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First-home buyers to take advantage of new government scheme in 2020

By |2019-12-06T10:09:48+11:00November 2nd, 2019|Finance News|

There could be 20,000 first-home buyers in 2020 who buy their property with a deposit of as little as 5 per cent under the new federal government home loan deposit guarantee scheme.

The number of applicants across Australia will be capped at 10,000 every financial year, but as the initiative begins on January 1, there will be a double opportunity during 2020.

The 10,000 opportunities that allow low-and middle-income earners to participate on a first come basis from January 1 and then from July 1

Even with 20,000 likely participants in 2020, it is likely some 80,000 first-home buyers will need to find their own regular borrowing arrangements.

Sydney first-home buyers wanting to buy next year using the federal government’s new home loan deposit scheme will need to buy properties costing less than $700,000.

The price cap will also apply to the large NSW regional centres with a population of 250,000 plus, namely Newcastle, Lake Macquarie and the Illawarra around Wollongong.

Buyers in the rest of the state can spend up to $450,000 to be eligible to buy under the scheme.

The Sydney house median sits at $900,000 and for units it is $710,000 according to CoreLogic.

The scheme, to be known officially as the First Home Loan Deposit Scheme (FHLDS), will apply to owner-occupied loans on a principal and interest basis.

Many first-home buyers are already setting their hopes based on the already available stamp duty tax incentives and available grants, which is centred around a $650,000 purchase.

To be eligible for the (FHLDS) the contract of sale must be dated after January 1, 2020.

It removes the cost of lenders mortgage insurance for FHBs with an annual income of up to $125,000 or couples with a combined $200,000 per year who haven’t saved the standard 20 per cent deposit.

There are to be no more than two borrowers on any loan and where there are they must be the spouse or de facto partner of the other borrower. Off-the-plan purchases can be made under the scheme.

If the loan relates to the purchase of vacant land, it must also relate to the construction of a dwelling.

The scheme will only apply to Australian citizens.

The loan-to-value ratio will be between 80 and 95 per cent for loans not more than 30 years.

Repayments will be required for the principal of the loan for the full period except for construction loans where the loan agreement may permit interest-only repayments.

Any building contract requires construction commencement within 26 weeks of the settlement date and the issuance of an occupancy certificate within 15 months.

Treasurer John Frydenberg and Housing Minister Michael Sukkar have been credited with getting the balance right in recognising the variations in markets around the country, between metropolitan and regional areas.

It is however likely more loans will be for apartments than houses.

The National Housing Finance and Investment Corporation (NHFIC), who will be responsible for implementing the First Home Loan Deposit Scheme, is currently seeking lenders.

Source Daily Telegraph

New depreciation legislation for Australian property investors

By |2019-11-03T09:20:37+11:00November 17th, 2017|Finance News|

In one of the most dramatic changes to property depreciation legislation in more than 15 years, Parliament has passed the Treasury Laws Amendment (Housing Tax Integrity) Bill 2017 as at Wednesday 15th November 2017, with the Bill now legislation. The new legislation means owners of second-hand residential properties (where contracts exchanged after 7:30pm on the 9th of May 2017) will be ineligible to claim depreciation on plant and equipment assets, such as air conditioning units, solar panels or carpet. The good news is that there are still thousands of dollars to be claimed by Australian property investors, as there has been no change to capital works deductions, a claim available for the structure of a building and fixed assets such as doors, basins, windows or retaining walls. These deductions typically make up between 85 to 90 per cent of an investor’s total claimable amount. Previously existing depreciation legislation will be grandfathered, which means investors who already made a purchase prior to this date can continue to claim depreciation deductions as per before. Investors who purchase brand new residential properties and commercial owners or tenants, who use their property for the purposes of carrying on a business, are also unaffected. Owners of second-hand properties who exchanged after 7:30pm on the 9th of May 2017 will still be able to claim depreciation for plant and equipment assets they purchase and directly incur an expense on. To read more about the new depreciation legislation and how this applies to a range of property investment scenarios, download our comprehensive white paper document Essential facts: 2017 Budget changes and property depreciation. It’s more important than ever to work with a specialist Quantity Surveyor to ensure that all deductions are identified and claimed correctly under the new legislation. Each and every BMT Tax Depreciation Schedule will be tailored to suit an individual’s property investment scenario, ensuring that all deductions are maximised. For investors who are planning on selling a property affected by the new rules, a BMT Tax Depreciation Schedule can be provided to assist them and their Accountant to perform a calculation adjustment for CGT liabilities.

