Written by Hudson Adviser Michal Park
What is a Buyers Agent / Advocate?
Purchasing property can be difficult! Enquiring about property online only to be advised that is has already been snapped up, or putting in an offer that is nowhere near the final sale price can be frustrating and disheartening.
A Buyers Agent/Advocate offers another way to purchase whilst avoiding these issues. A Buyers Agent is simply a real estate professional who is engaged by you to do all the “footwork” on your behalf, with the added bonus of insider information when it comes to the property market.
- Their industry knowledge and negotiation skills level the playing field between buyer and seller. Fundamentally, because the selling agent works for the seller, but the Buyers Agent works for YOU.
- Their industry contacts broaden your property horizon, least of all because many properties are sold never actually being listed. This can result in the acquisition of properties at prices well under what they would be publically advertised for.
- They save you time and stress which can be priceless.
Fees to access a Buyers Agent include an upfront engagement fee (generally up to $2,000) and then once a successful property purchase has resulted, you pay a commission to the Agent (up to 3% of the property contract price). Well worth the cost if they can save you on the purchase price.
Written by Hudson Adviser Kris Wrenn
Cash Back for Refinancing Your Loan
Did you know that many banks are offering cash back amounts as an incentive to re-finance your home or investment loans? This can be a great bonus, especially if you’re reducing your repayments by refinancing to a lower interest rate, thereby decreasing your repayments. This money can be put towards paying off your home loan further or perhaps starting up a managed fund to save up for something you can’t afford right now!. However, it is really important that all aspects of the loan are considered before rushing in for the cash back; features such as interest rates, fees, availability of offset accounts and all other finer details of the loan should take precedent. The Hudson Finance team can help you source the banks that are offering cashback, taking into account the fees and interest rate of the home loan on offer. You could be eligible for up to $4000 in cash for refinancing and if you’re willing to fix in your interest rates, you could see interest rates as low as 2.09%, depending on your personal situation. If you are a COVID-19 pandemic frontline worker, you could be eligible for even more cash back from some of the banks. There is usually a minimum loan size amount and for most banks this is $250,000. Needless to say, now is the time to have a mortgage health check done. Call the Hudson finance team to check how healthy your mortgage is.
Written by Hudson Adviser Phillip McGann
Where are Official Interest Rates Headed?
Short answer is NO WHERE anytime soon – maybe for as long as 2 to 3 years. We are currently experiencing historically low official interest rates both locally in Australia and also around the globe and for the most part these official rates have been passed on through the banking system.
This is good news if you are borrowing money but bad news if you have funds on deposit.
Home loans in Australia today come with interest rates with a 2% in front whilst Term Deposits offer under 1%. Banks are increasingly getting more of their funds from deposits rather than the money markets – just this month the CBA announced that 74% of its loan book is funded by deposits, a large rise from ten years ago when it stood closer to 55%.
The Reserve Bank has cut official interest rates to 0.25% early on in the pandemic and have held them steady there and have also gone headlong into the debt markets buying up debt along to yield curve to keep rates lower for longer with a 0.25% target rate for the benchmark three year bond rate.
The Reserve Bank in its latest economic update in early August said low rates were here to stay and did not rule out further measures if required;
Members reaffirmed that there was no need to adjust the package of measures in Australia in the current environment. Members agreed, however, to continue to assess the evolving situation in Australia and did not rule out adjusting the current package if circumstances warranted.
Source: RBA Minutes of the Monetary Policy Meeting of the Reserve Bank Board 4 August 2020
Now this is a pretty clear indication that official rates aren’t rising anytime soon but what of commercial available rates from the major banks? Usually the majors follow the RBA lead - but not always and to the same degree.
Could a bank (or banks) with an eye on profits raise rates from here without the RBA increasing official rates? The simple answer is YES.
However it appears that the market share (and reputational loss - if banks still have those) would be too great a burden to make any major increase worthwhile for the bank(s) in question.
The loss of business would be too great, however it may still be attractive for the banks to increase existing customer rates slightly or alternatively not offer as large of a discount off the variable rate (or other benefits) to existing borrowers, just to maintain profitability in a tight credit market.
The banks will always looking to be competitive for NEW customers (to grow their lending book) but don’t always look after EXISTING customers to the same degree It is called a “bank loyalty tax“ payable by those who don’t shop around for the best deal.
You need to be vigilant and keep an eye out for where the market is heading and don’t just take your banks view about what rates they will offer you. It pays to always use a broker to review your current lending and keep your bank honest.
If you would like to assess your own lending and speak with Hudson Finance Broker Nicole Green please call 1800 804 296.
Written by Hudson Adviser Ivan Fletcher
Assessing the True Cost of Your Investment Property
The only true way to assess how much profit one has made from an investment property is to assess not only the increase in market value but the income/cost (in after tax terms) of holding the property each year. This information is available in your tax return each year and thus provide an easy way for you to assess.
Your tax return will have a schedule for any investment Property which has all the information there for you. It will look something like this:
How to calculate the True cost of holding this property in the last year?
- Convert the above ‘Tax Income/loss’ to a ‘Cash flow income/loss’ by adding back the non-cash items of depreciation and capital works/write off. In the above example by adding back $1,800 and $4,500 to the tax loss of $9,760 provides a genuine cash flow cost (Before Tax) of $3,460 p.a.
- Calculate the tax refund based on your marginal tax bracket. Assuming a taxable income of $120,000 means the tax refund is based on 39.0% MTR. The refund based on the property gearing is the Tax Loss ($9,760) x MTR (39%) = $3,806.
- The true after tax income/cost (out of your pocket) is then the Tax Refund $3,806 less the Net Cash Flow Cost of the Property ($3,460) = $346 profit.
The above example shows a Tax Loss of $9,760 however the After Tax Cash Flow shows a $346 profit.
Note : this reflects an Interest Only loan and therefore does not include any Principal repayments on an investment loan.