At the start of each year our focus is often on eating healthier, losing weight and travelling more while our financial and property goals tend to fall by the wayside.
Whether you’re an owner-occupier or an investor, here are 7 New Year Resolutions sure to put you on the road to property success in 2016:
Whenever you have a free afternoon take out time to do your own home loan health check. What’s a home loan health check, you ask?
It involves looking at all the aspects of your home loan and finding ways where you can save money. For instance, you may consider downgrading to a basic loan if you find you’re paying service fees on features you don’t even need.
Investors who have recently moved into their investment property should take extra care to ensure their investor loan is changed over to owner-occupier to avoid unnecessarily paying higher investor loan rates.
Your lender may have increased variable interest rates but that doesn’t mean you have to settle for higher repayments on your home loan. Say you have a $300,000 loan at the average standard variable rate of 4.67%, by switching to Bank Australia’s Basic Home Loan at 3.98%, you could save $177 per month –that’s $34,913 over a typical 25 year term.
Interest rates aren’t the only thing to consider when it comes to refinancing. Be sure to check whether the home loan has any features you may need such as an offset account or extra repayment facility, and of course, what upfront and ongoing monthly fees are involved.
As a general rule, you should only consider switching home loans if you recover the money you spent on refinancing in the first 12 months.
Historically low fixed rates and lenders’ decision to independently increase variable interest rates make a good case for homebuyers to fix at least a portion of their home loan this year. Just a quick search of Mozo’s database uncovered a handful of providers with competitive 2 and 3 year fixed rates under 4%.
If you do fix make sure you’re in it for the long term because you’ll be up for hefty break costs if you terminate the loan before the fixed period ends. Once the fixed rate ends, be prepared to shop around for a better deal in case the revert variable rate isn’t as competitive as the interest rates charged by other lenders.
Spring property buying season is months away but there are still plenty of things you can do to get yourself primed and ready. For instance, start by working out how much you can afford to borrow and decide upon 2-3 suburbs that fall within your price range.
The next step is to get a pre-approval from your lender so you’ll know exactly whether your loan will be approved or not come auction time.
Commit yourself to putting at least 20-30% of your income aside every week. You may need to forgo a couple of luxuries this year to keep to this benchmark but you’ll get a deposit together quicker and be in a better position to negotiate with your lender on several aspects of your home loan including interest rates.
Good news is you don’t have to wait for the RBA to get your own interest rate cut this year. Fierce competition amongst lenders especially in the owner-occupier market means banks are more prepared than ever to negotiate their rates to keep valued customers.
In fact, a mystery shopping exercise revealed Mozo staffers posing as borrowers were able to negotiate up to 1.25% off the average standard variable home loan rates from the Big 4 banks. On top of a nice rate cut, staffers were offered other impressive incentives including $1,500 cash back.
The thought of haggling your bank may send a shiver up your spine but it’s easier than you think when you don’t settle for the advertised price and do your research on what rates you can get elsewhere.
Add capital growth to your property this year by donning on a pair of baggy denim overalls and renovating.
When renovating make sure you steer clear of overcapitalising, which occurs when the renovation costs are greater than the increase in value to the property. For instance, a newly renovated kitchen could add up to 5% value, which on a $500,000 property may seem a profitable enterprise until you have to foot a $50,000 renovation bill.
Whether you’re hiring tradespeople or doing it yourself, it’s worthwhile to get a couple quotes to have a rough idea of what it’s going to cost so you’re not overspending if you opt to do the renovation yourself.