Watch our short video to learn about the key points of this new legislation

Lenders blacklist more than 100 suburbs in new apartment crackdown

By |2017-10-18T14:09:00+11:00October 18th, 2017|Finance News|

Big banks are set to announce tougher measures to crack down on high rise apartment purchases including blacklisting more than 100 Brisbane suburbs, doubling the minimum apartment to qualify for funding, evidence of rental cash flows and tough new valuation criteria.

Lenders such as Adelaide Bank are introducing “minimum funding requirements” requiring apartments to have their own bathrooms, kitchens, laundries and windows in key rooms, such as bedrooms and lounge rooms.

Others, such as Suncorp Bank, the nation’s fifth largest mortgage lender, are circulating a confidential list of 39 Brisbane postcodes covering more than 100 city and metropolitan suburbs where the new lending restrictions will apply from next Monday.

“Our settings have been adjusted for postcodes based on recent weakness in the investment unit market in Brisbane, with evidence of a reduction in prices,” a Suncorp Bank spokesman said.

Nervous lenders are turning the screws on apartment buyers amid growing concerns about over-supply, falling prices, restrictions on foreign buyers and potential risk from combustible cladding widely used on high rise apartment exteriors.

Developers, such as Consolidate Properties, claim Brisbane has been cruelled by restrictions on financing set up to ease speculative buying in Melbourne and Sydney.

Other developers, such as ForceOne Development, have been using incentives like a free Toyota Yaris to encourage apartment sales.

AdelaideBank, a division of Bendigo and Adelaide Bank, will today (Wed) announce stricter controls on apartment lending that include bigger sizes, better design, identifiable cash flows for investor/lands and more stringent calculations of a borrowers’ capacity to repay.

‘Better the risk’

Minimum requirements for high density apartments to obtain funding include windows in bedrooms and living rooms, separate bathrooms and their own laundries and kitchens. High density apartments are complexes of more than 50 units or five storeys.

Minimum sizes for two bedroom apartments have been doubled to 60 square metres and timeframes for off-the-plan valuations have been reduced from six to three months to “better the risk” and “align acceptance of applications and valuers’ professional indemnity cover”.

Last month Australia and New Zealand Bank also issued a blacklist imposing tougher terms requiring borrowers to have a 20 per cent deposit.

The value of apartments has fallen by about 1 per cent in Brisbane during the past 12 months, according to SQM Research, which monitors property prices.

Several recent reports by independent consultants have warned demand will be exceeded by the estimated supply of new apartments in Brisbane, which will add to downward pressure on prices.

There is also growing investor about the outcome of current investigations into the widespread use of inflammable cladding on apartments, particularly who will be liable for its replacement.

Other lenders, including Citi, have also compiled postcode blacklists amid concerns about over-supply and falling demand.

Under Suncorp’s new rules, it will no longer accept investment loan applications for apartments that do not have a minimum deposit of at least 20 per cent.

The exceptions are existing home loan applications and those received before next Friday.

How to get the best deal on your home loan interest rate today

By |2017-10-06T11:18:24+11:00October 6th, 2017|Finance News|

HOME loan customers are reveling in record-low interest rates but many could be missing out on nabbing rock-bottom deals by failing to pay attention.

The Reserve Bank of Australia has kept the cash rate on hold today at 1.5 percent — where it has sat since August last year — but there are five mortgage secrets every borrower should know to ensure they are not getting ripped off.


Lenders do not want you to contact them, but it pays to phone up and ask to speak to the retention team so you can discuss your existing rate.

Banks love customers who are on “old rates” and are paying far more than they should.

So with a fluctuating mortgage market at the moment, for borrowers particularly owner-occupiers who are on variable deals, make sure you contact your lender every three to six months to see if you can get a further discount.

If you are an owner occupier with a loan-to-value ratio below 80 percent you should be on a deal below four percent.


If your lender won’t budge on the deal you are getting now threaten to walk out.

