Author: Xavier Quenon

Residential construction costs have increased at a record annual rate, according to the CoreLogic Cordell Construction Cost Index.

Home building costs in the September quarter were 11.0% higher than the year before. That was a sharp increase on the 10.0% increase in the June quarter and also higher than the previous record of 10.2% from 2001.

CoreLogic construction cost estimation manager John Bennett said costs were continuing to rise, especially across timber and metal materials, which was affecting framing and reinforcing.

“In particular, we are recording significant volatility in pre-fabricated framing and the range of products affected by higher building material costs is only growing, with many suppliers having little choice but to pass on price increases,” he said.

“This quarter [September] has also shown a larger increase in the cost of wall linings, including plasterboard and fibre cement, which previously had been relatively stable. It will cost you more to get into your house too, with the price of doors showing a sharp rise in the last quarter.”

Conditions unlikely to improve anytime soon

CoreLogic research director Tim Lawless said the ongoing increase in construction costs would have a big impact nationally.

“This new high in the cost of construction flows through to margins, unexpected costs for consumers and potentially lengthy delays to homeowners who are waiting on the sidelines, often in rental or short-term accommodation, for the completion or possibly the start of their project,” he said.

“We also forget the impact to existing home owners and the insurance industry, as they struggle to reassess existing policies in a timely manner to make sure they are adequately covered in the event they need to make a claim.”

Mr Lawless said labour shortages and supply issues meant it was likely conditions in the construction industry would remain challenging in the short- to medium-term.

“The backlog of construction approved during COVID is still being worked through and on top of that is the rebuild and repair work following this year’s major weather events, with more forecast this month. The demand and pressure for construction materials and trades is expected to continue,” he said.

“There’s no quick solution for providing additional materials and fuel costs remain elevated. All of these factors have an impact and are likely to push building costs higher for some time yet.”

One of the key components of building a new home or planning a major renovation is organising the finance. Get in touch if you’d like to discuss your construction loan options.

Many homeowners set up their home loan repayments to automatically be debited from their account – knowing they are slowly chipping away at their debt without needing to put much further thought to it. But when is a good time to refinance your home loan?

However, this set-and-forget mentality could actually cost you thousands in interest repayments. How? Because interest rates are constantly changing and many lenders are offering deals to entice borrowers across. This means there could very well be a lower interest rate available to you. When was the last time you compared your home loan? If it has been more than a year, then it is a good idea to get onto it.

Finding a lower interest rate isn’t the only reason why you may choose to refinance your home loan. By comparing your options you may also be able to find a loan with more features that you want, free up equity or you may be able to consolidate multiple debts into one.

Here are four of the key reasons you may consider refinancing your home loan.

1. Find a more competitive interest rate

One of the most common reasons homeowners look to refinance their mortgage is to get onto a more competitive interest rate. With a lower interest rate you could lower your monthly repayment without altering the amount of interest you pay over the term of your loan, or maintain your repayments but pay your loan off sooner.

The interest rate isn’t the only consideration when refinancing. Some lenders offer home loan refinancing deals to entice borrowers. These often come in the form of a cash payment or waived fees. A cashback deal should not be the main determinant of whether you switch to a lender. However, this can be factored into the calculation of how much you could save you over the life of the loan.

2. Access equity

If you need additional funds, such as for renovations, you may be able to use equity built up in your property. This could be done through refinancing your loan amount by leveraging the equity as security. This allows the borrower to take out funds up to a certain limit at any time.

3. Make use of features

Not all home loans are equal – some come with features attached that may be useful for some borrowers. Some offer offset accounts or redraw facility that can enable you to put more money toward paying off the loan. This will save you in interest, but you can access it if you need it. Note that often these features come at an additional price tag. So it is a good idea to calculate the potential savings while considering the fees.

4. Consolidate debt

If you have multiple debts, such as credit cards, car loans or personal loans, it may be a good idea to consolidate them into one. This could merge repayments so you only have one and potentially get your other debts into a loan with a lower interest rate.

When can you refinance a home loan?

There is no hard and fast rule around when you can refinance your home loan. The key consideration is fees. For example, if you currently have a fixed-rate loan, you will likely incur break fees if you wanted to refinance. There are also fees such as application and discharge fees, property valuation fees and more. Because of this, it isn’t particularly common for people to refinance in their first 12 months – though it is possible.

Other common triggers for people to consider refinancing are major changes in your life, such as marriage, death in the family, birth of children or a change in career, you may choose to look at your options to refinance.

