mortgages

Kylie’s 5 Summer Reno Tips

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Whether the goal is to sell or to dwell, Kylie shares her five top tips for making renovations work for you and for your financial and lifestyle goals.

 

1. Budget

Are you planning on living in your property long term? Before setting a budget, think about your plans. Adding a swimming pool to the family home might not get the return you’re after when it comes time to sell, however, if you’re around for another 20 years it’s can be an investment your family will have time to enjoy.

Consider the re-sale value of your property and your target market if you were to re-sell. Look at what other properties in your neighbourhood are selling for and consider what you paid for yours.

It may be tempting to put an expensive $30,000 designer kitchen in, but not everyone can appreciate the difference between a $15,000 flat-pack kitchen and a designer one. However, doing things on the cheap can be counter-productive, too.

 

2. Keep it simple

Most buyers will be interested in putting their own stamp on the property. So, choose your colours and patterns carefully. Opting for neutral colours and styles is always the safe option.  

 

3. Make a priority list

If you’re not sure where to start, concentrate on things that will improve the comfort of your home, such as insulation and heating.

 

4. Consider your target market

If you are thinking about removing a bedroom to create more space in your dining room, it pays to think about who your target will be if you sell. Will your home be suited to a young family or a retired couple? The ideal number of rooms and the ideal size of the dining room will vary for different buyers.

 

5. DIY or professional?

It may be tempting to take a DIY approach to renovations, but some jobs are best left to the pros. Anything structural or major gas, electrical and plumbing work is best outsourced. Purchasing fixtures and plumbing yourself might not be the cheapest option either, as tradies can usually get trade discounts.

 

Brendon's Bathroom Budget Blowout

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Renovating the home you own rather than buying the house you may not be able to afford is an attractive option right now. But it’s not without its pitfalls … as Brendon found out. 

 

House-price inflation has two impacts that I want to reflect on:

 

1. People who own property feel richer ... because their house is worth more.

 

2. People are opting out of purchasing a nicer home. They are concerned about the cost of the new house, what their new mortgage would be and the risk that their house might now sell and they won’t be able to buy again. (As an aside, we may be able to help with the last one.)

 

So, what do we do when we already own a house but we don’t want to upgrade?

 

We renovate!

 

This can be a good option. Why not get your house into a state you are happy with and actually get to enjoy it—much better than just getting it there a week before you sell it and move out? Of course, the downside is the mortgage gets bigger rather than smaller over time.

 

I found myself in this situation this year and now have two new bathrooms, new carpet, paint and curtains. Yee ha!

 

However, here are some important life lessons learnt along the way:

 

1. Do your figures. Then double them.

 

2. Estimate the time frame. And then double it ... at least.

 

3. Remember all those extra things you might like to get your builder to do. Bigger cavity sliders, recessed shelving in the shower to put your shampoo in, extra lights—it all costs more money and can blow budgets (see 1 and 2).

 

4. When I did my figures, I asked myself, "How much can I get a toilet for? $500?”. Somehow I decided to buy the $1200 one. And, yes, we do need a black flush plate thing to match the black taps (see 1).

 

5. Tradies are busy right now and in to the foreseeable future (see 1 and 2).

 

6. If you are going to stay put for 10 years, design the house how you want to live in. For example, don't put a bath in just because it will “add to resale value” if you or your family aren't “bath” people. In 10 years, your bathroom will be tired and may need another make over anyway.

 

Several lessons learnt, but loving the new bathroom and its colour coordination!

 

Brendon Ojala is a Registered Financial Adviser with Velocity Financial. No investment decision should be taken based on the information in this blog alone. A disclosure statement is available free of charge upon request.

 

 

 

Fixed vs Floating: Feeling lucky?

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Brendon reveals the current best rates on the market and suggests that now might be a good time to bet on interest rates staying low.

Assuming you have at least 20 per cent equity and an average-sized loan on an owner-occupied property (note that these things matter when it comes to what interest rate you will be offered) the following are good rates right now:

 

·      1-year fixed rate is 4.3%

·      2-year fixed rate is 4.6%

·      3-year rate is around 5.0%

·      5-year rate is around 5.5%

·      A good floating rate is discounted to around 5.20%.

 

The amount of cash you can expect to receive from the bank as an incentive will vary anywhere from zero to almost one per cent of the loan amount.

We have seen a few drops in interest rates over the last week or so. Lenders are definitely starting to sharpen their pencils on their two-year fixed periods, as well as some of the longer term rates. And we are starting to see some good discounting on particularly strong deals. It looks like banks may be gearing up for their “spring sales”—if there is such a thing in the banking world.

So, what would I do if I was fixing my mortgages right now? 

If I felt like taking a bit of a gamble, I may fix for one year and roll it over year-on-year. I would win this gamble if rates don’t go up too fast over the next few years, as the 1-year rate is the cheapest on the market. To back up this approach, of late, there have been hints that things aren’t going anywhere fast, both locally and internationally, so perhaps it’s not a bad bet.

If, however, I get that wrong, and my budget won’t deal with large potential increases in mortgage costs over the next few years, I would fix for two or even three years and be willing to pay a little more now for that certainty. I would definitely keep some of my loan floating (in lines of credit or offset accounts) to allow me to pay extra down and have the flexibility of re-drawing these funds should I need to.

Additionally, banks are making it increasingly easy to re-fix on line. However, the downside of this is that there is no advice being offered during the re-fixing process.  So if you want some advice around what to do with a home loan that is rolling off a fixed rate, do get in contact with your friendly Velocity adviser.

Brendon Ojala is a Registered Financial Adviser with Velocity Financial. No investment decision should be taken based on the information in this blog alone. A disclosure statement is available free of charge upon request.