Lenders will do anything they can to keep a customer because it costs them far more to get a new one through the door.Do some online research and find deals that are cheaper than your own and hit them with the rate offers you can get elsewhere.


It’s always surprising how many people don’t do this and stick to paying monthly which costs them more.

By making fortnightly repayments you will make 26 payments in a calendar year, compared to monthly where you will make just 12 repayments.So in short, you end up making more repayments in the calendar year by paying fortnightly or monthly and this will shave down your interest bills by tens of thousands over the life of the loan.

Try and align your repayments with when you get paid to lessen the burden when that chunk of cash is taken from your account.


About half of all home loan customers use a mortgage broker to help sign up to a home loan deal.

Brokers can be extremely helpful and they usually don’t charge you to use them, instead, they earn their money via commissions direct from the lender in the form of an upfront commission and recurring commission.

But there’s a catch — there are some lenders that offer rock-bottom deals that are not available via mortgage brokers.

And there’s a reason for this — they are not paying commissions to brokers so a result that can offer cheaper deals.

So if you are using a mortgage broker it pays to find out which pool of lenders are in their network and see if you can save by going directly to the lender yourself.


Choosing a loan term is critical and 30-year loan terms are the norm now.

But some lenders offer loan terms up to 40 years so be aware while your mortgage repayments will be lower because they are spread out over a longer term, this means you will pay much more in interest costs because of the longer loan duration.

Fewer poor performing super funds – but banks still worst offenders

By |2017-10-06T11:11:15+11:00October 6th, 2017|Finance News|

The latest annual report on ‘fat cat’ superannuation and managed funds by online investment platform, Stockspot, shows an 18 percent fall in the number of poor-value funds from last year.

However, funds owned by the big banks and AMP continue to dominate the ranks of the fat cats with high fees and poor performance; though NAB has fallen out of the top-five owners of the worst-value funds this year.

A candidate fat cat fund is one that underperforms it peers over the past one, three and five years to June 30, 2017.

To qualify as a fat cat, it has to also underperform its peers by more than 10 percentage points over five years.

Chris Brycki, Stockspot founder and author of the report, says there is 521 fat cat super and managed funds and two-thirds are managed by the big banks and AMP.

That’s down from last year when the big banks and AMP accounted for three-quarters of the fat cat funds, he says.

 As well at the fat cat funds, Stockspot identifies the “fit cat” funds – those that perform more than 10 percentage points better than peers over five years.

The big banks and AMP, the “retail” funds, do have a number of super funds and managed funds that feature in the ranks of the fit cat funds.

Brycki says the big banks and AMP have a number of “legacy” funds.

They are often closed to new members, but still have a lot of money in them, he says.

“Their newer funds tend to have lower fees but they could be doing more to migrate people across from their older, higher-fee funds,” he says.

Retail funds have pointed out that many of their customers receive fee discounts and so pay lower fees than the disclosed fees that are used in comparisons.

There is also a question mark over the accuracy of some industry fund’s reporting of their costs and fees, which do better in the report than retail funds.

“It appears many industry super funds don’t fully disclose all costs and fees,” Brycki says.

He says when the super fund reporting standards change in 2018 he suspects some industry funds with low advertised fees will report significantly higher fees.

Spaceship slashes fees

In a separate move, Spaceship, the tech-stock heavy super funds targeting the “internet generation” has slashed its fees following criticism.

Spaceship is not included in the Stockspot report as its track record is much less than the required five years.

Brycki has recently criticised the fund for its flashy marketing and celebrity endorsers which, he says, distracts people from the underlying financial product being sold and its high fees.

Spaceship was charging 1.6 per cent a year for its flagship GrowthX option. It has now cut that to 0.99 per cent.

The option has been rebalanced to include a 50 percent allocation to technology investments, up from 30 percent.

Spaceship has also launched an index fund, called the Spaceship Global Index Fund, with an annual fee of 0.65 percent.

Index investing is cheaper than using active managers who charge higher fees with the promise to outperform the  market in which they invest over time.

Spaceship has also formed an advisory board made up of Sarah Goodman, previously with the Australian Prudential and Regulatory Authority, Paul Dortkamp, an independent director of Ellerston Global Capital and Jodie Baker, the managing partner at management consultants Blackhall & Pearl.

