A major conversation topic for home loan borrowers right now is... Principal & Interest (P&I) or Interest Only (IO)..? As boring as the topic may sound, it's very important to address it given that ~75% of the Australian population has a home loan or an investment loan.
Interest rates are a hot topic right now. Up until recent times, home loan rates were identical to investment loan rates. Over the last few months, banks have been slowly increasing interest rates to the point where Interest Only (IO) loans are 1% higher than Principal & Interest (P&I) loans. With a 100 basis points price difference, one must consider whether it still makes financial sense to pay IO on your mortgage.
Higher interest rates... Higher property prices... What's next? The truth is, does it really matter? All these things are out of your control. BUT what you can control is your mind, and that is the only thing that will make ALL the difference between your financial position today to your financial position 10 years from now.
When it comes to property and taxes, change is the only certainty. There are a few major changes coming your way that relate to property in Victoria. These changes impact both owner occupiers and property investors and therefore you should take a closer look.
Australia's banking watchdog APRA is worried about the housing market overheating and exploding. To counteract this perceived risk, APRA has changed the rules of play which Authorised Deposit-Taking Institutions (ADIs) must adhere to when assessing loan applications.
In my daily work, a misunderstanding I often come across amongst property investors is whether recycling debt against a property is "always" tax deductible. Property investors need to be across this issue as loan interest claims are a hot button for the ATO with regular audits being conducted.
A survey conducted by UBank earlier this year revealed that 85% of Australians don't know their home loan rate. 41% had no clue and 44% could only recall an approximate figure. If you're one of these people, you should be aware that it's costing you a lot more than just money.
Just when you thought the dust had settled, out comes another credit policy change which is a game changer, particularly for property investors. APRA is the regulator pulling the strings, with the motive to curb investor lending further. Banks and lenders have been forced to tighten up their credit policies further, which is positive for a healthy and sustainable property market.
Capital Gains Tax was a hot topic during the recent (July 2016) federal election. When it comes to property, CGT is usually only considered by property investors as the tax only applies for investment purchases and not your owner-occupied residence. From time to time I come across clients that change "intent" during ownership of their home which then "potentially" raises the CGT issue.
Spring is often referred to as the selling season when it comes to property. Traditionally the warmer weather brings out more buyers and sellers to market, making it an ideal time to buy and/or sell your property. Your priority should be to buy with minimal risk and with certainty. Here's an 8 step guide I prepared to assist you.