Money Tree Financial Solutions, L9 1 Corporate Court Bundall, Gold Coast (2026)

06/07/2022

Did you know a lot of home owners overpay on their mortgage?

Could a better deal put an extra $250+ per month back into your pocket?
We offer a free Loan Comparison Service to see if switching could save you hundreds per month. Private message me today to get a free loan comparison!

06/07/2022

Prevent A Nasty Property Surprise

[Educational Blog Status Update]:

HOMEBUYERS and real estate investors are being warned to watch out for the hidden traps that may be lurking in their potential purchases.

Leaky showers, cracked ceilings and self-opening doors and among the signs pointing to bigger and more costly “nasty surprises”, the Association of Building Consultants says.

Spokesman Chris Short says understanding a building’s condition and the likelihood of future repairs is vital when assessing a property purchase and managing a mortgage.

“Many homes are tidied up for sale, with the pre-sale spruce ranging from a basic clean through to bogging cracks, repainting, retiling and re-grouting, and even new floor coverings,” Short says.
“The makeover might look good, but it also masks what might be more sinister problems such as termite damage, salt damp, structural issues, unlicensed and dangerous electrical work, and more.
“For example, a leaky shower might seem harmless on the surface but if the leak is allowing water to flow into the soil next to your home, it’s likely to attract termites.”

Short says building inspections can be particularly valuable for investors who will not be living in the property they buy.

“You need to know it well so that you’re clear about urgent maintenance requirements to meet your obligations as a landlord – such as ensuring smoke alarms are hardwired – and the cost of long-term maintenance,” he says.

Property academic and author Peter Koulizos says beginners should always consider a building inspection.

He adds to make sure the report is a written one, rather than a verbal agreement.
“Some of my students have been able to negotiate the contract down by the repair amount or they have just pulled out,” he says.

Koulizos says when entering any property, potential buyers should take in a deep breath.
“If there is a musty smell, it’s a sign of salt damp,” he says.

Another thing to check is the perimeter of the house and make sure there are paths surrounding it.
“You can minimise cracking by keeping the moisture content of the soil fairly constant,” Koulizos says. “Paths around homes are not just there for decoration.”

HIDING A BIGGER PROBLEM?

* Cracks in ceilings and walls are hallmarks of footings sinking or rising, which causes the walls to flex.
* Other signs are doors out of square in their frames, self-closing and self-opening doors.
* Leaking hot water services, rainwater tanks and airconditioning pipes can create moisture that attracts termites.
* New floor tiles installed over old tiles can trap moisture between the tile layers.
* Cracked tiles and mould at the shower base and plaster bubbling on the wall in the room next to the bathroom are also signs of moisture.
* Any repair work to the building’s paths can provide an entry point for termites.

Source: Association of Building Consultants

05/07/2022

Did you know that your borrowing capacity can vary by over $200,000 + depending on which lender you use ...

So if your current lender isn't giving you the funds you need - get a 2nd opinion ... you may just get the loan you want with better terms ...

04/07/2022

What's A Better Strategy To Access Equity: Take Out A Line Of Credit Or Just Top Up A Loan?

[Long Blog Educational Status Update]:

Lines of credit can be very useful; however, you need to be careful regarding an evergreen set-up in which no repayments are needed and the interest is added on to the loan.

Years ago that was a sound strategy for increasing your tax deductible debt. This has been a very contentious subject with the ATO (and many court rulings), and my advice would be to stay away from such a strategy or ensure you seek expert advice from a tax expert that may require a private ruling to ensure you stay on the right side if you are seeking to capitalise the interest.

If you are looking to access equity from your home, it is never a good idea to top up the loan for investment purposes.

The reason is that you are mixing together investment debt with personal debt.
As an example, if you had an $80,000 home loan and you took out a $20,000 investment loan, your total single loan amount would be $100,000. This would equate to a ratio of 80% personal debt to 20% investment debt.

The challenge is that if you wanted to make accelerated repayments onto your home loan you would simultaneously be wiping out your investment debt.

This would mean that every time you made a $1,000 principal repayment (not taking into account the interest portion charged) you would be – staying with the example of 80/20 – reducing your home loan by $ 800 but also wiping out $ 200 of the investment debt.

