Downsizers are tipped to take advantage of ‘the perfect storm’ and get the most out of the property market this year, predicts the national body representing professional buyers’ agents.
With softer lending conditions and strong property prices tipped for 2020, cashed-up downsizers looking to sell the family home and move into apartments or regional areas are in the box seat, says Real Estate Buyers Agents Association (REBAA) president Cate Bakos.
“With the potential for further low interests, softer lending conditions and low stock levels, it could be ‘the perfect storm’ for downsizers this year,” says Ms Bakos.
“The sorts of challenges that most buyers face – including valuations and gaining finance approval – is obviously not a concern for a buyer who is not impacted by a shortfall.”
Ms Bakos adds that low loan-to-value ratios, or even cash purchases, will eradicate any concerns about valuation dilemmas and make downsizers a formidable opposition at any auction.
“There is no doubt that wealthy older buyers – downsizers, baby boomers, empty nesters, retirees – will be a powerful force in the property market in 2020 and one that won’t be going away soon,” she says.
Interested in the idea of downsizing? You’re not alone.
In fact, more than half of Australians over the age of 55 are open to downsizing, according to another recent report by the Australian Housing and Urban Research Institute (AHURI).
According to the report downsizers are mobile, with nearly half moving to new neighbourhoods; the main reasons for downsizing were lifestyle, financial considerations and reduced maintenance.
“While downsizing may include a reduction in dwelling size, to older Australians it points to a housing aspiration where the internal and outdoor spaces are manageable, and represents a financial benefit,” explains lead report author Dr Amity James.
In fact, most downsizers move into a dwelling with three or more bedrooms, the report shows.
“Most downsizers still want space and regard spare bedrooms as necessary in a dwelling,” Dr James adds.
If you’re interested in downsizing to improve your lifestyle and reduce home maintenance then feel free to get in touch.
We’d be more than happy to chat with you about all things finance for that new home you’ve got your eye on.
Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute 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.
How much do you think the average Aussie spends on gifts each month? $20, $50 or 100? (hint: we’re a generous bunch). Today we’ll look at why it’s important to budget for these expenses correctly, rather than succumbing to ‘buy now, pay later’ services.
Did you know Australians spend nearly $20 billion a year on gifts?
That’s about $1,200 each per year, or $100 a month, according to a new research report by the Financial Planning Association of Australia (FPA).
It turns out that Gen Y is by far the most generous age bracket (25-39), spending $130 on gifts each month, well ahead of Gen Z ($91), Boomers ($89) and Gen X ($87).
Ok, so here’s where this feel-good story starts to get a tad concerning: three in four Australians (73%) do not budget for gifts at all.
Now, with the average gift costing between $66 and $137 (depending on the occasion), that’s enough for some households to turn to ‘buy now, pay later’ services.
And make no mistake: these ‘buy now, pay later’ services are booming.
Market leader Afterpay saw its shares rise by 8% this week alone, with the company now valued at more than $7 billion.
In fact, in the 12 months to January 2019, 1.59 million Australians used one of the latest ‘buy-now-pay-later’ digital payment methods, with a whopping 40.6% of its customers being Millennials.
That’s right – Millennials, who are not only by far the most generous gift-givers, but are also seeking to enter the mortgage market for the first time.
According to recent media reports, lenders are increasingly trawling through bank statements for evidence of outstanding ‘buy now, pay later’ accounts when prospective borrowers apply for a loan.
In one incident, a 21-year-old NSW woman said a couple of hundred dollars worth of Zip Pay purchases, all of which had been paid off, almost prevented her from getting a bank loan to buy her first car.
“I honestly never thought it would impact me being able to get a loan. I am now petrified of using it at all, as I really want a house,” she said.
In another incident, a big 4 bank knocked back a 26-year-old Perth woman’s mortgage application after discovering she had an outstanding Afterpay balance.
These are just two examples of the importance of making sure you factor gifts into your monthly budget to ensure you aren’t setting off a lender’s warning bell by using ‘buy now, pay later’ services.
If you’ve used a ‘buy now, pay later’ service to buy a gift for a friend, family member or even yourself, there are steps you can take to help minimise the impact it might have on your next loan application.
Your most obvious course of action is to pay it off as soon as you can, and then avoid using the service again in the future.