Paul Bennetts, Spaceship chief executive, and founder, says: “The formation of this board underlines our commitment to best-in-class governance and risk management, and to making sure our members benefit from the wisdom of some of the most experienced names in the industry.”

Transition to retirement strategies are down but not out

By |2017-10-05T08:17:20+11:00October 5th, 2017|Finance News|

TAX incentives for pre-retirees have been watered down dramatically this year but there’s still a chance to grab extra cash and other financial benefits.

Lucrative transition to retirement pensions, which allowed people aged over 56 to slash their tax while boosting their nest egg, took a hit in the July 1 superannuation changes when the government made their earnings taxable just like regular super.

Super specialists say this has wiped thousands of dollars of potential financial benefits off TTR pensions.

However, super remains the lowest-tax place to park your retirement savings and the TTR pensions can still pack a punch — particularly for over-60s.The initial benefit of TTR pensions — to allow people to withdraw some of their super while cutting their work hours in later years — remains. What has largely stopped is the popular financial strategy of salary sacrificing as much as possible into super to save tax, then withdrawing the funds needed from a tax-free TTR pension.

Calculations by Colonial First State show a 56-year-old with $250,000 in super and a $60,000 salary would have been $11,000 better off over four years from a TTR strategy under the old rules, but that benefit is now just $4000.

Colonial First State head of technical services Craig Day said the news was better for the same person aged 60, whose $26,000 four-year benefit would only reduce to $19,000.

He said payments from TTR pensions remained tax-free despite the rule changes.

“The changes on the first of July did put a bit of a cloud over the transition to retirement strategies and whether people should continue to use them, but they’re still there and still may be very useful,” he said.

They could be used by pre-retirees to top up income, reduce working hours and cover their lower wages with super savings or pay down a home loan faster, Mr. Day said. And they still could combine TTR pensions with salary sacrifice to boost super nest eggs, he said.

“A lot of the advisers still recognise the benefits of TTR and are considering them for their clients.”

Wealth for Life Financial Planning principal Rex Whitford said the July changes hit higher income earners the hardest, which was what the government wanted.

“The greatest benefit was that earnings inside the pension were tax-free — now they’re not,” he said.

 “In some cases, there’s still a benefit, albeit significantly reduced.”

Mr. Whitford said seeking advice about TTR pensions was more important because the complexity had increased. He said even smart, educated law professionals had “no idea” how the new rules worked. “If they don’t know what’s going on, what’s the average punter’s idea?”

Scammers pretending to be from NBN or ATO are after your money

By |2017-09-18T17:59:21+10:00September 7th, 2017|Finance News|

SCAMMERS impersonating government agencies are sharpening their methods to steal money and information from consumers.

A fresh warning has come from the Australian Competition and Consumer Commission about a surge in National Broadband Network impersonators, and follows similar warnings about scammers claiming to be from the Australian Taxation Office and Centrelink.

RELATED: Tax scammers take a walk on the wild side to steal your money

ACCC deputy chair Delia Rickard said the NBN scammers were signing up victims to fake accounts and often demanding payments using iTunes gift cards. Others were impersonating NBN staff to gain remote access to people’s computers, or requesting personal details as part of a phony NBN set-up.

“NBN will never call you remotely to ‘fix’ a problem with your computer, or to request personal information like your Medicare number or your bank account numbers,” Ms Rickard said.

“NBN is a wholesaler, meaning they don’t sell direct to the public. If you get an unsolicited call like this, it’s a big red flag that you’re dealing with a scammer.”

FRAUD WATCH: Beware of Woolworths gift card scam emails

The ACCC says its scamwatch.gov.au service has received 316 complaints this year about NBN scammers, with $28,000 reported lost. Last year it received more than 2200 reports about fraudsters pretending to be from Centrelink or the Department of Human Services.

The ATO also has warned people to beware that scammers impersonating its officers are becoming more sophisticated.

ATO assistant commissioner Kath Anderson said reports of tax scams rose 23 per cent in July, after rising 26 per cent in June.

“As we get better at letting people know, the scammers are getting better at finding new ways,” she said.

