Could an eco reno boost your property’s value?

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You’ve probably heard that interest rates are on the rise and national property prices are on the way back down. Here’s how you can kill two birds with one stone: by refinancing to unlock equity and giving your home an energy-efficient makeover at the same time.

Did you know that energy-efficient homes generally attract premium prices and sell faster than non-eco listings?

That’s according to the 2022 Domain Sustainability in Property Report, which found an energy-efficient house in the median range sells for $125,000 more (+17.1%) on average than a non-sustainable house.

The results are quite good for apartment owners too, with energy-efficient units selling for $72,750 more (+12.7%) than non-energy-efficient apartments.

Dr Nicola Powell, Domain’s chief of research and economics, says more and more sellers are addressing the demand for eco-friendly homes, as online listings with popular eco features attract 8.7% more views on average.

“More than half of all for sale listings in all states and territories contain energy-efficient keywords,” she says.

Installations that are popular with potential buyers

Here are the top three eco features popular in house listing searches right now.

1. Solar power: Australia has no shortage of sunshine. And there’s no shortage of demand for houses with solar panels either. A 2020 Origin Energy survey showed 77% of Australians view houses with solar panels as being more valuable. And 55% of renters said they would consider paying increased rent for solar panels.

2. Water tanks: if you have a sizable garden or lawn, a sustainable irrigation system can help keep your water bill down. Make use of the rainy season by collecting water in tanks. When the dry season hits, you’ll be prepared with free, nutrient-dense rainwater to lavish on your garden.

3. Insulation and glazing: window glazing and insulation can help stop your heating and cooling efforts from leaching out. You’ll also reduce the summer heat and winter chill invading your home.

Financing your eco reno

Depending on your situation, many lenders now offer green loans to help homeowners install environmentally sound features – and the good news is that lenders usually offer lower interest rates on green loans in an effort to encourage sustainability.

Another option at your disposal is to unlock the equity in your home to fund your eco reno.

And it’s not a bad time to consider doing so, as property prices increased 23.7% in 2021.

So how does ‘unlocking equity’ work?

Well, let’s say you bought an $800,000 house three years ago that, due to last year’s property price surge, is now worth $1 million.

And let’s also say you took out a $600,000 loan for that house, which you’ve managed to pay down to $500,000 (hurrah!).

By refinancing that $500,000 loan into a $700,000 loan (70% of your property’s new market value), you can unlock $200,000 in equity to help fund a deposit for your renovations.

It’s also worth noting that banks will typically let you borrow up to 80% of a property’s market value.

And don’t forget to check out any government rebates that may be available for eco your installations.

Get in touch today

If all of this seems confusing, don’t fret! We’re more than happy to help you navigate loans, equity, and refinancing for your eco reno.

And if you decide to proceed, the good news is that part of the process can include refinancing your home loan.

Why’s that good news?

Well, just because interest rates are going up, doesn’t mean you can’t scope out a better deal on your mortgage. Competition amongst lenders remains fierce, particularly if you have a decent amount of equity and a strong track record of meeting your mortgage repayments.⁣

So if you’d like to discuss your reno and/or refinancing options, get in touch today.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

Why you might want to refinance sooner rather than later

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Thinking about refinancing? As interest rates rise, so do the hurdles you need to clear. Here’s why you might want to look at refinancing soon to avoid potentially missing out.

When was the last time you refinanced?

If the answer is “never”, or you can’t actually remember, there’s a good chance you’re paying a higher interest rate than you could be due to the “loyalty tax”.

You see, the banks don’t think you’re paying attention, and as such, they only offer their lowest rates to new customers in a bid to win them over – as proven by the RBA.

In fact, a recent RateCity analysis found that customers who stay loyal to their bank could be hit with an extra $5,101 in interest over the next three years alone (based on a $500,000 loan taken out with CBA in 2019).

For a $750,000 loan that would be an extra $7,652 in interest, and for a $1 million loan it’s $10,202 extra.

This is a big reason why owner-occupier refinancing across the country rose 9.7% in June to a new record high of $12.7 billion, according to the Australian Bureau of Statistics.

Great. But why is refinancing now so important?

Ok, so when you refinance, your new lender must assess something called your “home loan serviceability”.

Basically, that’s your ability to meet your home loan repayments at an interest rate that’s at least 3% above the rate you’re being offered.

And as you might have seen on the news, the big four banks are tipping the RBA’s official cash rate to increase from 1.85% in August to anywhere between 2.60% (Commbank forecast) and 3.35% (ANZ forecast) by November.

That means as interest rates go up, so too will the hurdle you’ll need to clear for home loan serviceability when refinancing.

All in all, that means the sooner you refinance, the lower the hurdle you’ll need to clear to ensure you’re not stuck with your current rate and lender.

How to explore your refinancing options

This is the easy bit! Simply get in touch today and we’ll help you get the ball rolling.

And even if you don’t want to refinance with another lender, there’s always the option of asking your current lender to review your rate, indicating that you’re prepared to refinance if they don’t come to the table.