And look, let’s be honest, no one likes a Scrooge, so your next step would be to ensure you’re including an allocated (and realistic) amount for gifts in your monthly household budget moving forward.
If you’d like to know more, or want a hand getting your monthly budget in order before applying for finance, then get in touch – we’d love to help out.
Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute 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.
Reckon you could scrounge together an extra $50 each week to pay off your mortgage? If so, latest modelling shows the average household with a $400,000 loan could save $46,992 and pay off their home loan four years faster.
This week we’re going to look at the benefits of paying just a little bit more off your mortgage each week.
Now, this is quite a timely subject because the RBA has just delivered back-to-back cash rate cuts, so even if your monthly repayment amount has been reduced, there’s a lot to be gained by sticking to the same amount you’ve been paying over the last few years.
One of the biggest problems people run into when trying to pay off their mortgage faster is trying to do so in big, irregular lumps.
It helps a lot more if you break it down.
So instead of trying to pay an extra $150 to $300 extra each month, break it down to a weekly amount that you can actually commit to, like $20 to $50 a week (or $3 to $7 a day – basically one or two takeaway coffees).
Breaking it down into smaller figures also helps reinforce good habits, and can help with your family’s cashflow.
Below, we’ll look at some modelling conducted by AMP that shows the benefits of setting up a weekly direct debit that will automatically pay an extra $20 to $50 a week off your mortgage.
– $400,000 loan: save $21,281 in interest and pay it off 1 year and 9 months faster
– $400,000 loan: save $46,992 in interest and pay it off 4 years faster
– $400,000 loan: save $78,828 in interest and pay it off 6 years and 11 months faster
Check out the full list here, which covers loans of $300,000, $500,000 and $1 million. All the calculations assume that you’re five years into a 30-year average home loan.
If you want some more tips on paying off your mortgage sooner – or you want to discuss your refinancing options – then get in touch.
We’ve got plenty of ideas up our sleeve and always love sharing what we’ve learned with our clients.
Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute 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.
Welcoming a baby into your family is one of the most joyous occasions of your life. But just like anything worth celebrating (such as your wedding day or buying your first property), it’s not without its expenses.
How quickly they grow! The bills, that is.
Did you know it costs roughly $300,000 to raise a child from birth to age 17?
If you break that down, that’s $1470 a month.
This can put a significant strain on your monthly budget and mortgage repayments.
Rest assured, however, there are several steps you can take in advance to minimise the impact on your new family’s bottom line.
The upfront expenses are really going to whack your budget hard. So it’s best to obtain the items you’ll need well in advance to spread the cost.
Of course, you can purchase a brand new bassinet, playpen, clothing, car seat, cot, stroller, toys, high chair and changing table.
But chances are you don’t really need that fancy, brand new $1,000 cot. Focus on your needs instead of your wants, because wanting can quickly add up.
There’s absolutely nothing wrong with obtaining gently-used items second-hand, either at a substantial discount through trading websites or for free from a family member or friend. Remember that bub outgrows everything quickly anyway.
If you worked before having your baby and made under $150,000 annually, you could be eligible for the government’s Paid Parental Leave program.
You do have to apply, but you get 18 weeks of minimum wage benefits (amounting to $719.35 per week before taxes).
There’s also a two-week partner and dad pay option available, and take time to check into your company’s leave programs.
Unless you plan to stay home with your children or have family members who will help provide childcare, get your name wait-listed at several childcare facilities.
Availability is a huge issue, so getting on the lists quicker will help in the long run. You can use the Childcare Subsidy Estimate Calculator to figure out if you’re eligible for entitlements.
It’s common for Australians to have total and permanent disability and death benefits through their super fund.
However, while the life insurance coverage may have been adequate pre-children, there’s a good chance it won’t be enough for a single parent to comfortably raise a child.
Additionally, you don’t want to fall into the trap of just insuring the breadwinner in your family. Everyone should have coverage in case something happens to one, or both, of the parents. This can be a complicated area to navigate alone though, so be sure to seek financial advice.
Even if you don’t have significant assets or debts, you need a will if you have children.
Not only does a will specify what your family does with your belongings (including your super and insurance), but it also specifies who makes decisions if you can’t make them yourself, any wishes you may have, and who will take over raising your child or children if both parents pass.
If it’s possible before the baby comes, prioritise your existing debt and work on paying it down – or off – before the baby is born.