Ms Anderson said fraudsters were using people’s personal information to file fake tax returns, have the refund deposited in the victim’s bank account, then contact them pretending to be from the ATO saying the deposit was a mistake and getting the money transferred to the scammers’ account.

“It’s quite elaborate … They don’t go for big amounts — they’re trying to fly under the radar,” she said.

Ms Anderson said the best defence was keeping your information safe. “Your personal information must be treated like your bank PIN. If someone knew your PIN, they would have access to your hard-earned income, and it’s the same with your personal information and tax return.”

People concerned about whether they have been legitimately contacted by the ATO can call 1800 008 540, while those worried that their tax file number might be stolen should phone 1800 467 033.


Originally published as ’Sophisticated’ scams stealing your money


Getting a CBA home loan just got even harder

By |2017-09-15T10:49:10+10:00June 25th, 2017|Finance News, Investors & Owner Occupied|

Australians will find it harder to take out new home loans with the Commonwealth Bank after the lender tightened repayment tests for borrowers.

When customers with an existing CBA home loan apply for a new home loan, the bank will assess their ability to continue to repay the existing home loan in the same way they assess their ability to pay a new home loan.

That is, the bank will apply an interest rate buffer of either 7.25% or the current product interest rate plus 2.25%, whichever is higher.

Customers with an existing home loan with another lender who apply for a Commonwealth Bank loan must demonstrate they can afford repayments on their existing loan plus 30%.

Westpac raises interest-only rates as mortgage stress heightens

By |2017-09-15T10:47:37+10:00June 25th, 2017|Finance News, Investors & Owner Occupied|

Westpac is the latest lender to put up interest rates, increasing pressure on interest-only borrowers.

The bank yesterday announced it would increase rates on interest-only variable home loans by 34 basis points to 5.83%, and on interest-only investor loans by 34 basis points to 6.30%.

In a move designed to lure customers into switching to a paying principal and interest, the bank reduced its variable rate by eight basis points to 5.24%.

“We understand the significance of interest rate changes to our home loan customers, so we try to balance the needs of both owner occupiers and investors in making these decisions,” said chief executive George Frazis.

The bank said there would be no switching for customers.

Record numbers of Australians are experiencing mortgage stress, according to research released by Digital Finance Analytics in May.

A quarter of home owners were feeling the pinch when it came to making home loan repayments, and more than more than 50,000 Australian households were at risk of defaulting on their mortgages in the year to May 2018.

Latest research to come from S&P Global Ratings blames interest rate rises for increased mortgage stress.

Their latest report shows a jump in the number of home owners now more than 30 days in arrears. Report shows an increase from 1.16% in March to 1.21% in April with Queensland recording the greatest growth in 30-day home arrears.



Make extra repayments
If you can, avoid interest-only loans. The more of the principal you pay, the more you’ll save on interest and the faster you’ll pay off your mortgage. Adding an extra $100 a month to your home loan amounts to an extra $1200 a year which, if you keep it up, could result in a mortgage paid off years in advance.

Reduce your loan term
You might believe that a long-term loan is helping you financially by allowing you to make smaller repayments every month. But while you’re saving more on repayments, you’re paying more in interest over the long term. Consider shortening the term of your loan, and try to commit more of your savings to the mortgage.

Save a bigger deposit
It’s a tough ask with property prices in the capitals, but a 20% or more deposit is ideal. The more money you borrow, the more you end up paying in interest over the life of your loan. Do some research on the government subsidies available in your state before you commit to buy.

Use an offset account
An offset account is a savings account linked to your home loan, which can be used to offset the balance of your mortgage. Interest earned by the offset account goes directly towards paying down your home loan interest, which means you won’t have to pay tax on your savings. It is a great way of streamlining the repayment process.

Fix your loan
If you’re worried that interest rates are going to skyrocket in the near future, consider fixing your loan. While you will have some security against interest rate rises, fixed loans may not allow you to make extra repayments, so you should evaluate whether it will be worth it. Instead, you could split your loan to be 50% fixed and 50% variable, which can help you have the best of both worlds.

Not in their interest: The home loan borrowers that have been left out to dry

By |2017-06-25T07:04:20+10:00June 25th, 2017|Finance News, Investors & Owner Occupied|

There is a hidden and worrying risk lurking for a particular set of mortgage borrowers, whose level of financial stress is about to get a whole lot worse.