Why is this bad?

Well, if you had a home loan for $100,000 and an investment loan of $100,000, it would make sense to discard the home loan first since it is not tax deductible.
A great set-up would be to have both loans as interest only.

Attach a 100% offset account against the home loan and drive all of your extra income into the offset account to eliminate interest repayments on your home loan. This also gives you the choice (should you ever move out of your home) to take all of the money out of the offset account and buy a new home, and instantly the entire interest is charged again against your old home, making it now tax deductible. It is never a clever idea to top up your home loan for investment purposes.

A better strategy:

So how do you get around this without using your home as security against a new investment purchase?

It’s simple: you apply for a separate loan against your home.
Using the previous example, you would leave your $80,000 home loan in place and apply for a separate loan of $20,000 for investment purposes.

This also makes accounting very simple because now you know which loan is for investment purposes and what to provide to your accountant at tax time.

If you are accessing equity from a property that you are already renting out, meaning that the existing loan is already tax deductible, it is still a good idea to use a split loan.

From an accounting perspective it makes it easier to know which expenses belong to which property.

This serves a number of purposes. From a business point of view, you can review your properties and work out what their holding costs are and their overall performance.

Also, if you decide to sell any of your properties, you know which loans belong to which property and you can make a choice to either wipe out those loans or, from the sale, reduce one of the smaller loans to zero without paying it out, providing you with redraw capability should you wish to buy again (effectively turning that loan into a line of credit type function).

Using line of credit:

Line of credit loans, in my view, are a good tool for two reasons.

Firstly, they are great to have as a buffer. In cases of emergency repairs, etc., there is instant access to funds to assist you.

Secondly, they provide instant access to cash, should there be a property-buying opportunity and you require funds quickly for a 10% deposit.

The negative aspect of a line of credit is that it can be more expensive than a normal investment loan. There can also be a negative impact on your borrowing power if you have a large line of credit. This is because a line of credit is like a gigantic credit card with a limit.

Let’s say you have a $200,000 line of credit with zero owing.

Lenders, at the time of an application for new finance, will consider repayments as if the entire line of credit is drawn, therefore drastically diminishing your capacity to borrow. This could mean the difference between being approved or declined for finance.

A balanced approach is needed: a line of credit limit that takes into account your income and expenses position, leaving sufficient surplus funds from your monthly income (assuming your line of credit is fully drawn) to ensure a fresh loan application would be successful. A competent banker or broker can assist in calculating various scenarios to ensure your strategy works for you.

One way to get around a line of credit is to simply take out a normal interest-only investment loan. For example, instead of taking out an $80,000 line of credit, apply for a cheap, no-frills investment loan.

Once the money is available to you, simply transfer the $80,000 onto the loan, reducing the balance to zero.

No interest is charged, and, if you require funds, simply use redraw for access. This way you have a low-cost loan with a line of credit functionality.

All these matters require forward thinking and planning. Take into account your overall goal and strategy. Devise a plan and then research the finance market, or seek expert advice to ensure that not only can you execute your plan today but you don’t get stuck at your next intended property purchase due to poor research, planning and ex*****on.

01/07/2022

Ain't that the truth...

29/06/2022

🧐 Top tips for young property investors

It is possible for people to launch into the property investment market in their early twenties – in fact, this is a great time to start, when you are first launching into your career and don’t yet have any other financial responsibilities such as a family to support.

However, buying an investment property can never be an impulse decision – it takes self-discipline and applied knowledge to start building a profitable investment property portfolio.

Set a budget and save
The first step of course is to start saving for your first deposit, which is usually at least 20% of the purchase price (can be lower, check with your broker). You will need to be focused and realistic, and quite single minded in order to save a sufficient amount. Your best option is to set a budget and create a clear financial plan that will help you remain focused and prepared once you do buy your first property.

Think long term
While some of your peers will be looking into short term gratification – visiting pubs and night clubs, booking overseas holidays or buying a new car - you need to establish a mind-set that focuses on the long term rewards of building your investment portfolio.