It is a good idea to regularly conduct a health check on your home loan to ensure you have a competitive interest rate and are getting the most out of your features – Start your health check by clicking here

Or Call us today if you have more questions about whether it is a good time for you to refinance?

The Reserve Bank of Australia (RBA) today increased the cash rate for the seventh month in a row. The cash rate increased from 2.6% to (2.85%?).

Australians are feeling the pinch as interest rates rise across the board. Whether paying off a mortgage or saving to purchase property, the cost to service a loan is increasing. This combined with high inflation, growing cost of living and relatively stagnant wage growth has made it an important time to double down on saving money where possible.

While you may not be able to avoid increasing interest rates if you are on a variable interest rate or an expiring fixed rate loan, there are a number of ways you could still save money.

Six tips to save in an interest-rate-rise environment

Some ways you could save money while interest rates continue to rise include:

1. Refinance: Get your broker to check if you can reprice or refinance your loan to a lower rate or for lower fees.
2. Consider your package: Your broker can also check if your home loan package suits your needs. Switching to something more basic if you are not using all the features could save you in fees. Or if you would make use of additional features that could save you money, such as an offset account, your broker can run the calculations for you to determine if it is worth switching.
3. Change the term: You could consider extending the term of your loan to lower repayments. Keep in mind this means you will be paying more over the life of the loan, but is an option if you are experiencing cash flow problems now.
4. Check your budget: By making note of all your expenses, you could identify areas where spending could be reduced. This could include memberships, subscriptions or luxury purchases. This calculator can be a good place to start.
5. Offset account/redraw facility: If you have an offset or redraw facility, now is a very good time to make use of them. By putting money into your offset or additional repayments on your loan, you will save on interest which becomes even more money as interest rates rise.
6. Extra repayments: If your loan allows for it, consider making extra repayments now, which can save you money in the long run as interest rates continue to rise.

If you are looking for ways to save on your home loan, speak to your broker for a free, no-obligation home loan health check. We can also discuss your options and right strategy to achieve your goals.

Getting pre-approval for your home loan can give you an understanding of your borrowing power and confidence your lender is satisfied with your preliminary application. It means it is time to get out there to find your home.

To help you on your way, here is a quick overview of what your pre-approval means.

The basics

A pre-approval is basically the lender giving you the heads up that they feel comfortable lending a certain limit to you, based on the circumstances we presented to them. There is no obligation for you to take out the loan and equally, the lender is not guaranteed to approve the loan approval – particularly if your circumstances change. It does, however, help you to refine your property search, bid with confidence and show vendors you are serious about buying.

How long is pre-approval for and what can I do if it is expiring?

In general, pre-approval can be around two or three months, depending on your lender. Your paperwork sent separately will outline the expiry date of your pre-approval.

If the expiration date of your pre-approval is approaching, reach out. We can discuss your options and since we already have your documents on hand, can potentially fast-track an application for an extension or a new pre-approved product.

Are there limitations to a pre-approval?

It is important to note the pre-approval is conditional (and based on your circumstances at the time of application), and not an absolute guarantee of being approved for the loan. That said, we will work with you to do everything in our power to get your finance across the line, and the pre-approval is a solid indication the lender is comfortable lending to you. If any of your circumstances change, let us know and we can discuss whether this could change your application.

Some lenders have restrictions around the type of property you can purchase and will also conduct an evaluation before the loan is approved to ensure it is satisfied with the value offered. Some limitations can include:

• Serviced apartments
• High-density properties in inner-city areas (particularly if you have less than a 20% deposit)
• Commercial or company title properties
• Properties under 50sqm

Does my pre-approval change if interest rates rise?

Small changes in interest rate increases are unlikely to impact your pre-approval as the lender will take this into account as a possibility when assessing the approval. However, pre-approvals are conditional, meaning if there are major changes between getting the pre-approval and applying for the loan – such as changes to your income or interest rates increasing significantly – your borrowing power and loan application could be impacted. Because of this, it is a good idea to speak with us before making an offer on a property and including a finance clause in any home purchase contract.

I found a property I like. What next?

If you’ve found a property you believe is in your price range, it is time to make an offer. Reach out to us first to ensure it satisfies the lender’s criteria and to receive your free property report. This report shows you the previous sales data of the property as well as recent transactions in similar properties nearby to give you an indication of what the property you like may be worth.