It’s those home owners with interest-only loans that are now increasingly under the pump – with National Australia Bank the latest of the big four to announce big hikes in rates on these types of loans.

While banks, the media and the government regularly characterise those that have interest-only loans as wealthy property investors, the fact is that there are many owner-occupiers that have used this method to finance the family home.

Ironically, regulators have pushed the banks to reduce interest-only lending to improve the overall risk of consumers’ debt to the financial system. But for those investors with interest-only loans, the chances of being unable to service them creates a new and unintended risk.

These hikes have not attracted the ire of the government, which has put the banks on notice that any move to increase mortgage rates will be intensely scrutinised. Again, because it is not seen as hitting the political heartland of the average voter with a mortgage to finance their own home.

But these borrowers are particularly vulnerable because many of them took out their interest-only loans because they didn’t have enough cash flow to repay interest and principal.

The banks have been under regulatory pressure to herd these interest-only borrowers into interest and principal loans – offering little or no fees to change over to principals, and interest rates that are now around 0.6 per cent lower.

The catch though is that monthly repayments will be higher in most cases because the borrower also needs to repay principal.

Those that can afford to switch will do so, but there will be many that will need to remain on interest-only and have to wear the rate increase.

For owner-occupiers who have an interest and principal loan, interest rates have not fallen by much in this latest round of adjustments.

National Australia Bank and Westpac customers will see their rate fall by 0.08 per cent while ANZ customers will benefit to the tune of 0.05 per cent.

It is better than nothing, but won’t have a really meaningful impact to the weekly household budget.

For banks, the positive effect of the far bigger increases on interest-only loans will significantly outweigh the negative impact of the small fall in rates on interest and principal loans.

Indeed Westpac – which has a higher proportion of interest-only loans than the others – could boost its earnings by 3.5 per cent, according to research from Macquarie. This is calculated on the basis of all other things being equal.

But Macquarie takes the view that this earnings benefit will be eroded to some degree by some customers switching to interest and principal loans – the caveat being if they can afford it.

Martin North from industry consultant Digital Finance Analytics believes that some investor/borrowers that have interest-only loans would have less incentive to switch because the tax effectiveness of this type of borrowing could be negatively affected.

Young families, investors most at risk

The bottom line is that regardless of the kind of borrower, the overall effect of this latest round of interest rate resets will be to improve bank earnings, because in aggregate borrowers will pay more.

North said the two segments most at risk for mortgage stress are younger families that are more typically first home owners that pushed their finances to get into the property market over the past couple of years and at the other end of the spectrum a more affluent group that took advantage of the rising property market and low interest rates to buy one or more investment properties.

Both North and analysts at Macquarie warn that the flow-on effects from increased rate rises even on just interest -only loans, and the potential for some to switch to interest and principal, could be damaging for the wider economy.

“The increase to IO (interest-only) loans combined with the increased likelihood of customers switching to P&I (principal and interest), in our view, will ultimately lead to further reductions in disposable incomes and put even greater pressure on highly indebted households. We estimate that a 50 basis point increase in interest rates has a 4 to 10 per cent impact on disposable income of highly indebted households.

“While it would rationally make sense for many households (particularly for owner-occupiers) to switch to P&I, …. many of these households would not have capacity to do this,’ Macquarie said in a note to clients this week.

‘Deadly combination’

In analysing the reasons for an increased level of stressed households, North noted that “the main drivers are rising mortgage rates and living costs whilst real incomes continue to fall and underemployment is on the rise. This is a deadly combination and is touching households across the country, not just in the mortgage belts.’

Against this, the incentive for banks to massage rates higher is greater than ever, given they have been hit by the Federal Government’s bank levy and this week by an additional tax from the South Australian government that many fear could be adopted by other states down the track.

On the other side of the household ledger, the lack of any real growth in wages is only exacerbating the squeeze.

A report from Cit this week that analyses the industry segments in which jobs are growing provides insight into the problem.

“Not only does Australia have an underemployment problem that has been highlighted by the monthly labour force series, but the quarterly data shows that the economy is creating mostly jobs that are below average in terms of earnings,” it said.