Learn from the experts
While you are saving your deposit, take this time to educate yourself about the property investment market and the best type of property for your first investment. Read articles about property investment and monitor the real estate section of your local newspaper, so you can build a vision of an affordable and profitable investment property. Consult local agents and mortgage brokers as soon as possible so they can offer their insight into the market. Seek advice from a professional accountant, who can oversee your savings plan and advise you on your first home loan.

Consider a family guarantee
If you have the option, you could ask a family member to act as guarantor of your bank loan. The guarantor allows the equity in their property to act as additional security for your home loan. This strategy could potentially reduce the amount of deposit you need to save. You can split the loan into two portions, so your guarantor is only guaranteeing one portion of the loan. That way, you can pay off that portion first, so you can release your guarantor from the agreement as soon as possible.

Invest, don’t gamble
Gambling is a game of chance where you can hope to win big but you are perhaps more likely to lose it all. Investment is based on knowledge and experience, so you make decisions that will be profitable in the long term. Learn everything you can about the property and the market, so you can make objective, beneficial decisions.

29/06/2022

Which is better?

Plan A - Buy a home
Or
Plan B - Buy an investment property and rent

28/06/2022

Did you know that you can obtain a home loan even though you are in a probation period with your work?

27/06/2022

How to calculate your borrowing power

One of the most important factors in your home ownership journey is the amount of money you can – or should borrow. You want to borrow enough that you can purchase the right property for your needs, yet you don’t want to end up out of your depth in debt.

Most lenders rely on their own variation of a basic formula to calculate your borrowing power. They look at six elements of your financial situation – gross income, tax, existing commitments, new commitments, living expenses and buffer – to calculate your monthly surplus. This formula gives a good overview of your level of financial security, and tells lenders how much you are able to pay back each month. If you assess yourself based on a similar formula, you can have a realistic idea of how much you can borrow and whether you need to save and prepare a little more first.

So how do all these elements combine to assess your borrowing power?

Gross income

The lender will look at all your sources of income to calculate your gross income. Sources include your base income, overtime, a two-year history of any bonuses, commission (if you have been receiving a regular ongoing amount for at least one or two years), any regular payments from a family trust and any rent derived from investment properties. If you have children under the age of 11, the lender will also include any Family Tax Benefits A& B.

Tax and Medicare

Your tax and Medicare expenses will be calculated to assess how these costs reduce the amount of your gross income.

Negative gearing benefits

If you already have investment properties and incur benefits through negative gearing, the lender tend to increase the amount of the potential loan.

Your new mortgage

When calculating how much your new loan repayments will cost, the lender will slightly increase the interest rate by about 1% to 3% to create a buffer against future interest rate rises. If you are purchasing an investment property, they will sometimes calculate an even higher interest rate, depending on the current market.

Your current financial commitments

Your ability to pay off your loan will be affected by your other financial commitments, such as ongoing debts and living expenses. Lenders will look at your existing mortgages, credit cards and personal loans to determine your financial status. Credit cards will be assessed as if you owe the maximum limit, not on how much you currently owe. And the lender will also calculate on a slightly higher interest rate. If you are living rent-free with a family member, the lender will calculate in a hypothetical rental payment to allow for a change in your circumstances.

You can present your lender with your own estimate of your living expenses; your lender will compare this amount to their own calculation of the minimum expenses for a family of your size. They will use the higher figure to make their estimation.

The buffer

The lender will add a hypothetical expense as a buffer against any unexpected expenses that could affect your ability to repay the loan. The purpose of the buffer is to ensure that you are borrowing slightly less than you can currently comfortably afford.

Surplus or shortfall?

Once the lender has calculated each expense, they will deduct these expenses from your gross income. If the expenses are greater than your gross income, the result will be a shortfall. If you are living within your income, the result will be a surplus – extra money that can be used to pay off a loan. A surplus is a good first step to securing a loan, although the lender will also take into account factors such as your employment history, your credit score and your savings before making a decision.

You can use this method yourself to calculate your own surplus so you have a good idea how you can manage loan repayments once you purchase a property. This is an excellent exercise in getting a strong grasp on your budget and working out ways you can make your money work for you more effectively.

For assistance in calculating your borrowing power, contact us today.

24/06/2022

Tip: Watch your credit card limit! Even if your balance is zero, the higher your limit the lower your borrowing capacity.

Money Tree Financial Solutions

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