The way you make an offer, and the legalities around how binding the offer is, depends on the type of sale. For example, auctions are unconditional so your bid is binding. If you are asked to make an offer on a property on a contract, or your bid is accepted and you are sent the contract, speak with your solicitor or conveyancer to ensure you are satisfied with any conditions, including cooling-off periods and building and pest inspections. Even though you have pre-approval, it is usually a good idea to include around ten days for finance approval, but speak with us if you have any questions about this.

Remember to let the real estate agent know you have pre-approved finance so they know you are serious and likely able to move quickly. This can give you a competitive advantage.

My bid was accepted. Now what?

Congratulations! This is an exciting time, and the next few weeks will be busy to lock everything into place ready for settlement. Firstly, contact us to let us know and we can let you know what comes next.

You will usually be required to pay a deposit to secure the property. For auctions, this is often a 10% non-refundable deposit, and for other sales it can be 25% of the purchase price. Make sure you have this deposit money ready to go, and understand what you need to do based on your contract. Your solicitor or conveyancer can help with this.

Once we have a copy of your signed contract, we will work with you and your chosen lender to get your loan formally approved and finance ready by your settlement date. We will keep you updated every step of the way.

Whether you are just beginning your property-purchase journey, or adding to your portfolio, a common stressor is determining how much to offer and how to put your best foot forward when there is competition. As we arguably enter a slightly better buyers’ market than the start of the year (house price growth as a national average has stagnated or declined and listings are up year-on-year), there may be more time to breathe and consider your approach to putting in an offer.

An important thing to keep in mind is to only ever bid within a range you know you can comfortably afford, regardless of emotional attachment to the property. To determine your comfortable range, it is a good idea to speak with a broker who will calculate your borrowing power and show you how much your repayments will be. It is also important to factor in potential rising interest rates and ensure you have a buffer, so you can be confident you can meet repayments into the future.

You might also consider getting pre-approval for your home loan. This can give you confidence when making an offer by understanding the total amount your chosen lender is likely to approve you for once your bid is accepted.

Once you are aware of your borrowing power and are confident you are comfortable with your potential repayments, the bidding can begin. Here are some quick tips to help you on your bidding journey.

1. 1. Keep an eye on the market. See what other, similar properties in the area are selling for to give you an idea of what is a good deal and what may be overpriced.
   2. Reach out for a property report. I can provide this free of charge, showing the approximate value of the property you are interested in and listing other recent sales in the area.
   3. Attend open homes. Even if you don’t think you want to bid for that property, it can help to understand demand in the area.
   4. Create a shortlist. By having a few homes on the radar you could be less likely to develop an emotional tie to one, which can lead to bidding higher than you were comfortable with.
   5. Research the property. It can pay to view your council’s natural disaster maps and flood zones to see if the property could be impacted. You may want to speak to an insurer to get a quote to find out if there are unexpected exclusions for that area, or if statistics such as crime rates could increase the premiums.

If you’re heading to an auction, Ray White Frankston Principal, Ashley Weston gave the following tips.

• Knowing your maximum bid is just one part of being prepared. Knowing how much each extra bid will cost you in weekly repayments can help you make the tough decision of whether to keep bidding or not.
• At an auction there is no cooling off period, the property is sold when the hammer falls. If you are worried about getting too emotional in the auction process you can make someone bid on your behalf, with your instructions to purchase.
• Ensure you know the conditions of the sale before you bid so you know when the property would settle.
• Open the bidding confidently at a respectable price to show you mean business.
• Bid boldly, confidently and don’t show any sign of weakness.

If you’re preparing to make a bid, feel free to reach out for a chat for more tips about determining the amount you can offer and ways to improve your chances of being accepted.

Many homeowners set up their home loan repayments to automatically be debited from their account – knowing they are slowly chipping away at their debt without needing to put much further thought to it.

However, this set-and-forget mentality could actually cost you thousands in interest repayments. How? Because interest rates are constantly changing and many lenders are offering deals to entice borrowers across, meaning there could very well be a lower interest rate available to you. When was the last time you compared your home loan? If it has been more than a year, then it is a good idea to get onto it.

Finding a lower interest rate isn’t the only reason why you may choose to refinance your home loan. By comparing your options you may also be able to find a loan with more features that you want, free up equity or you may be able to consolidate multiple debts into one.

Here are four of the key reasons you may consider refinancing your home loan.