Once the baby arrives, you may not have a whole lot of spare cash to put toward any existing balances. Consider consolidating your debts or speaking to us about refinancing your loans or mortgages to one with a lower interest rate.
One of the best things you can do is update your monthly budget with your newest family member in mind. It’s also great to start living on this budget before your bundle of joy arrives – start practising living on less.
You can update (or create) your budget using ASIC’s Budget Planner. Don’t forget to include your quotes for childcare and any new miscellaneous expenses you’re likely to incur.
If you don’t have an emergency fund, start one. You’ll want to have at least three to six months worth of living expenses saved, with the goal of at least a year’s expenses.
This can provide a buffer that you and your family fall back on if you run into unexpected expenses like an accident, the car breaking down, or something in the house needing immediate replacement.
The last thing you want during this happy time is to worry about your finances. That’s why it’s so important to prepare as early as possible.
If you’d like help with any of the steps above, then please get in touch. We’d love to help make sure that your first few months as a new family are enjoyable ones!
Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute 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.
With a federal election due in May, the 2019 federal budget is more a series of election promises than it is a set-in-stone budget. That aside, here are some of the more interesting talking points and what they’ll mean for your family’s monthly budget.
The winners from the 2019 federal budget are middle-income workers, small and medium businesses, and older Australians wanting to ramp up their super contributions.
The losers? Well, there was no direct announcement aimed at homebuyers struggling with housing affordability.
However, there were a number of indirect ways the budget may assist your mortgage repayment or deposit saving capacity.
Let’s take a look at a few.
Middle-income workers earning between $48,001 and $90,000 could receive immediate tax savings of up to $1080 for a single or $2160 for a dual-income family as early as July 1.
Workers who earn $90,001 to $126,000 don’t miss out on the action, either. However the more you earn over $90,000 the less you’ll receive until tax savings taper off completely at $126,001.
High-income earners could also benefit under the Coalition’s plan to flatten the tax brackets, albeit by 2024-25.
Essentially, all taxpayers earning between $45,000 and $200,000 would have their tax rate reduced to 30%.
This would see a couple earning $200,000 per person receiving total household tax relief of $23,280.
However, as the changes are not scheduled to come into effect until 2024-25, and Labor does not support the plan, the Coalition would need to win the next two elections to implement it.
Tax rates for small and medium businesses will drop from 27.5% to 26% next year, before falling to 25% in 2021.
The government is also increasing the instant asset write-off threshold from $25,000 to $30,000 per asset and will make it available to businesses with an annual turnover as high as $50 million (up from the current $10 million cut-off).
Meanwhile, apprentice incentive payments are being increased for businesses that employ carpenters, plumbers, hairdressers, bricklayers, plasterers, bakers, vehicle painters, tilers and arborists, to name a few.
Employers will have their apprentice incentive payments doubled to $8000 per placement, while apprentices will receive a $2000 incentive payment.
Australians aged 65 and 66 will be able to make voluntary superannuation contributions without having to work at least 40 hours over a 30 day period.
They’ll also be allowed to make up to three years worth of voluntary contributions ($300,000 in total) in just one year if they wish.
The government is also increasing the age limit for spouse contributions from 69 to 74 years.
A one-off Energy Assistance Payment, worth $75 for singles and $125 for couples, will help age pensioners, people on the Disability Support Pension, veterans, carers, single parents and Newstart recipients cover the cost of rising power prices.
Today we’ve covered the federal budget measures that may have a direct impact on your finances, but there were plenty more announcements that we haven’t touched upon, including infrastructure and transport projects, national security, pre-school education, healthcare, welfare, mental health initiatives, and regulator and compliance funding.
If you have any questions about any of the potential changes arising from this year’s federal budget and how it may affect your family budget, please get in touch. We’d be more than happy to discuss it with you.
Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute 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.
As technology continues to evolve, so too do the challenges of keeping your family budget in check. This week we’re going to look at a couple of technological trends that could put your family budget under some real strain in 2019.
Sure, having everything there at the click of a button these days is convenient. But convenient isn’t free.
In fact, it can blow out your annual family budget by thousands of dollars each year, which can put strain on more important bills such as your mortgage and utilities.
Below we’ll explore a couple of the technological trends that are really starting to chew up more and more of the average Australian household budget.