After all, loyalty should be a two-way street!

So if you’d like to find out more about what options are available to you, give us a call or flick us an email today – we want to help you through the period ahead as much as we possibly can!

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

Interest rates to keep climbing as RBA hikes cash rate to 1.85%

The Reserve Bank of Australia (RBA) has increased the official cash rate by another 50 basis points to 1.85%. Here’s how to hang in there and keep up with all these monthly cash rate hikes.

Another month, another RBA cash rate hike – that’s four months in a row now!

It’s hard to believe that at the beginning of May the cash rate was just 0.10%. Today, it was increased to 1.85%.

RBA Governor Philip Lowe said in a statement that today’s increase was a further step in the normalisation of monetary conditions in Australia.

“The increase in interest rates over recent months has been required to bring inflation back to target and to create a more sustainable balance of demand and supply in the Australian economy,” said Governor Lowe.

“The (RBA) board expects to take further steps in the process of normalising monetary conditions over the months ahead, but it is not on a pre-set path.”

If you’re having a little trouble hanging in there, below is a condensed version of an article we put out last week to help you alleviate some pressure on the household budget.

1. Build up a buffer

There are no two ways about it – interest rates will only continue to climb in the months ahead.

That means it’s important to start planning ahead now, if you can, by building up a buffer.

This usually includes putting extra money into an offset account, redraw facility, or savings account – usually a facility that’s attached to your mortgage or easy to access.

2. Reduce expenses

Stan, Netflix, Spotify, Amazon, Audible, Apple TV, Disney, Paramount+, Kayo, Binge … how much do you spend on subscriptions each month? And how many can you cut out?

Next on the hit list: takeaway coffees. Six takeaway coffees a week costs you about $120 per month, or $240 per couple.

Instead, you can brew your own (barista-quality) coffee at home for $30-$70 a month.

And if you can, try to cut back on takeaway meals – they can really add up over time and home-cooked meals provide more leftovers for lunch the next day, too.

3. Shop around

A recent Choice study found Aldi to be the cheapest grocery store. Failing that, this ING survey found the average Australian family saves $114 a month simply by doing their grocery shopping online.

And don’t forget to look around for better deals on your car insurance, pet insurance (sorry Rex!), home insurance, utilities, your phone bill, and your internet bill.

4. Refinance

If you haven’t refinanced for a while, there’s a decent chance you could get a better rate on your home loan.

And you may want to get the ball rolling sooner rather than later.

That’s because lenders need to stress test your ability to meet your home loan repayments at an interest rate that’s at least 3% above the loan product rate you’re being offered.

So as interest rates go up, so too will the hurdle you’ll need to clear to pass that test (aka home loan serviceability).

Another option to consider is consolidating multiple loans – such as a car or personal loan – into your mortgage to reduce your monthly expenses.

Similarly, you can also consider refinancing to extend the term of your mortgage, which could help reduce your monthly repayments.

Both these options come with a downside, however, as by extending them you’ll pay more interest on the loan than you would’ve otherwise (ie. car loans are shorter than home loans).

But if you need cash flow now they can be an option to get you out of a jam.

5. Come and speak to us

Last but not least, if you’re concerned about what’s going on with interest rates, inflation and/or how you’ll meet your home loan repayments, please don’t hesitate to get in touch with us.

Everybody’s situation is different. And we understand many of the ideas we’ve listed above might not suit your financial and personal situation.

So if you’re worried about how you’ll meet your repayments in the months ahead, give us a call today. We’d love to sit down with you and help you work out a plan moving forward.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

Keep calm and carry on: 5 ways you can absorb interest rate rises

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We’ve seen interest rates bounce back up over the past three months, and most economists are predicting more increases to come. If you’re starting to worry about your finances, rest assured there are several steps you can take now to get on the front foot.

The days of ultra-low interest rates are officially over (it was nice while it lasted!).

And while all the talk of doom and gloom you see in the media about rapidly rising interest rates can be a bit spooky, now’s not the time to panic.

Check out this Reserve Bank of Australia (RBA) graph here, for example. It shows interest rates are currently lower (as of July 2022) than they ever were prior to May 2019.

So the current cash rate is nothing extraordinary – although it might come as a shock to newer borrowers, as we previously hadn’t had a cash rate hike since November 2010.

Still, there’s no denying that some households are starting to feel the squeeze, and if you put yourself in that category, now’s the time to consider implementing one or more of the below measures.

1. Start building up a buffer

There are no two ways about it – interest rates will go up over the next few months.

Currently, the RBA cash rate is at 1.35%.

Economists from the big four banks are predicting it could increase to anywhere between 2.60% (Commbank) and 3.35% (ANZ) by November.

That means it’s important to start planning ahead now, if you can, by building up a buffer.

This usually includes putting extra money into an offset account, redraw facility, or savings account – usually a facility that’s attached to your mortgage or easy to access.

2. Reduce expenses

Stan, Netflix, Spotify, Amazon, Audible, Apple TV, Disney, Paramount+, Kayo, Binge … the list goes on.

How much do you spend on subscriptions each month?

While they helped us get through lockdowns, these subscription services (that you might have forgotten to cancel) could be costing you a lot more than you realise.

In fact, the average Australian household spends $55/month on entertainment subscriptions.

Next on the hit list: takeaway coffees.

Six takeaway coffees a week costs about $27, which is about $120 a month, or $240 per couple.

Instead, you can brew your own (barista-quality) coffee at home for $30-$70 a month.

Then there’s Uber Eats, Menulog, DoorDash, Deliveroo – sure, takeaway dinner is great every now and then, but if you’re making a habit of it then it’ll really start to add up.

And the best part about home-cooked meals is the leftovers for lunch the next day – that’s two meals for the price of one.

3. Shop around

A recent Choice study found Aldi to be the cheapest grocery store. So that’s a start when it comes to your weekly food bill (which is also going up each month thanks to inflation).

Failing that, this ING survey found the average Australian family saves $114 a month simply by doing their grocery shopping online (must be because you spend less time in the choccy aisle, and more time buying just the essentials!)

But it’s not just your groceries that you can shop around for a lower price on.

Car insurance, home insurance, utilities, your phone bill, and your internet bill are other monthly expenses you can usually find a better deal on.

4. Refinance

While we’re on the subject of shopping around, it goes without saying that if you haven’t refinanced for a while, there’s a decent chance you could get a better rate on your home loan.

But why refinance now if interest rates will just keep rising anyway?
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Well, let’s say you refinance your variable rate home loan this month from 3.50% down to 3%.
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If the RBA raises the cash rate by 0.50% next month, and your bank follows suit, your interest rate will then be 3.50%. ⁣
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But if you choose not to refinance (and your bank follows the RBA’s lead) it’ll be 4%. ⁣

This 0.5% gap would remain for all subsequent upcoming interest rate rises – so long as the banks increase their interest rates in lockstep with the RBA.⁣

Another option you can consider is consolidating multiple loans – such as a car or personal loan – into your mortgage to reduce your monthly expenses.

Now, it’s important to note that if you do this you’ll pay more in interest on the car and/or personal loan over the lifetime of those loans, but if you need cash flow now, this could be a possible solution.

Similarly, you can also consider refinancing to extend the term of your mortgage, which could help reduce your monthly repayments.

Once again, you’ll end up paying more interest over the life of your loan with this option, but it can give you more breathing space if you need it.

5. Come and speak to us

Last but not least, if you’re concerned about what’s going on with interest rates, inflation and/or how you’ll meet your home loan repayments, please don’t hesitate to get in touch with us.

Everybody’s situation is different. And we understand many of the ideas we’ve listed above might not suit your financial and personal situation.

So if you’re worried about how you’ll meet your repayments in the months ahead, give us a call today. We’d love to sit down with you and help you work out a plan moving forward.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

Renovate or invest? How 7-in-10 Aussies are using their equity

Seven in 10 homeowners have recently used the equity in their home to renovate, invest in property or shares, or boost their superannuation. Have you thought about how you could take advantage of last year’s property price spike?

You might have heard that property prices spiked 23.7% in 2021, yeah?

That’s quite the growth spurt!

So how do you take advantage of that growth without (or before) selling your home?

Well, one way to do so is to cash out equity while property prices are high (which we’ll explain in a little more detail below).

According to NAB research, three in 10 mortgage holders have recently done just that and have used the money to give their home a facelift by renovating.

Other popular options include using unlocked equity to buy an investment property (16% of homeowners), invest in shares (12%) and boost super balances (8%).

So how does ‘cashing out equity’ work?

It might sound complicated – but we promise it’s not.

Let’s say you bought an $800,000 house three years ago that, due to last year’s property price surge, is now worth $1 million.

And let’s also say you took out a $600,000 loan for that house, which you’ve managed to pay down to $500,000 (you little beauty!).

By refinancing that $500,000 loan into a $700,000 loan (70% of your property’s new market value), you can unlock $200,000 in equity to help fund a deposit for your renovations or to buy an investment property.

It’s also worth noting that banks will typically let you borrow up to 80% of a property’s market value.

So if you upped the ante and refinanced to an $800,000 loan, you’d be able to unlock $300,000 in equity.

Want to find out more about unlocking the equity in your home?

If it still all sounds a little confusing, don’t stress, we’d be more than happy to sit down with you and help you work out how much equity you can unlock.

And if you decide to proceed, the good news is part of the process can include refinancing your home loan.

Why’s that good news?

Well, just because interest rates are going up, doesn’t mean you can’t scope out a better deal on your mortgage. Competition amongst lenders remains fierce, particularly if you have a decent amount of equity and a strong track record of meeting your mortgage repayments.⁣

So if you’d like to explore your options when it comes to unlocking the equity potential in your home, get in touch today – we’d love to help you crunch the numbers.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.