1. Find a more competitive interest rate

One of the most common reasons homeowners look to refinance their mortgage is to get onto a more competitive interest rate. With a lower interest rate you could lower your monthly repayment without altering the amount of interest you pay over the term of your loan, or maintain your repayments but pay your loan off sooner.

The interest rate isn’t the only consideration when refinancing. Some lenders offer home loan refinancing deals to entice borrowers. These often come in the form of a cash payment or waived fees. A cashback deal should not be the main determinant of whether you switch to a lender, but can be factored into the calculation of how much you could save you over the life of the loan.

2. Access equity

If you have a need for additional funds, such as to conduct renovations on your home, you may be able to use equity built up in your property. This could be done through refinancing your loan amount by leveraging the equity as security, or potentially accessing a line of credit loan, which allows the borrower to take out funds up to a certain limit at any time.

3. Make use of features

Not all home loans are equal – some come with features attached that may be useful for some borrowers. For example, some may offer an offset account or redraw facility that can enable you to put more money toward paying off the loan, which will save you in interest, but access it if you need it. Note that often these features come at an additional price tag, so it is a good idea to calculate the potential savings while considering the fees.

4. Consolidate debt

If you have multiple debts, such as credit cards, car loans or personal loans, it may be a good idea to consolidate them into one. This could merge repayments so you only have one and potentially get your other debts into a loan with a lower interest rate.

When can you refinance a home loan?

There is no hard and fast rule around when you can refinance your home loan. The key consideration is fees. For example, if you currently have a fixed-rate loan, you will likely incur break fees if you wanted to refinance. There are also fees such as application and discharge fees, property valuation fees and more. Because of this, it isn’t particularly common for people to refinance in their first 12 months – though it is possible.

Other common triggers for people to consider refinancing are major changes in your life, such as marriage, death in the family, birth of children or a change in career, you may choose to look at your options to refinance.

It is a good idea to regularly conduct a health check on your home loan to ensure you have a competitive interest rate and are getting the most out of your features.

Call Us Now to see whether it is a good time for you to refinance and to set your strategy to achieve your financial goals.

You’ve found the property. Your broker has helped you find the right loan with a competitive interest rate and all the features you want. You’ve completed the application and now you’re waiting for settlement. As the day comes you look through the paperwork but that competitive fixed interest rate you applied for has just jumped without notice. Your monthly repayments are suddenly set to be higher than you anticipated and you’re locked into the loan for your fixed period.

It isn’t a scenario anyone would want and many people may not be aware that this can actually happen. Interest rates regularly change in response to market conditions, and the fineprint in your loan application likely specifies that the interest rate can change between application and settlement date. But there is a way to safeguard against this, and it is called a rate lock.

What is a rate lock?

A rate lock is an optional feature that may be available to applicants of fixed-rate home loans. It enables you to secure a rate, meaning even if interest rates rise, yours won’t. The lender usually charges a fee for this feature, but speak to your broker as this fee varies and some lenders may offer it for free.

The amount of time the rate lock lasts will also vary between lenders, for example 60 or 90 days, so if you have a longer settlement, your broker can discuss which lenders may be right for you.

How much are rate lock fees

The rate lock fee will vary depending on the lender but tends to range between free to around 0.2% of the loan amount. So for a $400,000 loan this amount could be around $800. The average is lower than this and tends to be around $750 for a $500,000 loan.

When should I consider a rate lock?

Rate locks tend to be most appealing when fixed interest rates are predicted to increase, for example if some banks have started increasing their interest rates and others are predicted to follow suit. It also is usually more beneficial for a longer fixed term as there is more the borrower stands to save over the life of the loan. Your broker can run the calculations for you to determine how much the interest rate would need to change to warrant the upfront rate lock fee.

It is important to keep in mind that if a lender lowers its interest rate and you have opted in for a rate lock, you are not necessarily guaranteed the lower rate. Each lender has a different policy around this and you may need to negotiate to see if you can cancel the rate lock to access the lower interest rate, which your broker can do on your behalf.

Also, this fee may be non-refundable even if your application is unsuccessful. Speak with your broker to put your best foot forward with your application and understand where you stand with lenders.

It is a good idea to read the terms and conditions of the home loan you are considering, including the Target Market Determination (TMD) and Key Facts Sheet (KFS). Your broker can also help to highlight key points for consideration and how they may impact you.

If you are wondering whether to opt in for a rate lock, speaking to your broker to understand the pros and cons and calculate your potential savings is your best strategy.

Want to look at your options? Call Us Now on 1300 855 244 to get the ball rolling