Remember the good old days when you used to ring up your local Thai restaurant and place an order directly with the store?
Sure, you’d have to pick it up, but you paid less and the restaurant got the full cut.
Those days seem long gone since Uber Eats, Deliveroo, Menulog and other food delivery services burst onto the scene.
These days you pay about $5 extra each time you order through Uber Eats, and they claim about a 35% commission.
But it’s not just the extra expense per meal. The thing about these apps is that they make it all too tempting to skip making dinner and order takeaway instead.
More than half of Australians are now struggling to plan and cook meals and turn to these apps instead, according to a survey by Australian Beef, and it’s costing an extra $4000 per year in some cases.
The solution? Spend more time cooking fresh food instead. Rather than thinking of it as a chore, consider it an option to spend more time participating in an activity with your loved ones.
It’s cheaper, healthier and more fun!
Video and music streaming subscriptions services have exploded in popularity over the last two to three years.
Entertainment giants have realised that the best source of revenue is recurring revenue, so they’re all climbing over one another to win over your hard earned cash.
One or two subscription services obviously won’t have too big of an impact on your bottom line (in fact it may even save you money), however problems start arising if you subscribe to a number of them.
For example, there’s Netflix ($18/month), Stan ($17), Foxtel ($50), Kayo ($25), Spotify ($12) and 10 All Access ($10), to name but a few.
Taking out just Netflix and Spotify would cost you $360 a year – about a dollar a day.
Subscribe to the whole lot however and you’re looking at an extra $1200, not to mention any other services family members may subscribe to such as Xbox Live, Podcasts, Youtube Premium, Twitch and Amazon’s Audible.
Long story short: they can add up very quickly!
The solution? Stick to your favourite one or two.
There’s plenty of free entertainment options out there, such as ABC iview and SBS on Demand.
And sure, it might be a bit old fashioned, but your local library is free and offers an endless stream of entertainment.
Don’t get us wrong: we’re definitely not saying you should shun technology altogether. After all, it makes everything much more convenient.
Rather, instead of the the technology harnessing you, harness it instead.
If you use it wisely and in small doses you can get the best of both worlds: an enjoyable today and a well-funded future.
Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute 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.
We all experience times in life when we just can’t wait to get our hands on that shiny new item. But as the old saying goes: good things come to those who wait.
Afterpay is the largest buy now, pay later scheme in Australia.
In fact, Afterpay had more than $1.45 billion pass through its platform in the first three-quarters of last financial year.
It boasts more than 1.8 million customers, who mostly use it for online apparel shopping, and 14,000 retailers under its wing.
The reason for Afterpay’s rapid rise is its interest-free, instant purchase business model.
To qualify, all a customer needs is a debit card, enough money for the first instalment and no proof of income. Customers then pay the final three instalments a fortnight apart.
Interest-free. Instant. Too good to be true?
Here’s the thing. As you can make many purchases with Afterpay without proof of income, before you know it you could adopt bad spending habits and may fall into debt.
Now, late payment penalties are capped at $17. But if you’ve made multiple purchases and you’re defaulting on all of them, the debt and fees rack up.
Afterpay, and its competitors such as ZipPay, are still credit liabilities and need to be disclosed when applying for a home loan.
And the banks are getting very stringent on who they lend money to these days due to the regulator crackdown.
In the current tightening lending market this could hamper your efforts to obtain a home loan if you’ve racked up quite the Afterpay bill. Especially if it’s obvious that you’re struggling to pay it off.
Additionally, the Terms of Service on the Afterpay website state:
“Afterpay reserves the right to report any negative activity on your Afterpay Account (including late payments, missed payments, defaults or chargebacks) to credit reporting agencies.”
This means that your credit score may be affected if you fail to meet repayments.
And last year alone Afterpay netted $11 million in late payment penalties.
Financial independence is not about racking up debt for shopping.
It is about saving money for a rainy day, rewarding yourself with purchases when you hit savings targets, and protecting your borrowing capacity for appreciating assets – not depreciating items.
Additionally, you never know when you will need money to pay for an emergency or capitalise on an opportunity.
You or a family member may become sick, or you might want to expand your property portfolio.
For all these things it helps to have extra cash on hand.
So if you can’t afford it, don’t buy it. Sure it’s hard, but short term pain is long term gain.
Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute 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.
