is to finance an asset over the life of the asset.

If you were to structure the financing for your car over 30 years, it means that if you sell the car in five years time, you’ll actually end up holding onto the debt for an additional 25 years – which dramatically increases the overall interest you’re paying for the car.

“We recently had a client that came to us wanting to refinance their existing home loan, and they were looking to consolidate a credit card debt of $7,500 and a car loan of $23,000 at the same time,”

“Initially, their friends had advised them to consolidate the debt directly into their home loan when refinancing, which would have meant they were financing this debt over 30 years. The advantage for our clients was that it reduced their overall monthly repayments substantially, as they only had one mortgage payment to make.

“We sat down with them and when we explained that they would be paying for their purchases on their credit card or for their car for the next 30 years, they soon realised that this wasn’t the best way to structure their finances!”

We came up with a plan that allowed our clients to refinance their home loan, consolidate their debts and reduce their overall monthly payments – but without paying unnecessary extra interest in the long term.

“We recommended that they take out two separate loans – one for their home loan, and the other to consolidate their credit card and car loan debt into a more appropriate term, which ended up being five years,” he says.

By doing this, they restructured all of their personal debts into one easy monthly payment, and reduced their exposure to the high interest rates that were payable on their credit cards.

The final step was for the client to cancel their credit cards, to ensure that they didn’t rack up a fresh debt on their cards, and end up exactly where they started.  “The last thing that we want is for our clients to clear their credit card debt, only to have them spend back up to their limit again!”

Another key point to consider when refinancing is to consider how long you have had your loan for. If you are 5 years into a 30 Year Loan Term (so you have 25 Years remaining on your loan) is it a good idea to refinance your loan back to a 30 Year Loan Term. By doing this it will reduce your overall repayments however you will end up paying more in interest.

Disclaimer: This article is not to be taken as financial advice. Every applicant’s personal situation will vary significantly and we would recommend that you sit down with an expert from Finance in Sydney before making any decisions. All loans are subject to the normal lending criteria.

Share by: